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Legalising black money through Mauritius
LIC to absorb service tax on agency commission
High air tariff hits domestic tourism, says Renuka
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REL Board asks RIL’s views on Dadri project
Rubber price fluctuation affects industry
Gold supply dips as demand for jewellery goes up
Rs 75,000 rebate for severe disability
X’mas bug may drag down Sensex
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Legalising black money through Mauritius
New Delhi, December 12 Though, with the change in capital gain rules and some strictness shown by the Mauritius government to prevent Indian companies from misusing the treaty, on papers it may not be so attractive to exploit this island country yet industry experts say that “the treaty still offers a chance to befool the income tax officials by routing domestic black money as FDI through Mauritius.” The controversial 21-year old treaty has encouraged a number of Indian, the US and European companies to open their “ one room size offices” in that country to channelise their investments to India, while avoiding taxation, indulge in money laundering and convert their ‘black money into white.’ During the NDA regime, the SC had prevented the income tax department from taxing the Indian companies allegedly using that country, in view of the provisions of the treaty. After that the government is trying to convince the Mauritius government to take steps to stop the misuse of the treaty. While claiming that there are no any specific complaints against the Indian companies using Mauritius route, Finance Minister P. Chidambaram says India would not prefer to sign DTAT like treaties with other countries. About Rs 40,000 crore worth of FDI has come to India from
Mauritius-based firms. Responding to the apprehensions of the Leftist parties and Opposition members in the Lok Sabha, Finance Minister said India would try to re-negotiate with the government of Mauritius some of the clauses of the treaty, in line with the model treaty framed by the Government. Commenting upon the apprehensions that some domestic companies were misusing the treaty to “ channelise their black money”, Mr Chidambaram said, “ certain companies might have taken advantage of the treaty. However, all transactions had taken place within the legal framework.” Mr Chidambaram said formal discussion with Mauritius is yet to take place but the Government had decided that a similar treaty (like that signed with Mauritius) would not be signed with any other country. He said the flow of investment since 1991 was $ 8.7 billion, mainly due to heavy investment in the stock market by Foreign Financial Investors. Meanwhile the Mauritius government has agreed to taken steps to prevent the misuse of the treaty through steps like imposing a condition that no company with Indians’ interest would be registered in that country. Further, conditions for the residential proof has been tightened. It is pertinent to note that Mauritius offers a wide array of activities for international businessmen to invest in and is fast becoming a regional business hub. Among the pioneers of Mauritius route in India was Enron, which used the gateway to establish the controversial Dabhol Power Company in Maharashtra. With a total population of some 250 million persons, that country offers wide opportunities for huge capital investment. It has also signed Double Tax Treaties with over 20 countries including France, Germany, India, Malaysia, South Africa, Sweden, United Kingdom, Northern Ireland and Zimbabwe. Analysts said that confidentiality provisions are enshrined in the Mauritian civil and banking codes. A possible vehicle for investment is through a trust. High net worth individuals, especially NRIs, to minimise their tax bill, use the country to invest their money in Indian stock markets.
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LIC to absorb service tax on agency commission
New Delhi, December 12 LIC would bear the cost of service tax under all conventional individual products. However, for pure risk products, which include Group Term Assurance Plans and Unit -Linked Plans, the policyholder will continue to bear the cost of premium, sources said. This is because, in these two categories of schemes, the risk premium is readily identifiable, sources said. Presently, service tax is leviable only on the risk cover in life insurance and is in force since September 10 this year. In cases where the premium amount towards risk cover is not separately shown in the documents, insurance companies have an option to pay service tax on 1 per cent of the gross amount charged. The effective rate of service tax is 10.2 per cent (10 per cent plus 2 per cent educational cess.) The decision of LIC, a state-owned life insurance behemoth, to absorb the service tax liabilities during the current fiscal year (2004-05) is primarily because of a significant decline in market share arising out of stiff competition from private sector insurers.
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High air tariff hits domestic tourism, says Renuka
Shimla, December 12 Ms Chaudhary was here to attend the concluding session of the three-day Himachal Tourism Conclave, jointly organised by the state Tourism Department and the Confederation of Indian Industry (CII). “I strongly feel that the foreign airlines, operating in India under the open sky policy, instead of getting tourists here were taking more people abroad as a result of which we were losing out on clientele,” she remarked. She advocated providing a level playfield to the private Indian airlines like Air Sahara, Deccan and Jet Airways at par with foreign airlines. If the foreign airlines are free to travel here then our private airlines be allowed the same on foreign shores, she said. She felt that very high domestic air tariff was another reason why Indians preferred to travel abroad rather than see their own country. “I am in favour of rationalisation in this as any individual would prefer to go abroad instead of paying the same air tariff for being within the country,” she said. She said having high aviation fuel taxes were proving to be detrimental to domestic air travel. Ms Chaudhary, said private-public partnership in tourism was a necessity but within the laid down parameters and guidelines. “Tourism, while generating employment for the locals should market the ethos, culture, tradition and folk art of the area and make it its unique selling point,” she said. She announced the clearing of Rs 16 crore for the two sectors of Shimla and Kangra and Rs 1 crore for Naggar and Pragpur under rural tourism.
