TIOL-DDT 563 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <p align="justify"><font face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 563</font></b><font size="2"><b><br> 02.03.2007<br> Friday</b> </font></font> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>1% education cess 100% unproductive labour - You can tax but should you torture? Why can’t we use a pencil instead?</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The babus really don’t realise the cascading effect of their careless actions. Look at the new 1% education cess. Paying 1% tax may not be all that difficult fiscally but physically it is a torture. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The invoices should have a new column "Secondary and Higher Education Cess" and so should PLA, Cenvat account, periodical returns, challans and a host of other documents and then you should keep track of which credit is going where and which credit is being used where. Please see our Budget article <b><u><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5069">Education Cess and confusion – Siamese twins?.</a></u></b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">What will happen to all the pre-printed stationery? Should you just dump them? How much paper are we going to waste? The worst hit are the ones who use computerised accounts, especially when the programmes are managed by outside agencies. The software programme does not have this new cess and unless the programme is updated, this cannot be added. Updating the programme will take some time. But the cess is immediately effective. Throughout the country hundreds of assessees stopped clearances yesterday because they had no clue as to how to integrate the new education cess with their systems. Is this what we call progress? Is this what we call simplification? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">An anguished industrialist A.Srinivasa Rao, called up <b>DDT</b> and asked, “Is there no way to stop this madness?”. He followed up his oral outbursts with a mail, which is just an example of the anguish and frustration of a sincere assessee. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the Budget Proposals Hon'ble Finance Minister proposed for a new tax "Secondary and Higher Education Cess" of 1% which is applicable on all the Direct and Indirect taxes similar to that of Education cess. I feel we in the industry do not have any clue why there is a new tax if every calculation is similar to that of existing education cess and why cannot our Hon'ble FM increase the existing Education cess from 2% to 3% and allocate the additional resources proportionately for the intended purpose. This additional tax leads to scraping the tons of pre-printed stationery used by number of assessees, numerous changes in many computer programmes, delayed the dispatches and lakhs of man-hours for on warranted issue. I suppose this has certainly resulted in waste of national resources much more than the additional revenue expected by the Finance Minister. Further this leads to changes in the Monthly / quarterly / Annual returns of Excise / Service tax and Income tax and God only knows how much additional productive income this country has generated with the new tax and frustration on the Govt policies.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">For a simple process modification in the companies we consult the IT team and why cannot Govt propose such a change in an IT friendly manner. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Will the mandarins of the North Block understand the plight of the assessees in complying with their directions? As pointed out by the assessee what was the need to create a separate cess, to be charged separately and accounted separately? Can’t the ministry do it at the end of the year instead of wasting thousands of man hours and tons of paper? Can’t we really think of some simple things or are we used to complicating everything that ultimately a strong impression is created that government is there to harass the citizens. This certainly can’t be the goal of the Finance Minister.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is a story about the US Space administration having spent millions of dollars for inventing a pen that can write in space. All experiments failed. Gravity or the lack of it would not allow the ink to come out of the pen. And this was a secret and so the CIA was commissioned to find out how the Soviet cosmonauts managed to write in space. The CIA came with startling facts. The Russians gave their cosmonauts pencils to write with. </font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Don’t harass biri manufacturers – Board tells the field</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Notification No. 3/2006 as amended by Notification No. 3/2007 dated 1.3.2007, biri manufacturers availing exemption up to clearances of Rs. 20 Lakhs are required to file a declaration at the beginning of every financial year giving particulars of name, address, details of manufacturing process undertaken by the manufacturer, quantity of biris manufactured in the preceding financial year, name and address of job workers manufacturing Biris on his account, and the number of Biris manufactured by each job worker or himself if any. Most of the biri manufacturers are illiterate and the declarations will have to be filled in by the excise staff. That will surely lead to unwelcome situations. So CBEC has instructed the staff that:-</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The departmental officers should neither visit any manufacturer who has filed a declaration for conducting verification nor should summon him.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. In case, intelligence inputs are received that a manufacturer has filed a false declaration, or has violated any other provision of law, then the jurisdictional Commissioner of Central Excise, with prior intimation to the zonal Chief Commissioner of Central Excise, may authorize a survey or such other action in order to detect any irregularity.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The jurisdictional Chief Commissioner and Commissioner should sensitize the staff to avoid any complaints of harassment. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Serious view would be taken of any violation of these instructions.