An RTI query recently, alerted the IT department to the strange fact that no venture fund, which can get tax exemption for earnings, has approached the department for tax clearance
The Income-Tax Department is initiating an investigation to check if venture capital funds (VCF), regulated by the market watchdog, Securities and Exchange Board of India (SEBI), have complied with income-tax regulations mandatory under the law to be able to claim tax exemption as VCFs. I-T department sources have confirmed to Moneylife that an investigation is underway to determine why VCFs have not registered with the IT department.
The IT department was alerted to this issue when a Right to Information (RTI) application was filed, seeking the number of VCFs which have been cleared by the IT department. Surprisingly, while replying to the RTI query, the department discovered that no VCF had sought its clearance so far.
Currently, for the purpose of tax exemption, VCFs have to comply with the income-tax rules under Section 10 (23FA) of the Income-Tax (I-T) Act. Section 10 (23FB) of the I-T Act provides tax exemption for "income from investment in venture capital undertaking."
But it is only after the RTI query that the I-T department woke up and started an investigation into why VCFs registered in India have not taken permission from the tax authorities.
As per the information available on SEBI's website, there are as many as 180 registered venture capital funds and 154 registered foreign venture capital funds in India. At present, venture capital activity in India comes under the purview of different sets of regulations.
The SEBI (Venture Capital Funds) Regulation, 1996, lays down the overall regulatory framework for registration and operations of venture capital funds in India. Overseas venture capital investments are subject to the Government of India Guidelines for Overseas Venture Capital Investment in India dated 20 September 1995.
For tax exemption purposes, venture capital funds also need to comply with Income-Tax Rules under Section 10(23FA) of the Income-Tax Act. However, no venture firm has approached the IT department, according to a senior IT official.
Medical fraternity happy over rollback of service tax on healthcare, but thinks it could be introduced in another form next year
Finance minister Pranab Mukherjee on Tuesday announced a rollback of the proposed 5% service tax on healthcare that was opposed by the medical fraternity who chose to call it the "misery tax". But experts feel that this may be a temporary respite and that the "sword of the service tax on healthcare" will continue to hang, and could well come back in the form of Goods and Service Tax (GST), expected to be implemented next year.
Deepak Samant, director finance, D Hinduja National Hospital and Medical Research Centre, told Moneylife, "The government has withdrawn the service tax only till the GST is rolled out next year. In all probability, it is likely to slap the tax in the form of GST next year. The government, which is already besieged by many scams and is facing elections in many states, probably does not want another controversy at this time. It could possibly be a temporary retreat. We should not prematurely rejoice."
Rolling back the service tax, Mr Mukherjee said, "The proposed levy on healthcare has raised considerable anxiety in this House and outside. The purpose of the levy was not merely to mobilise revenue. It was to pave the way for the introduction of the Goods and Service Tax (GST). However, I have decided to exempt the new levy in its entirety, both in respect of services provided by hospitals as well as by way of diagnostic tests, until GST comes into force."
The service tax on healthcare, which was proposed in the Union Budget, suffered a backlash, with protests against the extra charge, given the escalating cost of healthcare.
Mumbai-based social activist and chartered account Nagesh Kini said, "The finance minister has not ruled out levying the tax by another name like GST, as and when it comes through. The GST Bill, it must be remembered, has been swinging back and forth in the face of opposition by non-Congress ruled states. This is a classic case of the left hand taking away what the right hand giveth!"
Dr Devi Prasad Shetty, chairman of Narayana Hrudayalaya, who had coined the term "misery tax", said the rollback was a relief to the common man.
Medical experts stress that the government should give emphasis on building affordable healthcare facilities. They suggest that public-private partnership (PPP) could be one way of taking affordable healthcare to the public at large.
Dr Rekha Bhatkhande, dean of Mumbai-based Shushrusha Hospital, a citizen's co-operative hospital, told Moneylife, "I feel the government is in the process of finding out the best solution for people."
On the subject of affordable medical facilities, Dr Bhatkhande said, "Like PPP, co-operative hospitals could be a third arm to provide affordable medical facilities for all. In the future, it will help us to reach more number of people."
Mr Samant felt that all types of healthcare services should be permanently put on the negative list, once GST is implemented. "Industry bigwigs and social activists should start building public opinion to necessarily include all types of healthcare services (whether covered by insurance or not) in the 'negative' list of services under GST regime on a permanent basis."
