TIOL-DDT 622 · the untouched capture
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<p align=justify><font color="#663399" size="2"><b><font size="3" face="Verdana, Arial, Helvetica, sans-serif">TIOL-DDT 622</font></b><font face="Verdana, Arial, Helvetica, sans-serif"><b></b></font></font><font size="2"><font face="Verdana, Arial, Helvetica, sans-serif"><b><br>
28.05.2007<br>
Monday</b></font></font></p>
<p align=center><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#006600">Transfer pricing – Joint Working Group recommendations</font></b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Joint Working Group with senior officers from the income tax and customs departments was constituted to study transfer pricing (price adjusted in related party transactions) in the context of income tax and customs. The committee recommended that </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Cooperation and coordination between the two departments on transfer pricing is absolutely essential. For this coordination meetings are to be organized. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Information has to be exchanged on “need to know” basis.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Officers have to be properly trained.</font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Based on the recommendations, CBEC has decided that</font></p>
<ol start=3 type=1>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. Bi-monthly meetings are to be held at Delhi, Mumbai, Chennai and Kolkotta and the minutes to be forwarded to DG, International Taxation and DG, Valuation.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. Half-yearly meetings to be held with DG International Taxation, DG Valuation and Chief Commissioner of customs and minutes to be forwarded to the respective Members of the CBEC and CBDT.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. <st1:PlaceName w:st="on">National</st1:PlaceName> <st1:PlaceType w:st="on">Academy</st1:PlaceType> of Direct Taxes (NADT) and National Academy of Customs, Excise and Narcotics (NACEN) shall develop and organize training programmes on transfer pricing.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d. Exchange of information in specific cases to be done and nodal officers to be nominated.</font></p>
</blockquote>
</ol>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2007/cuscir07_20.htm" target="_blank">Circular No. 20/2007-Cus., Dated May 8, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Duty free import of pulses – Extended </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Serial No. 11A read with proviso in clause (f) in the preamble of Notification No. 21/2002, duty free import of pulses is allowed only upto 31.03.2008. Now this period is extended to 31.03.2009.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2007/ctariff07_071.htm" target="_blank">Notification No. 71/2007-Cus., Dated May 14, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Foreign Trade Policy – Several Customs Notifications amended</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) <b>Served From India Scheme Certificate</b> – Notification No. 92/2004-Cus is amended to stipulate that the foreign exchange counted towards fulfillment of export obligation (over and above the average) under Export Promotion Capital Goods Scheme shall not be eligible for benefits under the scheme.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) <b>EPCG Scheme – Waiver of export obligation</b> – Notification No. 97/2004 – Cus is amended to provide that Waiver of' Export Obligation may be considered where, because of force majeure or other unforeseen circumstances/ reasons, exporter is unable to fulfill export obligation. A Committee comprising representative(s) of Department of Commerce and Department of Revenue under Directorate General of Foreign Trade shall consider such requests. Decision of this Committee shall be notified by Department of Revenue for implementation;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) <b>VisheshKrushi and Gram UdyogYojana</b> – Notification No. 41/2005 is amended to stipulate </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. that the foreign exchange counted towards fulfillment of export obligation (over and above the average) under Export Promotion Capital Goods Scheme shall not be eligible for benefits under the scheme; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. that the exports made by EOUs/BTPs who do not avail of direct tax benefits/exemption shall be eligible provided the same is not covered under paragraph 3.8.2.2 of the Policy.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. The following categories of exports specified in paragraph 3.8.2.2 of the Foreign Trade Policy shall not be taken into account for duty credit scrip entitlement under the scheme: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. (i) export of imported goods covered under Para 2.35 of Foreign Trade Policy; (ii) exports through transshipment, meaning thereby that exports originating in third country but transshipped through India; b. deemed exports; c. exports made by Special Economic Zone units; and d. items, which are restricted or prohibited for export under Schedule-2 of Export Policy in ITC (HS): </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iv)<b>Focus Market Scheme</b> – Notification No. 90/2006 is amended to stipulate </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. that the exports made by EOUs/EHTPs/BTPs who do not avail of direct tax benefits/exemption shall be eligible, provided the same is not covered under paragraph 3.9.2.2 of the Policy; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. that the items allowed for import shall be in accordance with Paragraph 3.12.4 of the Foreign Trade Policy; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. that the foreign exchange counted towards fulfillment of export obligation (over and above the average) under Export Promotion Capital Goods Scheme shall not be eligible for benefits under the scheme. