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16th- 30th November 2016
Please find below the highlights of our newsletter with latest updates and information.
We hope you find this useful. You may send your comments to updates@neerajbhagat.in

E-commerce firms like Flipkart and Snapdeal to deduct TCS under GST

E-commerce operators like Flipkart and Snapdeal will have to deduct TCSBSE -1.02 % (tax collected at source) while making payments to their suppliers, according to the new model GST law, which has done away with the definition of 'aggregator'.
Explaining the changes in the provision, experts said the proposal will increase the compliance burden on e-commerce operators as they will have to deduct 2 per cent TCS and deposit it with the government.
The measure, Nangia & Co Director Rajat Mohan said, will not increase the incidence of taxation on consumers as the supplier will get tax credit for the TCS. The model GST law provides for 1 per cent TCS to be deducted by the E-commerce operators.
According to experts, this would mean that a similar amount will have to be levied on inter-state movement of goods, taking the total TCS deduction to 2 per cent although burden on consumers will not increase.
Mohan further said in case of return of goods by the consumer, the e-commerce companies will not have to deduct TCS as there is no actual sale.
The draft model GST law does not provide any definition of 'aggregators', saying that the government would later come out with a notification specifying which type of businesses would be covered under the term.

Demonetisation to Help Revive Affordable Housing Segment
Demonetisation will help revive the latent demand in the housing sector as people now hope to buy houses in transparent deals, said Sriram Kalyanaraman, managing director & CEO, National Housing Bank. In an exclusive chat with ET's Saikat Das, Kalyanaraman said some segments of the housing sector will especially benefit from it as prices may correct 15-20% with adequate supplies. Edited excerpts...
Will demonetisation drive demand in the housing sector?
Housing finance is a long term requirement, and the demonetisation exercise will have a long term impact as it will benefit both consumers and the industry. Most of the housing finance players have put in place systems for e-payments and e-receipts. Demonetisation will further improve the use of e-transactions and reduce cash dealings. It will result in greater transparency in property contracts, which will also bring in greater professionalism in the industry. As a result, the latent demand, particularly in the affordable segment is expected to revive, thereby increasing sales.
But will home prices come down?
We expect housing prices to correct by 15-20% in some segments. But we do not think it is a gloom and doom scenario. On the contrary, with a dip in prices and higher transparency in dealings, demand will pick up in the medium to long term.
Now Foreign Investors can invest in unlisted corporate debt securities
As announced in the Union Budget 2016-17, it has now been decided to expand the investment basket of eligible instruments for investment by FPIs under the corporate bond route to include the following:
(i) Unlisted corporate debt securities in the form of non-convertible debentures/bonds issued by public or private companies subject to minimum residual maturity of three years and end use-restriction on investment in real estate business, capital market and purchase of land. The expression 'Real Estate Business' shall have the same meaning as assigned to it in Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 Notification No.FEMA.362/2016-RB dated February 15, 2016. The custodian banks of FPIs shall ensure compliance with this condition.
(ii) Securitised debt instruments as under:
(a) any certificate or instrument issued by a special purpose vehicle (SPV) set up for securitisation of asset/s where banks, FIs or NBFCs are originators; and/or
(b) any certificate or instrument issued and listed in terms of the SEBI Regulations on Public Offer and Listing of Securitised Debt Instruments, 2008.
(iii) Investment by FPIs in the unlisted corporate debt securities and securitised debt instruments shall not exceed Rs. 35,000 crore within the extant investment limits prescribed for corporate bond from time to time which currently is Rs. 2,44,323 crore. Further, investment by FPIs in securitised debt instruments shall not be subject to the minimum 3-year residual maturity requirement.

GST to spur double-digit growth in hiring across sectors

The implementation of the Goods and Services Tax (GST) will lead to 11 per cent growth in hiring activities, says a report released on Tuesday.
HR services provider TeamLease said that GST would not only have a positive impact on the ease of doing business but also propel formal job creation.
"Adoption of GST will lead to an 11 per cent growth in hiring across sectors. Further, from a region perspective though marginally South India will top the job generation chart," it said.
Automobiles, logistics, home decor, e-commerce, media and entertainment, and cement sectors are projected to create 11-18 per cent additional jobs annually after implementation of GST.
In the case of IT/ITeS and BFSI segments, the growth rate has been pegged between 10 and 12.5 per cent.
According to TeamLease, around 10 to 13 per cent additional jobs are expected to be created every year by consumer durables, pharmaceuticals and telecommunications sectors.

Authorized persons to exchange old notes held by foreigners up to Rs 5,000 till Dec. 15, 2016: RBI
Attention of Authorized Persons is invited to the A.P. (DIR Series) Circular No. 16 dated November 9, 2016
 giving certain exemptions to foreign tourists visiting India. In supersession of instructions issued therein, it has been decided that foreign citizens (i.e. foreign passport holders) can exchange foreign exchange for Indian currency notes up to a limit of Rs. 5000/- per week till December 15, 2016 subject to the tenderer submitting a self-declaration that this facility has not been availed of during the week. The Authorized Person shall keep the passport details and the above declaration on record. Authorized Person may also ensure that the total value of such exchange to Indian currency notes does not exceed Rs. 5000/- during the week.
2. The Instruction in respect of issue of prepaid instruments by Authorized Dealer Category I Bank shall continue.
3. Authorised Persons may follow the above instructions and bring the contents of this circular to the notice of their constituents.
4. The directions contained in this circular have been issued under section 10(4) and section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
Royalty paid to AE wasn't capital exp. as it was paid for use of trademark and not for its acquisition
Where assessee-company made payment of royalty to its AE for mere use of trademark, that too by means of non-exclusive licence, it was to be allowed as revenue expenditure while determining ALP.
Assessee-company (GKN Driveline (India) Ltd.) was engaged in business of manufacture and sale of Constant Velocity Joints (CVJ) - During relevant year, assessee made payment of royalty to AE for use of its trademark in respect of manufactured products - In transfer pricing proceedings, TPO taking a view that payment in question was capital in nature, disallowed same and made certain addition to assessee's ALP - It was noted that Tribunal in assessee's own case relating to earlier assessment year, opined that assessee did not acquire any ownership right in trademarks by paying amount of royalty - It was further noticed that royalty was paid simply for use of trademarks, and that too, by means of a non-exclusive license - Tribunal had thus concluded that royalty payment was to be allowed as revenue expenditure - Whether in absence of any change in circumstances, following aforesaid order of Tribunal, impugned disallowance was to be deleted - Held, yes [In favour of assessee].
Companies with more than 10 times of turnover of assessee couldn't be selected as comparables
Assessee-company (Acusis Software India (P.) Ltd.) was rendering ITES to its AE - Whether companies providing KPO services cannot be considered as comparable - Held, yes - Whether companies having turnover in excess of 10 times of turnover of assessee could not be selected as comparable - Held, yes - Whether companies having employees' cost of less than 25 per cent were incomparable to assessee - Held, yes [Partly in favour of assessee]
Neeraj Bhagat & Company is a team of distinguished chartered accountant, corporate financial advisors and tax consultants in India. Our firm of chartered accountants represents a coalition of specialized skills that is geared to offer sound financial solutions and advices. The organization is a congregation of professionally qualified and experienced persons who are committed to add value and optimize the benefits accruing to clients.


Neeraj Bhagat & Co.
New Delhi, Gurgaon, Mumbai
www.neerajbhagat.in 

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