IL&FS' 2 offshore units file for bankruptcy in Dubai
Two offshore companies of IL&FS Group, ITNL Infrastructure Developer LLC, ITNL International DMCC have filed for bankruptcy in Dubai.
 
The two companies are subsidiaries of ITNL International Pte. Limited, (IIPL) Singapore, which is a step-down subsidiary of IL&FS Transportation Networks Ltd (ITNL).
 
The IL&FS holds 73 per cent stake in ITNL.
 
In a regulatory filing, ITNL said that the two "subsidiary/associate companies set up by ITNL International Pte. Limited, (IIPL) Singapore in Dubai, UAE have filed an application before the Courts in Dubai for opening of insolvency/bankruptcy procedures under the Federal Decree-Law No. 9/2016 on Bankruptcy"
 
ITNL Infrastructure Developer LLC, is a a limited liability company registered and incorporated with the Department of Economic Development, Emirate of Dubai, United Arab Emirates in which IIPL Singapore is a 49 per cent shareholder, and ITNL International DMCC, a limited liability company registered and incorporated with the Dubai Multi Commodities Centre,Emirate of Dubai, United Arab Emirates in which IIPL, Singapore is a 100 per cent shareholder.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Subway Franchisees Stung by NAA Notices for ‘Cornering GST Benefits’
    At a time when the country is witnessing rampant profiteering in every healthcare related product, such as N-95 masks, sanitizers, protective gear for health care workers, the National Anti-profiteering Authority (NAA) that was set up to ensure tax benefits were passed on to consumers under the GST (goods and services tax) regime, is busy chasing businesses that have been decimated by their near closure in the past six months. 
     
    According to a report in ‘The Financial Express’, the NAA has started multiple anti-profiteering investigations into international fast food brand Subway’s franchisees across the country. We learn that the NAA is also going after the parent company in India over royalty earned on the profiteered amounts. Action against the quick service chain began sometime in August 2018 when NAA began to investigate them for not passing on cuts in goods and services tax (GST) rates to consumers on select products.
     
    NAA was established in November 2017 as a forum to ensure that firms passed on the benefit of GST rate cuts to consumers.  In 2019, the government extended the original two-year tenure of the body.
     
    In April 2020, when the country was in the midst of a hard lockdown and all restaurants were shut, the NAA found two Subway franchisees (one each in Rajasthan and Maharashtra) guilty of not passing the GST rate cut benefit to consumers. It has now served notices and initiated action against franchisees all over the country. 
     
    NAA has alleged that although GST was reduced from 18% to 5% but without any input tax credit (ITC), this was not passed on to customers and that base prices of different items had been increased more than needed, to offset the impact of the denial of ITC.  Many franchisees disagree with NAA’s method of cost calculation but the agency has gone ahead and initiated action on the argument that reduction in prices had to be uniform across products.
     
    As reported by FE, “the NAA had found two Subway franchisees, one each in Rajasthan and Maharashtra, guilty of profiteering earlier this year. This has led to investigations into a wider network of Subway franchisees, a source said. He added that NAA often expanded the scope of the probe into multiple items sold by a business found to have profiteered from one item”.
     
    In one case decided by the Delhi High Court on 23rd September, Gaurav Sharma Food Industry was ordered by the court to deposit the principal profiteered amount but imposition of interest and penalty was stayed. While the Gaurav Sharma case involved a small sum of Rs7 lakh, there are others who have been asked to cough up as much as Rs80 lakh and they have been asked to deposit half the sum, which they are in no position to pay without liquidating personal assets or damaging their business further by squeezing liquidity even further. 
     
    The impact of NAA’s action has been devastating for several franchisees that are struggling to survive the economic impact of the pandemic. They are faced with a Hobson’s choice of paying up and facing a further liquidity crunch, or filing litigation which is not only slow and expensive but in a couple of cases, the courts have asked them to deposit a sizeable portion of the amount allegedly profiteered in NAA’s orders into the Consumer Welfare Fund (CWF). 
     
