India Regulatory Brief: Delhi Gov Moves to Block Taxi Apps, Retrospective Amendment Won’t Tax Indirect Transfers

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Delhi Government Asks IT Ministry to Block Taxi Apps

The Delhi government has asked the Ministry of Information Technology to block the mobile taxi apps Uber and Ola. Although the IT Ministry is unlikely to approve the request, the federal government has in the past blocked websites for national security reasons. The Delhi government’s request, however, does show the punitive approach local governments can take against e-commerce companies that violate local regulations.

Following the well-publicized sexual assault case by a Delhi Uber cab driver in December, local government moved with uncharacteristic speed to ban Uber operations. They also stipulated an extensive set of requirements for transport aggregators – newly defined as ‘Radio Taxi’ services – including the installation of panic buttons and around-the-clock helplines.

Despite the transport aggregators’ efforts to comply with these requirements, the Delhi government continues to retaliate against Uber and Ola. It insists that both companies halt operations while their applications under the amended Radio Taxi rules are underway, exacerbating the passenger-safety media storm that continues to tarnish the reputation and revenue of both companies.

Bullish Indian CFOs Emerge with Strongest Economic Outlook  

Leading Indian CFOs emerged with the most bullish economic outlook in the Global Business and Spending Monitor 2015 poll conducted by American Express and CFO Research Services. The poll surveyed 565 senior finance and corporate leaders around the world, 36 of whom were Indian.

With 94 percent of Indian respondents believing their economy will expand in 2015, India holds the most confident national economic outlook, beating America’s 83 percent and Singapore’s 70 percent.

Based on year-on-year comparisons, 85 percent of Indian finance leaders also reported higher revenue earnings, while 45 percent intend to increase investments into boosting production efficiency, business intelligence and analytics.

Notably, India proves to be a leader in technological integration and investment. Early adopters of the ‘mobile first’ mindset, nearly 69 percent of Indian respondents believe the use of mobile technologies will significantly improve customer service. Cloud computing also proved important to Indian financial leaders, with 44 percent stating it would be a critical component of their increased spending on technology.

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Dividends By Foreign Companies with Indian Assets won’t be Taxed in India

The Indian Central Board of Direct Taxes (CBDT) recently cleared up ambiguity over a retrospective amendment to tax indirect transfers. The CBDT ruled that it will not tax dividends declared by a foreign company on shares that derive substantial value from assets in India. The retrospective amendment was made in the 2012 budget by the previous Congress party-led UPA government.

Finance minister Arun Jaitley assured Parliament that the CBDT would clear doubts from the previous retro amendment on income arising from India. With the recent clarification, unintended double taxation can be avoided when a foreign company declares dividends to another overseas arm of the company.

Ban on Bull and Bullock Slaughter Could Affect Pharmaceutical Industry

New state laws banning the slaughter of bulls and bullocks in Maharashtra and Haryana could affect gelatin manufacturers. Most gelatin is manufactured by processing the bones, skin and tissue of cattle. Gelatin is used by pharmaceutical companies to make capsules, vitamin drugs and chicken fodder. India is one of the leading exporters of gelatin globally.

The Maharashtra state government began enforcing the ban on bull and bullock slaughter on March 4; however, the slaughter of cows has been banned for several decades. The Haryana state government followed later this month with a bill that banned bull and bullock slaughter. In both states, offenders can be punished with fines and imprisonment. The introduction of the new laws are expected to lead to tighter regulatory oversight of gelatin makers in India.

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