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VAT panel to meet Chidambaram
Hyundai to enter used-car segment
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Aviation Notes
Reliance Info may merge with RCoVL
NTPC, TERI pact
Investor guidance
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VAT panel to meet Chidambaram
New Delhi, March 11 However, before that, the states commissioners of commercial taxes would meet among themselves on March 18 to form a view on mechanism of any such package, Empowered Committee on VAT Chairman Asim Dasgupta told reporters here. During the meeting with the Finance Minister, the committee would also take up the issue of compensation to states for losses incurred after they cut VAT or sales tax on LPG to 4 per cent because of a proposal in the Union Budget 2006-07. The Budget has brought LPG under the “declared” goods under the CST Act, which will make it mandatory for states to cut tax on LPG to 4 per cent. “The proposal is good for customers. But there is revenue loss for state governments. The states are demanding 100 per cent compensation. And I think it is only air,” Mr Dasgupta said after a meeting of the Empowered Committee. Sources said states in aggregate would lose around Rs 200 crore because of cut in tax on LPG. Mr Dasgupta also said there is no change in the stand of five BJP-ruled states to implement VAT from April 1, 2006. The BJP-ruled states of Chhattisgarh, Gujarat, Jharkhand, Madhya Pradesh and Rajasthan have decided to switch to the VAT regime from the next fiscal. In fact, the Rajasthan government announced its decision to embrace VAT from April 1, in its Budget proposals. Asked when the meeting between the VAT panel and the Finance Minister was scheduled, Mr Dasgupta said it has to be held before March 31 since the proposed cut in CST would come into effect from the next fiscal. CST, which is imposed on inter-state movement of goods, will be brought down to 2 per cent during 2006-07 from the current level of 4 per cent. The reduction would result in a loss of Rs 9,000 crore to the states. The CST is scheduled to be completely removed from 2007-08. Finance Minister in his Budget speech had said the loss of revenue due to cut in CST may be compensated through monetary and non-monetary measures which, taken together, will ensure that states’ revenues remain buoyant. “Once the Empowered Committee and the government reach an agreement, I shall return to the house with firm proposals, including legislative changes and a supplementary demand,” Mr Chidambaram had said. The panel had earlier proposed a slew of options like VAT on sugar, tobacco and textile, which attract additional excise duties and are now out of the purview of VAT. It had also proposed VAT on imports. VAT on imports, however, requires Constitutional amendments. Moreover, government has to factor in the WTO commitments of maintaining a maximum bound tariff rate for imports, which will include both central and state taxes. In an earlier meeting, the states had also demanded more powers to collect taxes, especially Service Taxes, resulting in an increase in the overall tax kitty that would enable the states to get a higher amount as part of their share from the central divisible pool. — PTI
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Hyundai to enter used-car segment
Panaji, March 11 "Hyundai is planning its own trade-in which will offer second hand Hyundai cars and also offer upgrade facility to its customers," said Adit Garg, HMIL's senior officer (sales). Addressing media here at a road show in Goa, he said the company was yet to name this new arm, which would be set up in association with the Hyundai dealers across the country. Mr Garg said the company was targeting 23 per cent of the used-car market and would adopt customer-friendly strategy. He added that they are also aiming at middle-class customers by launching special non-AC Santro car. The company has shipped in its two yet-to-be-launched vehicles — ultra-luxury sedan Azera and the sports car Coupe — from Korea for the road shows, he added. Meanwhile, a senior company official today announced company’s plan to set up a second plant in Tamil Nadu and said India would soon become a global hub of small cars. During the inaugural function of a showroom here, Hyundai's southern region Senior General Manager, Young Jin Ahn, said the new state-of-the-art plant in Sriperumbudur near Chennai would produce 3 lakh units per annum and by the end of 2007, the total production would reach 6 lakh per annum. He announced that the company would be rolling out its "one millionth" car very soon. In a separate development, Japan-based NEC Corporation today announced its plans to set up a subsidiary here with an investment of $2 million to expand its IT and network business. "We are establishing a full-fledged subsidiary in New Delhi with initial capital investment of $1million," NEC Corporation senior Vice-President Norihiko Kunishima told reporters in New Delhi. — PTI
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Nokia handset plant inaugurated
Sriperumbudur (Tamil Nadu), March 11 “We anticipate that there will be a long-term sustainable demand for mobile telephony in the fast-growing Indian market,” Nokia’s Chief Executive Jorma Ollila said at the launch of the plant in Sriperumbudur, nearly 50 km from Chennai. “I am confident that our manufacturing facility in Chennai will enable us to reduce our time to market,” he said. Nokia’s two suppliers, Aspocomp group and Perlos Corp. will invest $70 million and $12 million, respectively, to set up a printed circuit board facility and a mechanics factory. The plant in Sriperumbudur is the Finnish giant’s fourth handset factory in Asia and 10th globally and Chennai is fast becoming a magnet for high-end hardware manufacturing. Nokia also said that two of its suppliers were commencing operations within the Nokia India Telecom Industry Park here. Nokia also announced that a total of 8 to 10 global and domestic component suppliers and service providers will be located within the Nokia India Telecom Industry Park. The Nokia Telecom Industry Park is estimated to generate 10,000 job opportunities when it is in full operation and will ensure that the Nokia India Chennai factory has a consistent supply of material and services from reliable, collaborative sources of global and local suppliers. Union IT and Communications Minister Dayanidhi Maran asked Finnish businesses to set up automobile and communication projects in India. Conveying this to visiting Prime Minister of Finland Matti Vanhanen, he said India had all infrastructural facilities required for setting up such industries. Vanhanen, who came to the city to inaugurate Nokia’s first manufacturing facility in the country, called on the Union Minister before he left for Sriperumbudur to inaugurate the plant. He is on a six-day visit to the country.