    To many of the franchisees, the timing of the action is almost Kafkaesque. While the rest of the world is helping businesses get back to their feet, the Indian authorities seem intent on shutting them down, says one franchisee. He points out that all Subway outlets are making no money even after re-opening for business. “We are only keeping the business going to remain afloat in the hope that things will return to normal in a few months”, he says.  With no walk-in or direct customers, the biggest chunk of their earnings (nearly 22%) is swallowed by the delivery operators like Swiggy and Zomato.  According to him, the cost break up for every franchisee is as follows: food costs at 40%, franchisee royalties and franchisee advertising fund at about 12.5%, salaries accounting for about 10% of costs, 10-15% on rentals, maintenance, electricity and admin. Most are struggling to avoid losses by trying to cut procurement costs. 
     
    While it is nobody’s case that businesses should get away with profiteering, it seems rather strange to pursue businesses for failing to pass on profits in the middle of a pandemic, that too over a tax system that remains very flawed and confused and has itself imposed additional costs on businesses just to comply with its draconian rules. 
     
    More importantly, when the finance minister has described the Covid pandemic as an ‘act of God’ it seems bizarre for temporary regulators to work at pushing businesses over the brink instead of helping them to revive, provide jobs and add to economic growth that has been decimated by the lockdown.  The NAA was set up in 2017 for a two-year period to ensure that businesses pass on the GST benefits to customers. With the badly-implemented GST refusing to stabilize, NAA was given a two year extension in 2019. A global economic crisis triggered by an unprecedented pandemic may be a good enough reason to wind up NAA rather than allow it to destroy businesses, especially since there are separate sector regulators to deal with those who are profiteering in the pandemic. 
     
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    COMMENTS

    vikram.chin

    2 months ago

    The purpose of a business is to make profits . If the profits are too high or the product too expensive customers will not buy. The Great Indian Govt. (GIG)has made life difficult and expensive for ordinary Indians and is now trying to make it easy by penalising businesses forgetting that businesses provide employment and instead of the GIG getting it;s own house in orderd.
    Has the Indian govt. ever discontinued any temporary or short term committee or law on the original end date ? Dont expect the NAA to ever disappear just as this 21 day lockdown hasnt. Our supreme leader said to th effect "if we don't endure these 21 days of hardship, the country will go back 21 years." I think he meant that " I will show you time travel, how to go back 21 years in 21 days then 21 days more then 21 dasy more etc." But even that failed, if only we had gone back 21 years we would be in the age of Dr.Manmohan Singh's economic liberalisation.

    Uday Kotak's term as IL&FS Chairman extended by 1 year
    Uday Kotak is set to remain the Chairman of IL&FS for one more year as the Centre has extended his tenure on the group's board till October 2, 2021.
     
    The restructured board with the Kotak Mahindra Bank's MD as the Chairman was formed in October 2018 and was mandated to complete the resolution of the IL&FS and its group companies, which have a debt of over Rs 90,000 crore, through a fair and transparent process.
     
    Resolution of the group companies is underway and the group expects to address debt of about Rs 57,240 crore out of the total debt of over Rs 99,000 crore. The revised estimate is well above the 50 per cent mark of the overall debt.
     
    The aggregate value of debt being addressed is now estimated at over Rs 57,000 crore, with around Rs 50,500 crore likely to be addressed by March 2021, IL&FS had said in July.
     
    IL&FS has, till June 30, 2020, addressed debt of Rs 17,640 crore from a combination of completed asset sales, debt repayment to green entities, debt discharged in non-green entities and available cash balance across the group.
     
    Earlier this month, the IL&FS Group completed sale of its 73.69 per cent stake in the education business, held under Schoolnet India Limited (SIL), to Falafal Technologies Private Limited.
     
    The sale was completed pursuant to the approval granted by the National Company Law Tribunal (NCLT) Principal Bench through an order dated August 31, 2020. The transaction provides positive equity value to IL&FS and resolves nearly Rs 650 crore of consolidated fund based and non-fund based financial debt, without any haircut to the lenders.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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