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REL Board asks RIL’s views on Dadri project
New Delhi, December 12 The December 4 letter written by Gen V.P. Malik and Leena Srivastava on behalf of the REL Board expressed full confidence in the existing management led by CMD Anil Ambani and asked RIL Board for its views on certain issues. The issues included continuation of five RIL nominees — Anil Ambani, Satish Seth, J P Chalasani, S.C. Gupta and Amitabh Jhunjhunwala — on the REL Board till their term of 2008. It also sought confirmation from RIL Board on the
availability, quantum and pricing of gas from RIL’s KG-D6 fields for REL’s 3,740 MW power project at Dadri in Uttar Pradesh. The letter also noted that against an investment of Rs 5,000 crore approved by the RIL Board on January 1, 2004 for REL, only Rs 1,500 crore had been received so far.
— PTI
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Rubber price fluctuation affects industry
Solan, December 12 The Deputy General Manager (Marketing) of Ralco Tyres, Mr G.S.Passi, while expressing concern at the market scenario urged the government to take required measures to rationalise its price. He said by the time finished goods were marketed the price of rubber changed considerably putting an additional burden on the manufacturers to maintain a steady price. He said rubber was generally procured from Kerala but it had to be often imported from countries like Vietnam, Thailand and others. He said though the Chinese had posed competition to the Indian automobile industry, but it had remained static at less than 1 per cent.
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Gold supply dips as demand for jewellery goes up
Chandigarh, December 12 The latest report of World Gold Council says that the retail gold market in the country has grown parallel with the surging gold prices from January to date, crossing an all time of Rs 6,500 for 10 grams. Interestingly, the gold supply to the market this year compared to last year dropped significantly by 22 per cent to 828 tonnes. The ongoing wedding season, which witnessed a record 14,000 marriages on one day on November 27, and average Indian housewife’s trust in gold as a secure investment, has propelled a steady 8.5 per cent growth in gold jewellery consumption in the country. Between July and September, the increase in gold jewellery demand was 16 per cent compared to the same period last year. “Surging gold prices may result in cumulative gain in the jewellery market in the long run,” avers Mr K.B. Goyal, Managing Director of a gems and jewellery company, holding that the gems and jewellery industry does not foresee any slump in gold consumption in the country. “I feel Indian consumers are less market sensitive because of their traditional association with this volatile market. In an extreme case, the jewellery market may witness a diminutive slump but it will ultimately benefit the consumer in the long run,” he adds. Insiders in the gold trade say that the consumers’ belief in the further strengthening of the gold price rise and their preference for investing in the commodity in preference over volatile markets like shares and mutual funds are also major contributing factors. They further maintain that strong economic growth and visible increase in shopping festivals, promotions and exhibitions this season also fuelled increase in gold consumption in the jewellery segment. Market, they claim, would continue to be driven by wedding requirements. Market supply, they held, dropped because of a number of reasons, including 3 per cent fall in mine production of the precious metal, besides identified net central bank selling was also less than last year.
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by J.C. Anand
X’mas bug may drag down Sensex
The stock market having its ever highest level is now on a slippery terrain. The Sensex rose to a new peak of 6,385 points during intra-day trading but closed at 6,322.5 points on December 6. On the closing day last week, the Sensex was down by about 71 points and settled down at 6,233.54 points. This downward trend is likely to continue during this fortnight or even later till next quarterly results are announced.
The longterm prospects of industry, however, are good and promising. The World Bank in its Global Economic Prospect Report has stated that while the global economic growth could fall to 3.2 per cent in the next two years, India and other South African countries are likely to sustain a GDP growth of 6 to 6.3 per cent. NCAER’s Business Confidence Survey is also positive and the index attains 136 points. India International Centre’s mid-year review of the economy also expects the economy to growth at 6.3 per cent in the current fiscal year. The FII investments have hit $ 7.5 billion mark (against $ 6.56 billion in 2003). Nevertheless, the stock market may move down and stage a short-term correction. Dispute between the Ambani brothers of the Reliance Group of Industries as well as Xmas syndrome are the other factors. During the Xmas holidays, the FII funds generally turn into sellers in order to book profits to include these in their annual reports. Domestic mutual funds also generally keep low profile during this period. The market, however, to perk up during the second week of the new calendar year. This view assumes that the amendments to the Patent Law by Parliament (or made through an Ordinance) are favourable to the multinational companies.
Shares to watch
Vardhman Group has planned large expansion. The company will set up a new plant in Madhya Pradesh with an investment of Rs 120 crore. The Mahavir Spinning has also approved a Rs 725 crore expansion plan in Budhni near Sehore. The Vardhman Group of Industries is very strong in its management capacity and financial background. Bata has planned a rights issue of about Rs 60 crore next year, which will be used for restructuring the company and to turn it into a profit-making concern. Tata Tele-Services has also planned a rights issue with Tata Sons subscribing to the largest chunk of shares. The company has excellent growth prospects in the near future. Majestic Auto, a loss making company so far, is now expect to turn its corner as two of its loss making moped brands are being merged with Hero Motors. Gujarat NRE Coke has also moved up from Rs 116 per share to Rs 140 per share on reports that it is planning vast expansion and a rights issue.
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FIIs Rites-Ircon deal |
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