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Aviation Notes by K.R. Wadhwaney Airlines, operating on international routes, have been resorting to a shrewd ploy in the name of “Taxes” to hoodwink gullible passengers. They sell tickets on ‘reduced’ fares to woo passengers but levy exorbitant quantum of taxes while ensuring high margin of profit. The in-depth study shows that taxes are nothing but to fill the kitty of airlines at the cost of passengers. The fare on the route between Delhi and New York via London, for example, varies between Rs 30,000 and Rs 35,000 in addition to Rs 14,000 as taxes. In reality, a passenger has to pay about Rs 50,000 on this sector. This is not all. Different carriers levy different quantum of taxes. British Airways, for example, levies Rs 14,065, Austrian Rs 14,725, Lufthansa Rs 14,770 and Air France Rs 13,200. It is not understood as to why Lufthansa should levy Rs 14,770 and Air France Rs 13,200. What are these taxes? A large — perhaps the largest — quantum of taxes is levied as ‘surcharge on fuel’. What is this surcharge on fuel when it is already added in fares. One day, the airlines may add perks to cockpit crews and cabin crews as part of taxes! According to aviation analysts, this is a wholesale racket operating within the framework of fares. The travel agents, already under pressure for reduced commission from 9 per cent to 5 per cent, are denied commission on taxes. There was a time when two fares were operative in this country. They were IATA (International Air Transport Association) fares and bilateral (between two countries) fares. Following widespread complaints of ‘hera-pheri’, another fare in the name of DGCA (Director-General of Civil Aviation) was introduced. That was the time when GSAs (General Sales Agents) got 12 per cent commission apart from over-riding commission and the IATA agents got 9 per cent commission. It is time the Ministry of Civil Aviation and DGCA examine this ‘racket’ in the name of ‘taxes’. It is understandable if airport charges are levied as taxes but why should surcharge on fuel be charged as taxes? Similarly, there are many anomalies obtaining in the structure of domestic fares. There is virtual jungle raj. In the name of open skies and open fares, mushroom airlines and their agents are selling tickets on non-operative routes. This is virtually down-right cheating apart from causing harassment to bona fide paying passengers. One private airline recently sold tickets for the Kolkata-Imphal sector without airline initiating operations. The passengers had to reach the Kolkata airport to know that they were ‘taken for a ride’.
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Reliance Info may merge with RCoVL
Mumbai, March 11 In a communication to the stock exchanges this evening, RCoVL said the Board "would consider a proposal for the reorganisation of RCoVL Group of companies, including the amalgamation of certain companies, in particular Reliance Infocomm." The reorganisation, if approved by the Board, would be subject to all requisite permissions, sanctions and approvals, including by the shareholders of the companies concerned, the RCoVL statement said. Immediately after getting listed, Anil Ambani had announced an investment of over Rs 15,500 crore over the next three years to expand its telecom operations in the country. — PTI
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NTPC, TERI pact
New Delhi, March 11 The agreement was signed by Mr R.K. Sikri, General Manager, NTPC, and Mr Sameer Maithel, Associate Director, TERI. Meanwhile, Union Minister of Power Sushil Kumar Shinde has informed the Lok Sabha that NTPC envisages to set up power projects with a capacity of over 15,000 MW in Uttaranchal, Bihar, Tamil Nadu, Kerala, Arunachal Pradesh, Chhattisgarh and Orissa.