When presenting the Union Budget for 2011-12, the finance minister had proposed a 5% service tax on medical services, including diagnostics, provided at centrally air-conditioned clinical establishments, with more than 25 beds for in-patient treatment. The service tax was to be levied also on services provided by consultant doctors operating from such hospitals.
After two days of decline the market rallied but it is still in no man's land
The market opened flat with a negative bias, following a weakening trend in Asian markets, on concerns over the effect of high crude prices on the economy. The Sensex opened 16 points lower at 17,972 and the Nifty was down three points at 5,411. The market succumbed to profit booking within 15 minutes of opening, falling to the day's low, the Sensex down 38 points at 17,950 and the Nifty also losing 12 points to 5402.
Buying in select sectors soon helped the indices to erase early losses and pushed them into a higher trajectory. The gains came from banking, healthcare and metal sectors. The indices gained some momentum to breach the psychological 18,000 and 5,400 levels, respectively, then moved sideways.
The market scaled to the intra-day high in the last half an hour, with the Sensex touching 18,218 and the Nifty going up to 5,485. The indices closed trade a tad off these highs. The Sensex ended 218 points higher at 18,206 and the Nifty closed at 5,480, a gain of 66 points. The advance-decline ratio on the National Stock Exchange was 833:550.
Among the broader indices, the BSE Mid-cap index gained 0.92% and the BSE Small-cap index rose 0.65%.
The top sectoral gainers were BSE Realty (up 1.92%), BSE Bankex (up 1.85%), BSE Healthcare (up 1.51%), BSE Metal (up 1.33%) and BSE Oil & Gas (up 1.17%). There were no losers in the sectoral space today.
Cipla (up 4.13%), ICICI Bank (up 3.76%), Jaiprakash Associates (up 3.48%), DLF (up 2.78%) and BHEL (up 2.43%) were the major Sensex gainers. The main losers were Mahindra & Mahindra (down 1.02%), Jindal Steel (down 0.64%), TCS (down 0.45%) and Bajaj Auto (down 0.20%).
Faced with surging raw material costs, Indian carmakers now face three additional serious challenges, including a shortage of key components that could impact their performance this year.
While car makers could pass on the burden of increased input costs to customers, a shortage of components, compounded by the 11th March earthquake and tsunami in Japan and the Reserve Bank of India's (RBI) rate hikes, which could result in higher car loan rates, have made investors jittery about their prospects over the short- to medium-term.
Markets in Asia settled mixed, with the Nikkei 225 closing lower on profit booking, after recent gains, as high radiation levels increased food safety concerns in the country. Stocks in China ended higher, on support from the realty sector and financials, ahead of a slew of closely-watched earnings that kick off later this week. However, the ongoing turmoil in West Asia remains a cause for worry.
The Shanghai Composite surged 1.03%, the Jakarta Composite advanced 1.09%, the KLSE Composite gained 0.19%, the Straits Times rose 0.65% and the Taiwan Weighted climbed 0.44%. On the other hand, the Hang Seng fell 0.14%, the Nikkei tumbled 1.65% and the Seoul Composite shed 0.07%.
Back home, institutional investors-both foreign and domestic-were net buyers in the equities segment on Tuesday. Foreign institutional investors pumped in Rs236.29 crore and inflows by domestic institutional investors stood at Rs96.04 crore.
Offshore services provider Global Offshore Services, formerly known as Garware Offshore Services (up 0.40%), has said that it has bagged a four-year contract in Brazil worth Rs194.5 crore.
The company's large platform supply vessel (PSV), MC Beaucephalus, owned by its subsidiary, Global Offshore Services BV, will be deployed in Brazilian waters for an approximate value of Rs48.6 crore per annum, according to a company statement.
Pharmaceutical major Wockhardt (up 4.64%) has received ad-interim relief from the division bench of the Bombay High Court through a stay on the admission of the winding up petition filed by the trustees to the Foreign Currency Convertible Bonds (FCCBs) issued by the company. The company has agreed to deposit in court Rs115 crore by 3 May 2011, as per direction of the Bombay High Court.
Jet Airways (down 1.46%)-India's premier international airline together with JetLite-has retained its leadership position in the Indian aviation sector with a market share of 26.1%. The airline has also posted a 16th consecutive month of double-digit growth with robust international and domestic passenger traffic in February 2011.
Jet Airways carried 3.81 lakh international revenue paying passengers in February 2011, with an overall seat factor of 81.1%. The airline has carried 8.24 lakh domestic revenue passengers with a seat factor of 76.5%.