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d. The following categories of exports specified in paragraph 3.9.2.2 of the Foreign Trade Policy shall not be counted for calculation of export performance or for computation of entitlement under the scheme: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) export of imported goods covered under Para 2.35 of Foreign Trade Policy; (ii) exports through transshipment, meaning thereby that exports originating in third country but transshipped through India; (b)Export turnover" of Special Economic Zone units or supplies made to such units or Special Economic Zone products exported through Domestic Tariff Area units; (c) deemed exports; (d) service exports; (e) diamonds and other precious, semi precious stones; (f) gold, silver, platinum and other precious metals in any form, including plain and studded jewellery; (g) ores and concentrates, of all types and in all forms; (h) cereals, of all types; (i) sugar, of all types and in all forms; (j) crude/petroleum oil and crude/petroleum based products covered under ITC HS Codes 2709 to 2715, of all types and in all forms; and (k) items, which are restricted or prohibited for export under Schedule-2 of Export Policy in ITC (HS). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(v) <b>Focus Product Scheme</b> - Notification No. 91/2006 is amended to stipulate </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">a. that the exports made by EOUs/EHTPs/BTPs who do not avail of direct tax benefits/exemption shall be eligible, provided the same is not covered under paragraph 3.10.2.2 of the Policy; </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">b. that the items allowed for import shall be in accordance with Paragraph 3.12.4 of the Foreign Trade. Policy;</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">c. that the foreign exchange counted towards fulfillment of export obligation (over and above the average) under Export Promotion Capital Goods Scheme shall not be eligible for benefits under the Scheme. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">d. The following categories of exports specified in paragraph 3.10.2.2 of the Foreign Trade Policy shall not be counted for calculation of export performance or for computation of entitlement under the scheme:</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) (i) export of imported goods covered under Para 2.35 of Foreign Trade Policy; (ii) exports through transshipment, meaning thereby that exports originating in third country but transshipped through India; (b) export turnover of Special Economic Zone units or supplies made to such units or Special Economic Zone products exported through Domestic Tariff Area units; and. (c) deemed exports. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2007/ctariff07_072.htm" target="_blank">Notification No. 72/2007-Cus., Dated May 21, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Handloom/Handicraft Machinery Exempted</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Government has exempted machinery or equipment for effluent treatment for handloom sector and handicraft sector from the whole of the customs duty. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2007/ctariff07_073.htm" target="_blank">Notification No. 73/2007-Cus., Dated May 21, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Import of commercial samples – Value enhanced</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Notification No. 154/94-Cus., Dated 13<sup>th</sup> June, 1994, Commercial samples upto a value of Rs. 60,000 a year can be imported without payment of duty. Now this value is enhanced to Rs. 75,000/-.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2007/ctariff07_074.htm" target="_blank">Notification No. 74/2007-Cus., Dated May 21, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Export policy – Limit for stone aggregate enhanced</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per the Export Policy – Export of Stone to Maldives is subject to certain quantity ceilings on annual basis. The ceiling for the stone aggregate was 2,70,000 Metric Tonnes for the year 2007-2008. Now this is enhanced to 4,05,000 Metric Tonnes. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2007/dgft07not005.htm" target="_blank">DGFT Notification No. 5/2004-2009, Dated May 18, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Focus Product Scheme and Focus Market Scheme -Shipments from Non-EDI enabled ports</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Para 3.9.2 and 3.10.2 of the latest Foreign Trade Policy, exporters of products through EDI enabled ports are eligible for duty credit script equivalent to 2.5% and 1.25% of the FOB value for the Focus Market Scheme and Focus Product Scheme respectively. Now the Foreign Trade Policy is amended to delete the requirement of export through EDI enabled ports. Consequently shipments from non-EDI enabled ports will also be eligible for benefits under the two schemes.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><u><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2007/dgft07not006.htm" target="_blank">DGFT Notification No. 6/2004-2009, Dated May 23, 2007</a></u></font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Cost effectiveness of SEZ in generating incremental investment and employment is open to question – WTO report</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Highlights from the report: </b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ India's tax to GDP ratio is relatively low and seemingly insufficient to meet its developmental needs. Further public spending on infrastructure and social services is constrained by the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, which requires India to reduce its fiscal and revenue deficits and to eliminate the revenue deficit by 31March2009. Private investment is also deterred by high real rates of interest, while foreign direct investment (FDI) at around 1% of GDP has remained disappointing. In order to meet its FRBM targets, the Government has introduced tax reform to improve collection and increase revenue. Expenditure reductions include further reform of the targeted public distribution system (TPDS) and a partial dismantling of administered pricing for petroleum. However, state-owned enterprises remain a considerable demand on government resources and the recent decision to "pause" privatization will have implications for future government support for these enterprises.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ India's legal system is based on written law. The judiciary is headed by the Supreme Court, which has jurisdiction over all disputes between the Central Government and states or between the states. The Supreme Court is also the court of final appeal for cases heard by the High Court in each state, and by district and session courts at the local level. The legal system is burdened by insufficient resources and procedural delays, resulting in a large and apparently growing backlog of cases before the high courts and the lower courts. Measures are being taken to address the backlog of cases, including through the establishment of fast‑track courts and greater funding to the judicial system.