Weekly news update

Submitted by Ankush Gupta

Budget to look into CENVAT credit claims

• Union budget for next fiscal would look into the various problems being faced by the companies under the central value added tax credit claims.

• CENVAT rate is currently fixed at 10% and companies get credit for tax paid on inputs under the scheme. Many of the current problems would disappear when goods and services tax (GST) gets operationalised as it was accrual based instead of cash based .

Food inflation falls to 3-month low of 10.15%

– Food inflation fell for the sixth straight week to a three month low of 10.15%, but there was no respite for consumers as prices continued to rise during the week.

– Index for food article rose 0.7% during the week ended November 13, indicating that the decline in inflation is largely because of the base effect.

– The arrival of winter vegetables has not done much to moderate vegetable prices which rose 4.48% during the week.

Tax evaders in trouble

– The issue of foreign bank accounts had figured in the discussions at an internal conference of IT department. Specific data on bank accounts will help the tax department seek information from other countries about Indian assets.

– Under OECD model of tax treaties, a country can source data on foreign assets and bank accounts of its nationals from countries with it has “Double Taxation Avoidance Agreement” but only in cases where it has specific information.

FDI down 26% during January-September

– Foreign direct investment in India stood as just $15.97 billion during the January-September, 2010 down by 26% from the value of FDI in the same period for last year

– In January-September, 2009 the country attracted foreign direct investment worth $21.44 billion. The countries that pumped the maximum foreign capital into the Indian economy were Mauritius, Singapore, US, Netherlands, Cyprus, Japan, Germany and France.

Government banks on long-term bonds to cut borrowings

– The government will increase the share of longer tenure government bonds to reduce the borrowing that is just for redemption of maturing securities by reducing the level of debt it needs to raise every year.

– The average maturity of center & apposes debt has inched up marginally in the current year to 9.81 years after dropping in the aftermath of the financial crisis to 9.67 years due to preference for shorter maturity securities.

SEBI asks MFs to simplify N.F.O

– Mutual funds schemes are becoming too complex for average investors. SEBI has asked several asset management companies to rework on some of their proposed new schemes.

– Regulator is going slow on approving structured mutual fund schemes where instead of investing in equities and debt market in pre-determined ratio, the fund manager is given the flexibility to adopt complex strategies.

Thanks