Modi in US: What scares CEOs about doing business with India

Indian taxes are not so much administered by laws as by the rules these officers take it upon themselves to write when the political masters have completed drafting the broad strokes.

Narendra Modi

Prime Minister Narendra Modi delivering a speech during his US visit.

Just hours before Prime Minister Narendra Modi sat down to a dinner with a group of CEOs in New York, back home the finance ministry issued a release clarifying that a zero tax regime will continue for foreign companies that do business with India but have not set up base on its shores.

The timing was obviously not coincidental. However, the contents of the release had a lot to do with those CEOs’ concerns about India, more specifically about the bureaucracy and even more particularly, the tax officers.
Indian taxes are not so much administered by laws as by the rules these officers take it upon themselves to write when the political masters have completed drafting the broad strokes.
In 2006, the Indian Parliament wrote an act to promote special economic zones. That act is still on the books but investments in the zones have dried up. That’s because, over the years, the revenue department has written in clauses often as rules in other acts that defeat most of the benefits to investors promised in the SEZ act.
In contrast, there’s the Benami Transactions (prohibition) bill that has been introduced in the Lok Sabha in May this year. The bill had to be brought in primarily because since 1988 the older act sat like a dummy without the rules being framed. Unless prodded vigorously this act too could go the way of the former. So while the SEZ act that promised investment sops galore turned sterile by rules, the act to extend the Executive’s powers to curb black money became a dead letter through the same means. This is what concerns the CEOs. The commitment made by the political executive in India is often nullified by the rule-making powers of the bureaucracy. While these rules are supposed to operate only under the umbrella of the act, they have often gone beyond, thwarting the very causes espoused by the economic legislation. For instance Thursday’s release was undoing a plan to levy minimum alternate tax (MAT) on all companies that did business in India irrespective of their country of origin. Those plans had killed promises made by a succession of finance ministers of a predictable and a reasonably low tax rate regime. As the Partha Shome Committee has pointed out, it should be made mandatory from now on for the tax department to spell out through press releases the reasons why they have made changes in rules when they make them. That will go a long way towards checking the capriciousness of the bureaucracy and to make international investors commit funds to India. It is an announcement that will help the Prime Minister in his meetings abroad.

 

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Punj Lloyd to expand defence facility: Atul Punj

NEW DELHI: Eyeing on defence sector demands, diversified group Punj Lloyd BSE -1.33 % is set to expand its Gwalior facility besides exploring other states like Karnataka and Rajasthan to set up manufacturing units.punj-lloyd-to-expand-defence-facility-atul-punj

“As the whole space opens up… we are expanding our Gwalior facility. We will be adding on new facilities in other states as well. Rajasthan, Karnataka, Andhra Pradesh are the options,” Punj Lloyd Group Chairman Atul Punj said.

“As the whole space opens up… we are expanding our Gwalior facility. We will be adding on new facilities in other states as well. Rajasthan, Karnataka, Andhra Pradesh are the options,” Punj Lloyd Group Chairman Atul Punj said.

The group is willing to make investments in this regard that could be in the range of up to Rs 2,000 crore depending on the opportunity, he said.
“The investment we will see as the opportunities we get. We have made our core investment in Malanpur, around that we will make only specific investments based on our winning some projects. We may invest in the range of Rs 200 to Rs 2,000 crore,” Punj added.

The company has its manufacturing and systems integration facility in Malanpur, near Gwalior, on 65 acres of land which is said to be one of the largest facilities of its kind by private firm in the Indian defence sector.

The facility is used for machining, welding and fabrication of precision engineered components assembly, integration and testing of weapons and maintenance and repair facility for existing weapons with the Indian Army.

“We are focusing on aerodynamics space as the opportunities open up as the tenders come out as we see that there is opportunities, based on that we will only take a call,” Punj said.

It has recently been shortlisted by the Defence Ministry for upgrading the Zu 23 air defence gun.

The group has agreements with leading global primes for collaboration in Indian programmes for a wide range of products including artillery systems, air defence gun systems, A-vehicle technology, assault rifles and carbines.

Its current orderbook stands at Rs 20,978 crore.

On widening of its net loss, Punj said, “Net declined essentially because we went through corrective action plan with banks …that got delayed for various reasons.”

The company has seen widening of its net loss to Rs 597.84 crore during the April-June quarter on sharp decline in income. It had reported a net loss of Rs 363.92 crore for the first quarter of the previous fiscal.
Punj, however, said that based on the corrective measures things would be rectified soon.

Punj Lloyd Group offers EPC services in energy and infrastructure along with engineering and manufacturing capabilities in the defence sector.

The shares of the company today closed at Rs 25.35 a share on BSE, down 1.36 per cent.