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Investor guidance securities transaction tax by A.N. Shanbhag Q: In the new Budget, what changes have been carried out on Securities Transaction Tax (STT) and what are the implications of the same? — Shrawani A: Securities Transaction Tax has been increased by 25 per cent across-the-board. This means that redemption of units of a mutual fund would attract STT of 0.25 per cent as against the erstwhile 0.2 per cent. Similarly buying and selling equity shares on the exchange would attract STT of 0.125 per cent as against the earlier 0.1 per cent. For investors, this directly raises the cost of investing by 0.25 per cent as STT cannot be set-off or claimed as a deduction. Neither can it be added to the cost for capital gain purposes. Close-ended funds
Q: In the new Budget presented by our FM, what are the changes carried out for close-ended funds? — Shrikant Deshmukh A:
Close-ended equity oriented funds will be no longer subject to dividend distribution tax and now will be on par with open-ended equity oriented funds. This was a salutary move much needed to encourage long-term funds in the market. There was no reason why close-ended funds were left out from the tax benefit. However, the Fund of Funds (FoF) product still suffers from the same problem, in as much as, the same is not eligible for long-term gains exemption or exemption from distribution tax. If close-ended funds could have been addressed then why not
FoF?
Equity-linked funds
Q: We hear that there was some change in the new Budget related to the definition of open-ended equity-oriented fund. Can you throw some light? — Shailesh Nanda A:
The definition of equity-oriented fund has been amended to mean those funds where the equity holding in domestic companies is to the extent of more than 65 per cent. The earlier limit here was 50 per cent. This provision that makes a risk averse investor willy-nilly adopt more risk. So far equity funds meant those funds, which had more than 50 per cent investments in equity shares. Therefore, those investors who were slightly risk averse went with Hybrid funds or Balanced Funds instead of a pure equity scheme. Now the 50 per cent limit has been hiked to 65 per cent with effect from June 1, 2006. It needn’t even be said that the fund manager concerned is left with no option. Else, the long-term capital gains and distribution tax benefit is lost. However, investors sure have the option either to continue or to opt out. Three months to go and counting.
Pension funds
Q: In Budget 2006, Section 80CCC limit has been hiked? Is it over and above the Section 80C limit? — S. R. Goyal A: The earlier limit of Rs 10,000 in respect of pension funds u/s 80CCC has been removed. Now, investment in pension funds will be having the ceiling of Rs 1 lakh along with other instruments under Section 80C. The earlier deduction was too low and would have resulted in an insignificant pension income. That’s why issuers too were not too keen on promoting this product. While on the one hand it is a good move to remove the sectoral ceiling of Rs 10,000, too many instruments crammed inside Section 80C make it unviable. In any case, note that Section 80C + Section 80CCC + Section 80CCD = Rs. 1 lakh still remains.
Housing loan
Q: Please refer to one of your query published in The Tribune on February 19 regarding HRA exemption and housing loan rebate can be claimed together. Please clarify me on these points. 1) For claiming the above, whether the assessee has to calculate the fair market value of house for rent realised or he can show the entire principal amount under the loss from house property. 2) For claiming the deduction u/s 80C the property has to be self-occupied or not. 3) As the assessee mention in your query that he has not occupied the house till date. Whether he can claim both deduction of principal amount u/s 80 C and interest amount u/s 24 B — Manjeet Singh A: 1. The annual value for self-occupied house (or the only house the owner has and is not rented out is considered as deemed self-occupied) is nil. He may stay in rented premises for convenience of employment. 2. The house need not be self-occupied for claiming deduction u/s 80C for repayment of the housing loan amount. 3. The deduction u/s 80C and the interest u/s 24 are allowed only when the income from house property becomes chargeable to tax. In other words, the construction should be complete, the flat should be ready for occupation and the municipal annual value is known. It is not necessary that the house should be occupied.
Advance tax
Q: I retired from government service on July 31, 2005, and as such my total income during 2005-06 shall be full pay for the first five months and pension for the remaining seven months besides interest on deposits. I can calculate my total salary and pension but can’t calculate grand total income unless I get interest paid calculations from bank/post office concerned which I shall know only after March 31. As far my own calculations a little amount shall remain on which I would be liable to pay income tax even after savings but exact amount can only be known after getting the interest paid certificates. Please advise: 1. Can I pay the required income tax even after March 31 after receiving the interest paid certificate and knowing the exact amount on which I am liable to pay the tax? If so, then up to what time? 2. If not, then how to calculate the exact grand amount of income and income tax thereupon without knowing the exact interest amount? — Balbir Singh Batra A: Where an assessee, who is liable to pay advance tax, has failed to pay it or where the total advance tax paid is less than 90 per cent of the assessed tax, simple interest @ 1 per cent for every month or part of a month comprised in the period from April 1 next to the date of assessment, on the assessed tax or on the amount by which the advance tax paid falls short of the assessed tax. In the instant case, you may pay advance tax on estimated income including interest. If there is a marginal tax paid extra, the same can be claimed as a refund while filing tax return.
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