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Have we gone back to the 18<sup>th</sup> century? What is all this about filing declarations by small time biri manufacturers? What is the department going to do with all these declarations? This declaration is to be filed with the Assistant Commissioner/Deputy Commissioner. The biri manufacturers are mostly situated in remote villages and it would be a difficult job for them to visit the Divisional offices. And the declaration for the current year is to be filed by 31.3.2007. Small biri manufacturers don’t actually read the pink papers or log on to fancy web sites. When will they know about this and what are the penalties for not filing the declaration? Denial of exemption obviously! Should the might of the Government come down so heavily on the small man? </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=31&filename=notification/excise/2007/excircular846.htm">CIRCULAR NO. 846/04/2007-CX, Dated: February 28, 2007</a></u></b></font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Liberalisation of Export and Import procedures – RBI instructions</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In order to facilitate external trade and provide greater flexibility to the Authorised Dealer Category - I banks, the following relaxations have been made in the areas of exports and imports and foreign currency accounts :</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>A. EXPORTS</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>I. Extension of Time for Realisation of Export Proceeds</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">AD Category I banks may now extend the period of realisation of export proceeds, beyond six months from the date of export, up to a period of six months, at a time, irrespective of the invoice value of the export subject to the following conditions :</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) The export transactions covered by the invoices are not under investigation by Enforcement Directorate / Central Bureau of Investigation or other investigating agencies, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) The AD Category - I bank is satisfied that the exporter has not been able to realise export proceeds for reasons beyond his control, </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(c) The exporter submits a declaration that the export proceeds will be realised during the extended period,</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(d) While considering extension beyond one year from the date of export, the total outstanding of the exporter does not exceed USD one million or 10 per cent of the average export realisations during the preceding three financial years, whichever is higher,</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(e) The date up to which extension has been granted is indicated in the `Remarks’ column of the XOS statement as hitherto,</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In cases where the exporter has filed suits abroad against the buyer, extension may be granted irrespective of the amount involved / outstanding.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>II. Write-off of Unrealised Export bills</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has been decided that Status Holder exporters may write-off outstanding export dues to the extent of </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) 5 per cent of their average annual realisation during the preceding three financial years or </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) 10 per cent of the export proceeds due during the financial year, whichever is higher.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>III. Repatriation of Funds in Case of On-site Software Contracts</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In order to increase the competitiveness in the Indian IT Sector, the requirement of repatriation of 30 per cent of the contract value in respect of on-site contracts by software exporter company / firm has been dispensed with. The company should, however, repatriate the profits of on-site contract after the completion of the said contract. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>IV. Reduction in Invoice Value </b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It has been decided to allow reduction in value up to 25 per cent of the invoice. Accordingly, AD Category – I banks may allow reduction in the invoice value upto 25 per cent of the invoice. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>B. IMPORTS</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Import Bills – Credit Report on the Overseas Supplier</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Henceforth, credit report on the overseas supplier (where the import documents are received directly) need not be obtained in cases where the invoice value does not exceed USD 100,000, provided that the AD Category - I bank is satisfied about the bonafides of the transaction and track record of the importer constituent.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>C.GENERAL</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Different Time Base Prescribed in RBI Directives</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the various Directions / Circulars / Notifications issued under FEMA from time to time, Reserve Bank has prescribed different time frames viz. calendar year, financial year, previous year, etc., for considering eligibility for various trade related facilities.</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To simplify matters, henceforth, 'financial year' (April to March) is to be reckoned as time base for all transactions pertaining to trade related issues. To mitigate the mismatch in the time period due to change of time base from calendar / previous year to financial year, AD Category – I bank may, up to March 31, 2007 only, reckon the time base which is beneficial to its constituent/s. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=49&filename=notification/rbi/2006/rbi06cir033.htm">CIRCULAR NO. 33/RBI., Dated: February 28, 2007</a></b></font></p> <p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>What is <st1:country-region><st1:place>India</st1:place></st1:country-region>?</strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Article 1(3) of the Constitution says, “The <st1:place><st1:PlaceType>territory</st1:PlaceType> of <st1:PlaceName>India</st1:PlaceName></st1:place> shall comprise—</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>(a) </i>the territories of the States;</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>(b) </i>the Union territories specified in the First Schedule; and</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><i>(c) </i>such other territories as may be acquired.”</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 2(27) 0f the Customs Act says,</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:country-region>India</st1:country-region>” includes the territorial waters of <st1:place><st1:country-region>India</st1:country-region></st1:place>;</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Section 2(25A) of the Income Tax Act says,</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><st1:country-region>India</st1:country-region> shall be deemed to include the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and <st1:place><st1:City>Pondicherry</st1:City></st1:place> .</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this is sought to be amended in the Finance Bill to state that <st1:place><st1:country-region>India</st1:country-region></st1:place> means</font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zone s Act, 1976, and the air space above its territory and territorial waters. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This amendment will take effect retrospectively from 25th August, 1976. </font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until tomorrow with more DDT </font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p> <p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font> <font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></span></font></p>