Major retail chains obtain stay orders on service tax on commercial properties

More has received a stay order from the Andhra Pradesh High Court and Shoppers Stop has received the same from the Bombay High Court. Retailers plan to intensify their legal battle against the tax in coming months

We had earlier reported that retailers were approaching various High Courts to get a stay order on service tax on commercial properties (see: http://www.moneylife.in/article/8/5839.html). Recently, More, the retail chain of the Aditya Birla Group, got a stay order from the Andhra Pradesh (AP) High Court on the service tax on commercial rentals in June 2010. The service tax was imposed in this year’s Budget by finance minister Pranab Mukherjee.

Several other retailers like the Future Group, Shoppers Stop and Trent (the retail arm of the Tata Group) have approached the AP High Court for a stay order on service tax. 

“We have approached the AP High Court and have got a stay order on service tax on commercial rentals. AP generates almost one-thirds of our supermarket revenues. Therefore, we had to approach this court. Several other retailers have approached the same court,” said Thomas Varghese, chief executive officer, More Retail.

In April 2010, Home Solutions Retail India Ltd approached the Delhi High Court and got a stay order on service tax. Shoppers Stop is also approaching various courts to get a stay order.

“We have filed a petition before the AP High Court two days back; we are yet to receive a decision. We got a stay order from the Bombay High Court on Tuesday. In the next 10 days, we are going to approach the High Courts in Karnataka, Tamil Nadu and West Bengal,” said Govind Shrikhande, president and chief executive officer, Shoppers Stop Ltd.

“In the current scenario, the industry is not ready to take this kind of enhancement in taxes. (The service tax of) 10% is a big number, because in the first place, we are struggling to meet revenue targets versus our expenses,” said DV Ram Kumar, vice president-Food and Agri, Spencer’s Retail Ltd.

The Retailers Association of India (RAI) is helping various retail players to file litigations. “RAI is helping its members to take the cases to court. The service tax impacts retail more than anyone else. Currently retailers pay 10%-12% of the turnover as rentals and the service tax is affecting them by 10.2%. On total turnover, the retailers might pay 1%-1.2% as service tax. Most retailers make a profit between 2%-4%. The government will take away half of the profit,” said Kumar Rajagopalan, chief executive officer, RAI.

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CVC to probe PSU bribe allegations

Documents presented by the US Department of Justice in an American court stated that California-based Control Component Inc had bribed officials of Indian PSUs, including BHEL, NTPC and several state electricity boards, to bag orders

The Central Vigilance Commission (CVC) today said it will look into the allegations of bribery against officials of state-owned BHEL and NTPC once their names are disclosed by the US Department of Justice, reports PTI.

"We have our chief vigilance officers in all organisations and they are supposed to carry out their job," the CVC's chief technical examiner, V Ramachandran, told reporters, adding that the commission will scrutinise the matter whenever it is brought to its notice.

Mr Ramachandran said this while responding to queries on the documents presented by the US Department of Justice in an American court stating that California-based Control Component Inc had bribed officials of Indian PSUs, including BHEL, NTPC and several state electricity boards, to bag orders.

California-based Control Component Inc (CCI) on 31 June, 2009, pleaded guilty before the US court to having committing bribery in 36 countries from 2003 to 2007.

While NTPC denied any involvement in the case, BHEL said it could not comment on the issue in the absence of details.

"For the Sipat project (in Chhattisgarh), NTPC has not placed any direct order on the said company. NTPC is also not a party in the contract between any of the manufacturers and its equipment suppliers, i.e. the said party Control Component Inc," NTPC had said in a statement.

"It is a general statement with no specific details, BHEL can comment only when full details (as put up by Control Component to the US court) are accessible," a BHEL official had said.

Mr Ramachandran said, "The case has not been registered with the Central Bureau of Investigation (CBI_. As and when it comes to India, the CBI will refer the matter to us. Then, we will look into it."

India, besides China, the UAE and Qatar, are some of the major countries where CCI indulged in unfair practices to bag contracts, as per the court documents.

According to the documents, the payments related to India were made between 2004 and 2007.

Topping the list is the Sipat coal-fired power plant of NTPC, for which CCI paid a bribe of $163,449 in two instalments to an official of a Moscow-based company, who has been identified as Vladimir Batenko in the documents submitted by the US Department of Justice before the US court.

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COMMENTS

TP Viswanathan

6 years ago

Time is changing. If State / Central Governments supportor suppress corruption cases, we can get hints or rather irrefutable complaints from across the border. Truly US Government is doing a great service to the world by publishing and intimating the concerned governments of the corrupt people and practices in India. This trend is truly going to hurt those with ambition of getting rich quick.

Indian economy to grow 9.5% in 2010: IMF

The multilateral lender hiked its growth projection from the earlier estimate of 8.8% on favourable financing conditions and robust corporate profits

The International Monetary Fund (IMF) today raised India's growth forecast for 2010 to 9.5%, stating that favourable financing conditions and robust corporate profits will accelerate economic expansion, reports PTI.

The multilateral lender hiked its growth projection from the earlier estimate of 8.8% it made in April.

"In India, growth is expected to accelerate to about 9.5% in 2010, as robust corporate profits and favourable financing conditions fuel investment, and then to settle to 8.5% in 2011," the IMF said in an update of its World Economic Outlook.

Recently, prime minister Manmohan Singh had said the country's economy is expected to grow by 8.5% for the fiscal year ending 31 March, 2011. In the last fiscal, the economy expanded 7.4%.

According to the IMF, the world economy expanded at an annualised rate of over 5% during the first quarter of 2010, mostly due to robust growth in Asia.

"World growth is projected at about 4.5% in 2010 and 4.25% in 2011," the report said.

The lender noted that Asia's strong recovery from the global financial crisis continued in the first half of 2010, despite renewed tension in global financial markets.

"GDP growth forecasts for Asia have been revised upward for 2010, from about 7% in the April WEO (World Economic Outlook) to about 7.5%," it added.

Meanwhile, the IMF warned that despite the stronger than expected first half recovery, uncertainties surrounding sovereign risks could hamper the economic outlook.

IMF chief economist Olivier Blanchard pointed out that downside risks have risen sharply.

"While we remain cautiously optimistic about the pace of recovery, there are clearly dangers ahead... outcome will be decided based on how Europe deals with fiscal problems, how advanced countries proceed with fiscal consolidation and how emerging market countries re-balance their economies," Mr Blanchard said.

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