Government to make changes in section 56(2) of Income Tax Act in a bid to promote startups
The government has removed the so-called ‘angel tax’ for investors providing funding to startups under its ambitious plan to boost entrepreneurship and job creation in the country. Funding to startups, notified under the government-approved plan announced by PM Narendra Modi in January, will not face tax even if it exceeds the face value. Resident angel investors, domestic family offices or domestic funds which were not registered as venture capital funds can now heave a sigh of relief and not worry about the invested amount getting taxed. Under existing rules, funds raised by an unlisted company through equity issuance are covered under this tax to the extent the amount is in excess of the fair market value. Such extra inflow is taxable as “income from other sources” under Section 56(2) of the Income-Tax Act and charged the corporate tax rate, resulting in an effective tax of over 30%. The venture capital industry has been lobbying for removal of this tax, terming it a big deterrent to investments. In many cases, the valuation of startups is far in excess of market value as it is based on the promise of the idea and not the immediate worth. In such a case, the startup would end up losing a chunk of the inflow to this ‘angel tax’. The Central Board of Direct Taxes has issued a notification to this effect, exempting startups raising investments from the rigours of Section 56(2)(viib). “This has been long awaited and is a very welcome step. The abolition of this so-called ‘angel tax’ has been a long-standing demand of the industry,” said Amit Maheshwari, partner, Ashok Maheshwary &Associates LLP. However, earlier investments can still be questioned by tax officers as being overvalued in the light of declining valuations globally and in India, he said. Michael Raffl Womens Jersey
Sellers seek regulatory body for online marketplaces
The All India Online Vendors’ Association (AIOVA), a lobby group of sellers on online marketplaces, urged the government to set up a regulatory body for ecommerce. They also requested to resolve certain taxation issues faced by them during a meeting with Jayant Sinha, minister of state for finance. According to the seller body, online vendors end up paying taxes on commission charged by marketplaces and courier charges in the form of value added tax and service tax. They requested relaxation in these taxes. “We are paying tax on sale value and on expenses such as commission, courier and other services which is approximately 25-30% of the cost of sales. Hence we are facing double-taxation. Reducing those taxes will reduce our cost of sales,” said the spokesperson of the online vendors’ association. The representatives of 1,000 medium and large sellers also complained about “mismanagement by marketplace executives and lack of interest in solving the problems with mutual consultation”. The group requested the need for setting up a regulatory body for ecommerce in order to take up issues pertaining to the sector in the lines of those for telecom, insurance and markets. A letter presented to the minister requested: “Safeguard the interest of stakeholders, make marketplace accountable to a regulator, and take seller association in consultation while bringing in policies related to ecommerce marketplaces.” According to the online vendors’ association spokesperson, on issues that weren’t related to the finance ministry, the minister directed them to the concerned departments. Tyus Bowser Jersey
CAIT wants separate ministry to govern domestic trade
The Confederation of All India Traders (CAIT), in a communication sent to Prime Minister Narendra Modi, has urged for a national policy for retail trade along with a separate ministry for internal trade. It has also suggested that foreign trade should be transferred to ministry of external affairs and ministry of commerce should be designated to look after the domestic trade. The CAIT has also suggested that MUDRA should be made an independent regulator since loans under MUDRA are yet to reach the actual beneficiary targetted under the original plan. Agreeing that e-commerce is a promising business of future, it has called for specific guidelines and a law for governing domestic e-commerce. CAIT has suggested a mass national campaign by the government for encouraging digital payments in the country should be taken up. It says this will curb curb black money. “The CAIT in association with MasterCard and HDFC Bank has already launched a national campaign for cashless economy since last more than one year in line with your Digital India vision,” says the letter to Modi. Matt Niskanen Jersey
