New Delhi, October 1
India could amend controversial rules on tax avoidance within 20 days, Finance Minister P Chidambaram said on Monday, potentially ending months of uncertainty after the Prime Minister ordered a panel to clarify the tax proposals that had hurt investors’ confidence.

The finalised General Anti-Avoidance Rules (GAAR), which would target companies and investors routing money through tax havens, are expected to be softer on investors than originally proposed in the budget.

India's moves to toughen tax collection had triggered an outcry from global industry groups and were blamed for a drop off in investment flows into India. In response, Prime Minister Manmohan Singh set up the Shome committee to look at ways of addressing concerns that the new laws were arbitrary.

Chidambaram did not give details of the Shome committee report delivered to him on Monday but sources said the final version was similar to a draft that recommended watering down some rules and deferring implementation for three years. "I expect Stage 1-finalisation of our views on the final report (by Shome Committee) to take place in next 10 days. Stage 2-the final GAAR rules would take another 10 days because that would require vetting by the Ministry of Law. So at the moment, I would like to complete Stage 1 and Stage 2 ... that would be done by the end of this month," Chidambaram told reporters here.

Chidambaram said, we would first finalise its report on GAAR and then consider if there was a necessity to amend the Income Tax Act.

On Monday, panel chief Parthasarathi Shome also gave the Finance Minister a draft report on the issue of retrospectively taxing overseas deals involving local assets. Chidambaram said the draft could be made public in 10 days. In a move seen as targeting Vodafone, India passed a law in May to seek taxes from such deals.

The law followed a Supreme Court ruling that said Vodafone, the largest overseas corporate investor in India, did not have to pay tax in on its $11 billion deal to enter the country.

India had sought $2.2 billion from London-listed Vodafone in tax after its purchase of Indian assets from Hong Kong-listed Hutchinson Whampoa Ltd. Vodafone said the deal was between two overseas entities, and India had no such right.

"Do we resolve it through a settlement or through arbitration or litigation, is a matter that has to be considered," the minister said.

Mumbai/New Delhi, October 1
Ailing Indian carrier Kingfisher Airlines today completely suspended its operations on safety grounds after the Director General of Civil Aviation ordered it to get each one of its flights certified by an aircraft maintenance engineer before take-off.

Civil Aviation Minister Ajit Singh said that the carrier would not be allowed to fly if safety norms were flouted. No Kingfisher flights would take off till certified engineers gave a green signal on the safety of aircrafts, he said, warning: “We cannot compromise on safety”. “If there is any safety issue then we will shut down the airlines,” he cautioned.

Disruptions of already scaled-down services prompted the Directorate General of Civil Aviation Arun Mishra to summon airline chief executive Sanjay Agarwal with a status report of the airline on Tuesday. Sources said the aviation ministry would take a final call on shutting down the airline after considering all the issues. According to sources here, the DGCA issued the order on Sunday night after airlines' engineers went on strike over non-payment of salaries.

The airport authorities indicate that the airline has just seven aircrafts in operation with several others lying idle for want of spare parts. Leasing companies have taken possession of some of the aircrafts after Kingfisher defaulted on their payments.

Salary payment has also been an issue with national carrier Air India, prompting Ajit Singh to recently issue instructions to the management to clear the staff dues.

However, in the Kingfisher’ case the staff appears to be fighting a lone battle. The management, which has not paid salaries to most of its staff since March, had a meeting with employee representatives last week, but failed to get any firm assurance.

New Delhi, October 1
In a bid to boost the insurance industry, the Finance Ministry today said it is considering several tax breaks to make insurance products more attractive.

The government is trying to make financial products like mutual funds and insurance more prevalent to reduce the dependence of investors on gold, as savings in gold add to the import burden.

The Finance Ministry today announced several steps to give a fillip to the insurance sector in consultation with the insurance regulator, IRDA. These include offering simple and easy to understand products, increasing the role of banks in selling the policies, improving distribution network, making the Know Your Customer norms easier, allowing insurance companies to invest in infrastructure SPVs and considering tax breaks.

The incentives being considered include exempting first year premium from service tax and extending the scope of tax exemption scheme to cover more life insurance policies.

Finance Minister P Chidambaram said the tax authorities have been asked to examine these proposals in the next ten days so that decisions may be announced shortly thereafter.

Chidambaram further said he has asked the Central Board of Excise and Customs (CBEC) to look at the possibility of reducing service tax on first year regular premium as well as single premium policies.

The revenue department would also look into the proposal of exempting annuity policy from service tax in line with National Pension Scheme (NPS).

It is also being considered whether, in addition to NPS, some insurance pension products may be included in the separate limit over and above the limit of Rs 1 lakh under Section 80C of the Income Tax Act for the purpose of tax deduction on the premium. Further, whether contribution made to post retirement medical scheme offered by insurance companies may be allowed as deduction will also be examined.

"The CBDT will examine whether existing policies can be grandfathered whenever changes are made to direct tax laws, so that changes will apply only to policies issued prospectively," he said.

