India Regulatory Brief: New Tariff Policy for Power Rates, Relaxation of Compliance Norms for Start-Ups

Posted by Reading Time: 4 minutes
Regulatory brief logo
New Tariff Policy to Regulate Power Rates

The Indian government has approved new amendments to the National Tariff policy, 2005, which will tighten regulations on power tariffs and promote clean energy. Amendments to the tariff policy include the insertion of the word ‘necessarily’ in Section 61 of the Electricity Act 2003, empowering regulators to determine power rates at a utility level. The new regulations authorize customers to make use of smart meters to check power thefts and net metering. Additionally, they allow customers to interact with distribution companies and save money by switching off appliances during peak hours. Power companies can now expand their existing generation capacity to 100 percent and pass central taxes onto consumers. Other recommendations in the policy include promoting the use of renewable sources of energy and creating an environment enabling competition, efficiency and improvement in power supply.

Professional Service_CB icons_2015RELATED: Pre-Investment Advisory from Dezan Shira & Associates

Special Economic Zones to be Exempt from the Minimum Alternative Tax

Over 200 enterprises operating in Special Economic Zones (SEZs) could be exempted from the Minimum Alternative Tax (MAT) of 18.5 percent on their book profits. The move aims to revive domestic enterprises and provide a much needed lift to declining exports. The Ministry of Commerce and Industry has also introduced a new monitoring mechanism that examines remedial measures to promote exports in India’s crucial markets as well as existing Free Trade Agreements. 

The Ministry of Finance has, however, questioned the removal of MAT on SEZs. The tax cut would lead to a huge loss of revenue for the government, which anticipates tough challenges on account of increased expenditure based on the Seventh Central Pay Commission recommendations. According to official data, the corporate tax revenue exemption of SEZ units in 2014-2015 was estimated to be US $2.72 billion (Rs 18,394 crore). Official sources note that this could have been higher if MAT was not levied. SEZs are estimated to have total investments worth US $53.6 billion (Rs 3.63 lakh crores) and employ around 1.5 million workers. Most SEZs are engaged in the export business.

Related Link Icon-IBRELATED: India’s Economic Initiatives: A Magnet for Investments
Relaxation of Labor Compliance Norms for Start-Ups

Start-ups will be exempt from inspections related to important labor laws. The government will grant exemptions from several laws, including the Industrial Disputes Act, the Contract Labor Act, the Employees State Insurance Act, the Trade Union Act, and the Employees Provident Fund and Miscellaneous Provisions Act. The decision by the labor ministry comes after Prime Minister Narendra Modi officially inaugurated the Start-up India initiative on January 16 in a bid to boost job creation and entrepreneurial climate in the country.

New businesses identified as start-ups by the Department of Industrial Policy and Promotion (DIPP) will be allowed to self-certify with labor laws in the first year. In the two years following establishment, a start-up may be inspected  after the central analysis and intelligence unit of the labor ministry approves a written complaint  that warrants inspection. The ease in compliance norms for start-ups has been communicated to all the concerned regulatory bodies and autonomous institutions, such as the Employees’ Provident Fund Organization (EPFO), Employee’s State Insurance Corp. and the Labor Commission.


About Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email india@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related Reading-IB


Cover 90 x 126

Managing Your Accounting and Bookkeeping in India
In this issue of India Briefing Magazine, we spotlight three issues that financial management teams for India should monitor. Firstly, we examine the new Indian Accounting Standards (Ind-AS) system, which is expected to be a boon for foreign companies in India. We then highlight common filing dates for most companies with operations in India, and lastly examine procedures and regulations for remitting profits from India

 

IB Nov issue smallUsing India’s Free Trade & Double Tax Agreements
In this issue of India Briefing magazine, we take a look at the bilateral and multilateral trade agreements that India currently has in place and highlight the deals that are still in negotiation. We analyze the country’s double tax agreements, and conclude by discussing how foreign businesses can establish a presence in Singapore to access both the Indian and ASEAN markets.

Passage to India: Selling to India’s Consumer Market In this issue of India Briefing magazine, we outline the fundamentals of India’s import policies and procedures, as well as provide an introduction to engaging in direct and indirect export, acquiring an Indian company, selling to the government and establishing a local presence in the form of a liaison office, branch office, or wholly owned subsidiary. We conclude by taking a closer look at the strategic potential of joint ventures and the advantages they can provide companies at all stages of market entry and expansion.