PM Narendra Modi sets infrastructure targets for ministries to speed up action
In an ambitious drive to step up infrastructure investment and speed up execution, Prime Minister Narendra Modi has set targets for key ministries that have to be delivered by end of the financial year to effect visible change on ground. “Targets for infrastructure sectors have been approved by the Prime Minister and communicated to ministries. These will now be regularly monitored by NITI Aayog and reviewed by the Prime Minister himself on a quarterly basis,” a government official told ET. The high-level intervention comes after NITI Aayog made sectoral presentations to Modi last month, highlighting tardiness in many areas. Targets were communicated last week to infrastructure sector ministries of railways, roads, ports, civil aviation and others, with detailed timelines. The Prime Minister has identified 26 action points under 12 heads for roads and 36 action points for railways under about a dozen heads that need quick action by ministries to implement them in a time-bound manner. NITI Aayog presentations had flagged the progress in the last two areas —shortcomings and action points. Similar targets have been set for others as well, such as the number of villages that have to be electrified. Deadlines for these actions range from three months to up to three years for different key actions and there is clear indication that Modi does not want any slippage. Some big-ticket interventions include raising long-term funding for road projects, developing a contractor rating system that would incentivise early project completion, bringing about organisational reforms in Indian Railways, improvement in governance structure by setting up an independent regulator to correct tariff imbalance in railways. The ministry of road transport and highways has been asked to finalise highway network expansion and operations plan for next three years by September this year, while accelerating the rate of construction of roads in the North-East by six months to November 2016. Indian Railways has been asked to increase the total lines commissioned from 7-8 km per day to 10 km per day by FY2017 and 15 km per day by FY2019 besides increasing the average speed of freight and passenger trains by 5 km per year every year for next five years. The meeting has also tasked the ministries for roads and finance to expedite finalisation of PPP renegotiation framework and public contracts bill by September 2016. NITI Aayog has to steer progress and has — at a recent meeting with Modi — already identified nodal ministries/divisions that would be made accountable for all hits and misses. In absence of private investment, the government is now counting on public investment to drive growth and has a spending target of Rs 7 lakh crore Rs 3 lakh crore from budget and Rs 4 lakh crore from resources of public enterprises. It is keen that this amount is fully utilised. Chris McCullough Womens Jersey
Gujarat collects over Rs 2 crore in a month in entry tax from e-tailers
From May, the state government has begun collecting entry tax on items bought online by consumers from Gujarat, and in a month, has been able to collect above Rs 2 crore by taxing e-tailers. State authorities are hopeful that the collection would increase manifold once the government sorts out the online sales and physical check-post tracking system. The new levy was introduced in this year’s state budget to provide a level playing field to local dealers and to tax e-commerce transactions. The state commercial tax department, however, could not start collecting the tax from April itself due to some technical glitches, said officers. The entry tax on online purchases is calculated on the basis of difference in VAT rates between Gujarat and the state from where the item was sent. Though some e-tailers have challenged the move in high court, there has been no interim stay on the tax. Sources said Amazon India is one of the major players currently complying with the tax, while many big e-tailers are taking a wait-and-watch approach, given the cases pending in the high court. The state commercial tax department, however, has asked all e-tailers to shell out entry tax. P D Vaghela, commissioner, commercial tax department, said, “We have implemented the entry tax on online goods sold in Gujarat from the April 1. However, due to some software issues, we could not collect entry tax for the first few days. The collection was around Rs2 crore in May, but we hope it will increase considerably, as we have allowed companies to set their system.” “We have asked all the companies to pay advance tax as well as send their weekly sales details. We