News Archives

India, United States Settle Tax Profit Dispute

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May 20 – A tax dispute between India and the United States has been resolved with India agreeing to tax 17.5 percent of the profits earned by the Indian subsidiaries of U.S. companies in 2004-05.

Previously, India wanted to implement a 25 to 30 percent tax on profits of IT services and research arms of U.S. firms in the country. The latest transfer pricing settlement will only be applicable for corporate transactions in 2004-05 but could also set an example for future cases. India’s transfer pricing rules check an MNC from shifting profits out of India.

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Tax Exemption List for Port, Airport Services to be Released Soon

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May 19 – India will soon announce a list of tax exempt port and airport services as it tests aspects of the pending comprehensive service tax regime.

“We will tax even non-taxable services but spare some essential services such as medical, education, pollution control and emergency services such as fire fighting, special services provided at time of emergency landing from the tax,” the official said. Other services provided and consumed at ports and airports, but are not generally taxed and also do not fall in the category of essential services, will have to face tax, the official added.

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India May Widen Foreign Investment Definition

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May 18 – The finance ministry is considering widening the scope of foreign investments to include instruments that give voting rights to foreign investors.

Under the new FDI policy, a company qualifies as a local company if it has less than 50 percent foreign investments and has Indian directors as a majority resident. If the FDI definition revision is approved to include such bonds as above, this may hike foreign holding calculations in companies and lead them to be considered as a foreign firm instead of a local one.

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Commerce Ministry Proposes Increased FDI in Defense Sector

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May 18 – India’s Commerce and Industry Ministry has released a discussion paper that suggests increasing foreign direct investment in the defense sector from 26 percent to 74 percent to improve manufacturing and technology transfer in the country.

The response to the proposal has been varied, with some suggesting an increase of 49 percent instead to keep majority shares under Indian management. “We are for 49 percent FDI which will allow control of a company to remain in the hands of Indians,” Brigadier Khutub Hai, chief executive officer of Mahindra Defense Systems told The Economic Times.

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Government to Implement Stricter Audit for NGO Funding

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May 17 – The Finance Ministry has announced measures that will strictly monitor government funding to non-profit organizations as part of efforts to stay within budget during the year.

“All ministries and departments of the Government of India should include in their annual report a statement showing the quantum of funds provided to each of those (non-government and private societies) organizations and the purpose for which they were utilized,” the expenditure department in the finance ministry said in an internal circular.

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New Oversight Body to Enforce FDI Ban on Sensitive Sectors

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May 14 – The government will establish an oversight body to prevent foreign direct investments from entering banned sectors.

This is to prevent FDI from entering prohibited sectors such as multi-brand retail, gambling, betting, lottery, atomic energy and plantation. “The proposal was discussed at a meeting attended by officials from various ministries including the department of industrial policy and promotion, finance ministry, corporate affairs and a final view is to be taken shortly,” a government official told The Economic Times.

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Himachal, Uttarakhand Calls for Renewal of Special Industrial Package

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May 13 – Himachal Pradesh and Uttarakhand state authorities are requesting that expired special industrial packages be renewed.

Chief Ministers Prem Kumar Dhumal and Ramesh Pokhriyal Nishank submitted a joint letter to Prime Minister Manmohan Singh on Wednesday to request the renewal. The package has successfully enticed investment to the states with its host of benefits that includes a 100 percent excise duty exemption.

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India Briefing Releases Guide to Doing Business in India

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ib-bookMay 13 – India Briefing has just published a new business guide to India. “Doing Business in India” is the definitive guide to one of the fastest growing economies in the world, providing a thorough and in-depth analysis of India, a comprehensive guide to investing in the country, and key demographics and overviews of the states and union territories highlighting business opportunities and infrastructure in place in each region.

Also included is information on FDI trends, business establishment procedures, economic zone information and labor and tax considerations as well as an analysis of Indian business etiquette and culture. The guide details procedural, operational and tax differences between India and its economic and geographical neighbor, China.

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