He had earlier met IRDA chairman J Hari Narayan to work out steps to boost the insurance sector. The proposed amendments to the insurance laws were also discussed with IRDA, Chidambaram said, adding, some of the issues raised by the insurers have already been addressed in the Insurance Laws (Amendment) Bill, 2008, which is pending before Parliament. 

Following a study, the civil aviation ministry is convinced that there is a scope for regional airlines to operate its flights from Tier-II and Tier-III airports. In view of this trend, the Directorate General of Civil Aviation will issue 25 licences in a phased manner to non-scheduled airlines.

One such regional airline has already started its operations from Amritsar to Chandigarh. According to analysts, initial operations of the airline have been successful and it is planning to start its services on other routes, Dharamshala, Dehradun and Raipur, as well.

According to International Air Transport Association, despite slowdown in the sector worldwide, India continues to maintain a strong annual growth. While upgrading infrastructure and improving connectivity, the DGCA must stipulate norms for proper maintenance of aircrafts and to avoid mishaps.

History shows that when aviation sector was opened in the early 1990s, many airlines such as MDLR, Jagson, Paramount entered in the market but they could not withstand the competition and folded up abruptly.

The DGCA should explain rules pertaining to the Regional Schedule Operator Permit to the prospective airlines. The non-schedule airlines are not in competition with full-fledged schedule airlines but they act as feeders to these carriers. They also have a 'flexible' schedule of operations. The owners must observe maintenance audit of aircrafts and organise fitness tests for pilots for systematic flights’ operations.

New Delhi, October 1
Slowdown in the western economies pulled down India exports for the fourth month in a row in August to 9.74 per cent, making the task of achieving $360 billion target in the current fiscal difficult.

Besides, reflecting slowdown in the domestic economy, imports too dipped by 5.08 per cent to $37.95 billion, from $40 billion in August 2011, resulting in a trade deficit of $15.7 billion for the month.

The decline in the country's shipments comes amid India's economic growth slipping to 5.5% in the first quarter of this fiscal and subdued industrial output.

However, the decline in exports in August is lower than that of the previous month, when the exports contracted by 15%.

Commerce Secretary S R Rao had recently said the incentives announced in the foreign trade policy was the reason for the reduced decline. The government had extended 2% interest subsidy to exports in the policy besides other benefits.

In April-August, too, the shipment dipped by about six per cent to $120 billion from $127.5 billion in the same period last year.

During the first five months of the fiscal, imports contracted by 6.2 % to $191.1 billion. Trade deficit during the period stood at $71.1 billion.

India's apex exporters body FIEO said given the global scenario, meeting the exports target of $360 billion for this fiscal looks difficult. — PTI

Mumbai, October 1
Laxmibai Karanure sifts through the heavy bangles and necklaces that make up her life savings, working out which pieces to sell from the 100 grams of gold she holds to tide her family over during the drought at their farm.

The 55-year-old Karanure's heirlooms will add to a booming recycling trade, which could account for up to half of India's consumption this year and boost a fledgling refining industry.

The surge in recycling also comes as the country looks set to be overtaken by China as the world's biggest consumer of gold, after a hike in import duties in March and a rapidly weakening rupee pushed local gold prices to record highs.

The potential for recycling is huge with 1.2 billion people estimated to have stored up about 20,000 tonnes of gold in the form of jewellery, coins and bars, according to an estimate from industry body the World Gold Council - about three times the holdings of the US Federal Reserve.

"We have no other option but to sell our gold in these tough times," said Karanure, speaking from her village in Chikkodi in Karnataka.

She could get nearly Rs 150,000 ($2,800) from the sale of her bangles and necklaces, a vital source of income after drought this year has slashed rural incomes.

The Bombay Bullion Association (BBA) estimates the supply of recycled gold in India will hit 300 tonnes in 2012, up about five-fold from 2011 and the highest in more than a decade.

"There won't be new demand from farmers and scrap will flow in the market," said Prithviraj Kothari, president of the BBA, made up of 400 bullion dealers and traders. "In coming years, 50 per cent of the requirements will be met through scrap."

New Delhi, October 1
The sentiments in the car market continued to remain low with the sales remaining flat with only the market leader Maruti Suzuki India Ltd and Mahindra and Mahindra registering some growth.

The continuing high interest rates and the rising fuel costs being the main contributors to the fall in sales.

While domestic sales at MSIL grew 12.7% from a year ago to 88,801 vehicles in September, M&M’s automotive division sold 45,263 units, posting 10% growth.

MSIL’s performance was pushed by the popularity of its Ertiga multi-utility vehicle that was launched in April with the company selling 7,224 units in September. The passenger car segment saw a modest growth of 3.4% to 68,957 units. The entry-level Dzire sedan drove numbers in the segment, with sales of 11,697 units, registering a growth of 24.3%.

Buoyed by demand for utility vehicles, M&M’s passenger vehicle business grew 22% to 23,808 units.

General Motors India continued to post declining sales, which were down 36.13 per cent to 7,403 units.

Same was the case at Ford India which posted a flat growth for September, selling 7,794 units.

Tata Motors’ total sales (including exports) of Tata commercial and passenger vehicles in September 2012 were 75,773 vehicles, lower by 4%, over September 2011.