are cross checking them with the goods movement data at check posts for all online companies. We are charging only the difference between the taxes here and in other states. One or two companies have challenged it in the high court, but the court has not given any stay. So, all the companies have started paying entry tax,” Vaghela added. How the entry tax is calculated? The new levy was introduced in this year’s state budget to provide level playing field to local dealers and tax e-commerce transactions. The state has now worked out a formula and decided to charge difference in VAT rates between Gujarat and a state from where a particular product is supplied as entry tax. “Maharashtra charges 5% VAT on mobile phones and Gujarat has 15% VAT, the difference works out to be 10%. If someone from Gujarat buys a mobile phone through an e-commerce website and it is sold by a dealer in Maharashtra, the e-tailer will have to pay differential 10% as entry tax. The VAT can then be charged from the consumer,” explained a senior government official. Chris Jones Authentic Jersey
₹500-crore annual subsidy to fuel regional flights: Aviation Secretary
The Regional Connectivity Fund (RCF) proposed to offset the losses incurred by airlines for connecting un-served airports is likely to have a corpus of ?500 crore per annum. The Fund will be aided through a cess in order to subsidise flights connecting un-served airports under the Regional Connectivity Scheme proposed in the Civil Aviation Policy. The scheme has proposed capping air fares at ?2,500 for one-hour flights connecting un-served airports. “We will give this subsidy for three years, time enough for the airlines to know whether the route will work or not,” said Civil Aviation Secretary RN Choubey, adding that “ideally I would have liked the fiscal incentives to be in sync with the aviation policy period of 10 years, as most of the acquisition of planes happens through leasing and not outright purchase. For leasing to be successful, it normally should be for 10-12 years.” “However, we have promised that the fiscal incentive can be extended for 10 years. But, people don’t invest on promise. This is one aspect where I succeeded only partly. But, there are several aspects where the ministry succeeded quite well,” he said. Choubey told BusinessLine that the amount that will help subsidise flyers from tier-II and tier-III cities. It will be collected from all passengers except those flying to the North-East, island territories, and from flights on aircraft smaller than 80-seaters. Viability gap funding The corpus from this cess will go to the Airports Authority of India (AAI). Under the new scheme, the AAI will transfer the amount collected as Viability Gap Funding to airlines that fly to airstrips that are now un-served. “We are looking at it as a demand-driven thing,” he said, while accepting that even the government does not have a very good idea about how many of these un-served airports would come forward. Choubey also fears that the western and southern regions, which connect small airstrips well, may walk away with this scheme. “We are ensuring sufficient dispersal as well. We will have that check,” he added. India has nearly 450 airstrips, of which only 80 airports operate with scheduled commercial airlines. The scheme’s benefits are not applicable to airports where flying is currently happening. The rest — 370 un-served airports — will be eligible for the scheme. The idea is to develop these as no-frills airports. Initially, the plan is to develop 60 airports, including 10 under AAI, with government support. “If that number turns out to be more than 60, the better,” Choubey added. No additional charges Moreover, several measures have been suggested in the policy to keep the cap at ?2,500, he explained. “The excise duty on ATF sold at the un-served airports will be at 2 per cent; VAT on ATF will not be more than 1 per cent; service tax on the tickets will be at 1 per cent. Besides, there will be no landing, parking, air navigation charges on the un-served airport by the AAI,” he said. On whether States will be wiling to let go of VAT, he said: “They will be. In an airport where even one flight doesn’t come and, therefore, not a drop of ATF is sold, they don’t get one paisa of VAT. There is no revenue foregone.” While Choubey is looking at competition in the sector, he also expects the national carrier, Air India, to rejig its strategy. “Air India has done well largely due to the fall in crude prices. They have made an operational profit. They will make a net profit in 2018-19, which, as per the government’s turnaround plan, is to come in 2021-22. They will be three years ahead,” he said.