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ While import barriers have been falling, India's export regime continues to be complex. Export prohibitions and restrictions are largely unchanged since India's last Review. However, in order to reduce the anti‑export bias inherent in India's import and indirect tax regime, a number of duty remission and exemption schemes are in place to facilitate exports. While a number of these schemes are open to all exporters who use imported inputs, several schemes are targeted at sectors such as electronics (hardware and software), agricultural products and services. Export processing zones, export-oriented units (which are now special economic zones (SEZs)) also offer tax holidays to investors. According to Ministry of Finance estimates, revenue forgone from such schemes was Rs538 billion in 2006/07, with an additional Rs21billion estimated for the SEZs. The cost effectiveness of the schemes in generating incremental investment and employment is open to question. As many of the industries attracted, especially by the SEZs, appear to be capital intensive, it is not clear that this is the most effective way to create employment opportunities, especially for the less-skilled labour force. India also provides export assistance through export insurance and financing schemes by the Export-Import Bank of India.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Measures have been taken to simplify the tax structure, especially for indirect taxes, resulting in a substantial increase in revenue collection. Tax reforms have also been pursued to meet the fiscal deficit targets set by the FRBMA and include the introduction of a new value-added tax and an increase in the number of services subject to a service tax. The introduction of the VAT by all but one state opens the way for an eventual goods and services tax. India maintains an "excise" tax (CENVAT), which is a tax on manufacturing, but appears to have elements of a value-added tax as well: currently providing around 25% of Central Government tax revenue, the CENVAT remains the largest source of indirect tax revenue. In the longer run, further streamlining of India's various indirect taxes are planned so that the VAT, the CENVAT, and the services tax will be replaced by a broad-based goods and services tax.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ The main changes in protection of intellectual property rights include the passage of new legislation on patents, aimed at bringing Indian legislation in line with the TRIPS Agreement, and the establishment of a new Geographical Indications Registry in 2003. Steps are also continuing to improve enforcement of intellectual property rights including through increased seizures of infringing materials, and fines, although apart from copyright infringement, there are few data available on enforcement.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">++ Infrastructure remains a major bottleneck. In sectors such as telecommunications, where the market has been exposed to competition, there have been significant benefits to consumers, including through increased penetration, especially of mobile telephony, and a decline in tariffs. Progress has also been made in improving the transport infrastructure, especially road transport, where the network of national highways is being expanded. Although rail transport is one of three activities reserved for the public sector, private-public partnerships are being encouraged in some areas, for example, such as freight transport and railway infrastructure development. Liberalization has also taken place in air transport, resulting in an expansion in the number of airline operators and a decline in prices; foreign investment restrictions have also been relaxed (up to 49% of total equity is permitted), although foreign airlines are forbidden from investing in the sector. In contrast, maritime transport and port services continue to suffer from inefficiencies and constitute a major impediment to trade. Another major constraint on economic activity is the energy sector, where there are frequent shortages of supply and little progress appears to have been made in tackling the losses of state electricity boards, and transmission and distribution losses.</font></p>
<p align=center><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>High duty rates on alcohol - USA files complaint against India in WTO</b></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">USA on Friday filed a complaint at the World Trade Organization (WTO) against India, alleging that India’s duties on alcoholic beverages and other imports violated global trade rules.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“India is an important export market for US products and the United States and Indiahave successfully worked on a number of important trade issues. However, we believe the layers of customs duties India applies to US products, in particular to wine and distilled spirits, are not in line with its WTO commitments,” said US trade representative Susan Schwab in a statement. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“We are disappointed that WTO consultations failed to resolve our concern with the duties and that we must resort to a WTO panel. The United States will continue to work towards a resolution of this issue with India but we must ensure a level-playing field for US products around the world,” she added.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">US officials said India, in addition to its basic customs duties, imposes an additional duty of 20-75% on the value of imports of beer and wine and 25-50% on imports of distilled spirits. Moreover, India applies an “extra additional duty” on these imports that puts the total duties in a range of as much as 150% to 550%.</font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">US officials said that in the WTO, India committed that its tariffs on beer, wine and spirits would not exceed 150%.</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Maybe that phoren drink will be cheaper soon! Cheers!!!!</b></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> </font></p>
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