Finmin to set to announce new tax norms for foreign firms

New Delhi: The finance ministry today said safe harbour rules — a set of norms that would enable the income tax (I-T) authorities to accept without scrutiny the tax returns by the Indian units of foreign companies — would be soon put in place, reports PTI.

"Safe harbour rules are at an advanced stage of consideration. I can't share how the guidelines are going to will be a very favourable programme... we are working on it and it will be in place as early as possible," Central Board of Direct Taxes chairman S S N Moorthy said at an Associated Chambers of Commerce and Industry (Assocham) seminar here.

He said the norms would be taxpayer friendly.

The Central Board of Direct Taxes (CBDT) has set up a committee to formulate rules for the safe harbour provisions on transfer pricing returns.

Transfer pricing refers to the price at which one arm of a company, usually a multinational corporation, transfer goods or services to another division of the same organisation in order to calculate each arm’s profit and loss separately.

The committee comprises senior tax officials and representatives of trade and industry as well as Institute of Chartered Accountants of India (ICAI).

Its objective is to set conditions under the safe harbour rules to facilitate acceptance of a transfer pricing return without scrutiny.

The committee is expected to set an acceptable margin which would act as a benchmark for the industry.

Me Moorthy also said the Direct Taxes Code bill (DTC) proposes General Anti Avoidance Rules (GAAR) to prevent abuse of double taxation avoidance agreement by some.

He assured that GAAR would be implemented in a very modest, responsible and tax friendly manner.

The CBDT chairman also informed that DTC bill also proposed to bring public sector units under the ambit of Advance Rulings and Dispute Resolution (Authority) to resolve tax disputes.


Q2 growth to be lower than Q1: Kaushik Basu

Kolkata: Economic growth in the second quarter will be lower than the 8.8%
expansion witnessed in the first quarter, reports PTI quoting Chief Economic Advisor Kaushik Basu.

"Growth in the second quarter will not be as high as 8.8%," Mr Basu said at an
interactive session organised by the Bharat Chamber of Commerce here, adding that it could be well below 8%.

He predicted that the economy would register overall growth of 8.5% in the 2010-11 financial year.

Mr Basu said the good growth in the first quarter was largely on account of a lower base in the corresponding period of the previous year, whereas that was not the case in the second quarter.

Speaking about food inflation, he said the inflation data to be released on Thursday will likely report a 1% drop from last week's level of 11.74%.

Inflation will be lower in the coming months, Mr Basu said, adding that reducing it
drastically through policy measures would lead to high unemployment.

Criticising the government's foodgrains distribution policy, he said that the Centre's
mechanism was not proper and there was wastage.

Mr Basu suggested that the government could enter into a swap deal with other
countries, under which it would sell the foodgrains on the condition that it could buy fresh supplies at a later date.

"This is akin to storing them overseas instead of wasting them here," Mr Basu said.

He also said that selling foodgrains at zero or near zero prices would be of no use, as these would be again resold to the government through the minimum support price (MSP) window.

Mr Basu said that pricing of foodgrains should be done carefully so that it was not
above the market price and not at a very low level. He also called for changes in
labour laws.


Govt to rectify import duty disparity between natural rubber, tyres

New Delhi: The government today said work was underway to correct within a month the import duty disparities between natural rubber and tyres, in order to protect the domestic industry, reports PTI.

At present, raw rubber imports attract 20% duty, whereas import duty on tyres is 10%. From China and South Korea, duty on tyre imports is only 8.6%.

"Give me a month's time, we are trying to sort out the problem of inverted duty
structure," Commerce Secretary Rahul Khullar told reporters on the sidelines of a
Confederation of Indian Industry (CII) event here.

According to Automotive Tyre Manufacturers Association (ATMA) estimates, the industry imports about 1.5 lakh tonnes of natural rubber every year. The finished tyre import for truck and buses stands at about 1.25 lakh tonnes a month and 2.5 lakh tonnes a month for passenger cars.

When contacted, ATMA director general Rajiv Budhraja told PTI: "We have been demanding that there should be parity between import and local production. The government proposed a fixed specific import duty on rubber at Rs20.46 per kg, but we want that import duty of raw material should be 7.5% only (on ad valorem basis)."

In March, the industry body had written to prime minister Manmohan Singh to either reduce import duty on natural rubber to 7.5% from existing 20% or to hike customs duty on imported tyre to 20% from 10% to help domestic manufacturers.

With natural rubber prices in India hovering around Rs160 per kg from below Rs100a kg level a year-ago, tyre manufacturers are looking at importing the raw material,but find it economically unviable due to current duty regime.

To cope up with such a situation, domestic tyre makers have hiked the prices of their products by 10%-15% since January this year.

Earlier in May, the government had removed restrictions on import of radial tyres in the wake of increase in prices and their cascading effect on inflation.


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