Chennai-Delhi Cargo Express flagged off
The first time-tabled train from Chennai (ICD Tondiarpet) to Delhi (DCT Okhla) was flagged off today from Tondiarpet. The service will benefit trade with scheduled transit time at no additional cost being incurred. The trains will leave on every Saturday at 7 pm from Tondiarpet to reach Okhla at 8 am on Tuesdays covering the distance in 61 hours. In the return direction, trains from Okhla will leave on every Saturday at 1 am to reach Tondiarpet at 3 pm on Mondays covering the distance in 62 hours, the release said. The service will help loading of perishable cargo like vegetables, fruits and pharmaceuticals in specially designed ventilated containers and for parcel traffic, says a press release from Southern Railway. In fulfilment of his Budget commitment, Railway Minister Suresh Prabhu on June 15 flagged off the first time-tabled container train (called Cargo Express) of Container Corporation of India (Concor) from Delhi to Bengaluru and from Delhi to Chennai. This initiative was done in coordination with Concor to streamline freight traffic and attract parcel traffic being moved by road to rail, the release said. Michael Johnson Authentic Jersey
Krishna ZP chief feels heat as airport oustees up the ante on govt
The oustees of Gannavaram airport expansion on Saturday turned the heat on Krishna Zilla Parishad chairperson Gadde Anuradha, demanding a fair deal for their properties acquired for the project. Around 400 plot owners of two different ventures convened a meeting at Allapuram near the airport by inviting the ZP chief. They made a futile attempt to involve local MLA Vallabhaneni Vamsi of the ruling TDP who did not turn up citing preoccupation with a pre-arranged assignment. Uppala Vedavati, president of the Airport Vistarana Badhitula Sangham, petitioned Anuradha on behalf of the victims with a request for allotment of plot-to-plot compensation for the victims. She said when the government is treating house plots as agricultural lands and offering compensation it would hardly do justice to plot onwers. The cost of the plots is five times more than what the government is offering for agricultural lands. For farmlands the government is offering Rs 39 lakh per acre. Steven Stamkos Womens Jersey
UP govt to directly sell intra-state flight tickets
To provide wings to its plan to start intra-state air service in Uttar Pradesh, the Akhilesh government is all set to introduce a system in which it will sell tickets directly to flyers after having already paid per-hour charges to service providers. Tourists flying to destinations like Agra, Varanasi or Kushinagar from Lucknow will have to buy tickets from the UP tourism department. According to principal secretary for tourism, Navneet Sehgal, the government will underwrite all seats and, in turn, give per-hour flying charges to airlines. Once UP tourism takes all the seats, it will sell them to passengers through UP Tour, the department’s ticketing agency. Mr Sehgal said UP Tour will have a special website and counter for booking tickets. The official said that bids will soon be invited from airlines and tenders will be allotted to the company that quotes lowest flying hour rates. The new scheme, he said, would be passenger-friendly because the promoters will not be concerned about sale of tickets. The Akhilesh government has brought in changes in policy for introducing the inter city airline services to revive its nearly dumped policy. The tourism department had introduced a scheme to launch intra-state flights two years back but it never took off since investors and owners of private airlines showed no interest on grounds of feasibility. The state government has now repackaged the scheme and will table it for approval in the next cabinet meeting. Zack Martin Jersey
Growth blips in regional connectivity radar
Come July, there will be yet another regional airline opening shop in the country. Air Carnival will not be a player connecting big cities with each other, but one that tries to make inroads into less connected and unconnected air routes. Air Carnival is only the latest entrant into the regional aviation sector. There are already players like Air Pegasus, TruJet and others that seek to tap into the short haul segment. The new National Civil Aviation Policy (NCAP), with its unarguable emphasis on regional connectivity and affordability might well foster an environment where flying becomes mainstream for thousands of the unconnected. “The regional connectivity scheme (RCS) under NCAP will connect India’s remote unconnected regions, boost tourism, create jobs and stimulate the economy in Tier 2-3 cities,” observed Amber Dubey, Partner, KPMG India and an Aerospace and Defence expert. Shyson Thomas, Managing Director, Air Pegasus says there is immense potential for anyone gutsy enough to enter the segment. “While mid-segment and large players with larger aircraft cannot get sufficient passenger load to realise profits, those with smaller aircraft of 60 to 70 seats can easily do so,” he said. Air Carnival is entering the Madurai to Chennai sector with an ATF 72 – 500, seating 70. According to sources, the route already sees 86 per cent occupancy. “We have sufficient load factors on most routes we ply. and there is space for competition,” stated Thomas. Pegasus is also planning to invest in seven or eight more aircraft and is also increasing routes it covers to 24. Joshua Garnett Womens Jersey