The Department of Industrial Policy and promotion (DIPP) has said that the Government has reviewed the policy and decided to permit a citizen of Pakistan to make investment in Pakistan to make investment in India, under the government route, in sectors/activities other than defence, space and atomic energy.

The government body that approves foreign direct investments ( FDI) has rejected as many as four proposals and deferred one in its last meeting because there was no clarity about sources of funds and beneficiaries of investments, sending clear signal that government may be desperate for foreign funds but it will insist on antecedence of funds. The stand is also consistent with India's commitment to the global anti-money laundering body Financial Action Task Force (FATF) to take steps to clearly establish beneficial ownership.

Walmart is in for more trouble as the Central Bureau of Investigation (CBI) has found violation of Reserve Bank of India (RBI) and Foreign Exchange Management Act (FEMA) regulations by the US-based retailer when it made its India entry with the Bharti group. CBI in its letter has said that violation of FEMA regulations does not fall under its purview and hence it cannot investigate the matter & the complaint has been closed at their end. The issue is therefore being investigated by the Vigilance Officer of the Commerce Ministry.

The Reserve bank of India (RBI) has said that NBFC-AFCs are allowed to avail of ECB under the automatic route from all recognised lenders as per the extant ECB guidelines with minimum average maturity period of five years. In cases, where the NBFC-AFCs avail of ECBs in the form of Foreign Currency Bonds from international capital markets compliant with FATF guidelines, the same can be availed up to 75 per cent of owned funds of NBFC-AFCs, subject to a maximum of USD 200 million or its equivalent per financial year. Also, above 75 per cent of their owned funds will be considered under approval route by Reserve Bank. However, the currency risk of such ECBs is required to be
hedged in full.

The Securities & Exchange Board of India (SEBI) chairman UK Sinha has said that any entity acquiring control of a listed company would need to make an open offer for public shareholders. The statement is significant considering that the market watchdog is looking into Ethiad's proposed acquisition of a 24% stake in Jet Airways to check if there is any change in control.

To make its enforcement actions more effective, market regulator Securities & Exchange Board of India (SEBI) is considering a significant increase in its monetary penalties, as also steps like public censure, against the errant entities.

For investors, it's a new place in an annual report where they can find clues to financial risks facing a company that are currently under the radar but could snowball into something big. For auditors, it's a way to insulate themselves from a future backlash, even censure, on the quality of their audit. An increasing number of auditors in India are issuing a new category of qualifications in their audit reports addressed to shareholders. Shriram Subramanian, founder and managing director, In Govern Research Services has termed as 'emphasis of a matter' statements as these typically appear just before the regular qualifications and are highlighted in italics. We find it useful to discern matters of significance. Many firms are issuing 'emphasis of matter' statements to flag likely financial risks.

The Government has extended the date for registering 15 listed electronics products with Bureau of Indian Standards (BIS) by another three months up to October 2013.

A proposal to have differential credit rating scales for MSMEs and large companies under the Basel-
II framework is being considered by the Reserve Bank of India (RBI).

The foreign investors can now invest in Brownfield units or existing back-end infrastructure to meet the minimum investment norms. The Cabinet also allowed rental and land costs to be included in the mandatory investment in back-end infrastructure. It has also been clarified that in case of states which don't have cities with population more than 10 lakhs as per the 2011 census, the state government can decide whether and in which city they would allow foreign retailers to set up shop.

The Insurance Regulatory and Development Authority (IRDA) has proposed that each web aggregator should be paid a flat fee not exceeding Rs 50,000 a year towards each product displayed
in the comparison charts on its web site, compared with Rs 1 lakhs earlier.

The Telecom Regulatory Authority of India (TRAI) has said that telecom operators have to take double confirmation from consumers before activating value added services (VAS) and must complete deactivation requests in four hours.

At a time when the Prime Minister's Office (PMO) need to step up tracking the progress in award and implementation of infrastructure projects, the road ministry and the National Highways Authority of India (NHAI) have decided not to award any new highway projects until November. The reason is financial stress at potential bidders, non-availability of land and uncertainty over securing environmental clearances.

The Government has extended the date for registering 15 listed electronics products with Bureau of Indian Standards (BIS) by another three months up to October 2013.

A proposal to have differential credit rating scales for MSMEs and large companies under the Basel-
II framework is being considered by the Reserve Bank of India (RBI).

The foreign investors can now invest in Brownfield units or existing back-end infrastructure to meet the minimum investment norms. The Cabinet also allowed rental and land costs to be included in the mandatory investment in back-end infrastructure. It has also been clarified that in case of states which don't have cities with population more than 10 lakhs as per the 2011 census, the state government can decide whether and in which city they would allow foreign retailers to set up shop.

While the condition for mandatory 30 per cent sourcing from the domestic small sector remains in the policy, the definition of small sector has been expanded to include units with total investment in plant and machinery up to $2 million instead of the earlier threshold of $1 million. Moreover, foreign retailers will not have to change their vendors once they outgrow the $2 million investment threshold as the new rules say that the "small industry" status would be reckoned only at the time of first engagement with the retailer. Sourcing from agriculture and cooperatives and farmers cooperatives would also be considered in this category. Exempted foreign retailers from investing in back-end infrastructure beyond the first tranche of investments brought in and allowed stores to come up even in small cities.

Insurance Regulatory and Development Authority (IRDA) said that no agent/corporate agent can seek transfer from one insurer to another within one year of grant of license. IRDA has also said that no such transfer would be allowed if these agents do not achieve the minimum business norms mandated by the insurer. At present, agents/corporate agents have to submit a 'No Objection Certificate' (NOC) to transferee insurer from the transferor insurer. IRDA has further asked insurers to give the NOC within one week. These norms will be implemented with immediate effect.

Delhi government today lifted the ban on registration of property transactions involving general power of attorney (GPA) which is expected to provide relief to lakhs of residents living in group housing societies and unauthorized colonies. The Revenue Department issued a circular allowing registration of all GPA-based property transactions in the city with immediate effect. As per the circular, property transaction through GPA will be considered "legal" but it will not be considered as transfers of title for mutation of property. The order said transfer of property through general power of attorney and special power of attorney (SPA) by any registered property owner will be allowed in favour of "their spouse, son, daughter, brother, sister or any other relative or person of his trust to manage his property or empowering him to execute any further deed of transfer including conveyance, sale and gift deed".

The Reserve Bank of India (RBI) has, for now, relaxed the norm that requires non-banking finance companies (NBFCs) to have a minimum gap of six months between two non-convertible debentures (NCDs) issues.

Telecom and IT hardware suppliers such as Cisco and Hewlett Packard will have to set up a fully fledged manufacturing facility in India if they want to get Government contracts. The Ministry of IT and Communications has notified the guidelines under which 30 per cent of all equipment supply contract will be reserved for companies with manufacturing base in the country. The quota for locally made goods will increase over the next few years.

The Reserve Bank of India (RBI) has said that full Know Your Customer (KYC) exercise will be required to be done in at least every two years, eight years & ten years for high risk, medium risk and low risk entities respectively. Moreover, positive confirmation will be required to be completed in at least two and three years for medium & low risk entities respectively. The banks are also required to obtain fresh photographs from the minor customers on becoming major.

Realigning norms on gold imports, the Reserve Bank of India (RBI) has mandated that banks and bullion trading houses must retain 20% of every lot of imports of the metal at customs warehouses. The RBI has also added that fresh gold can be imported only when 75% of the stock lying in these warehouses is used for export purposes.

The Reserve bank of India (RBI) has said that the bank rate stands adjusted by 200 basis points from 8.25% to 10.25% with effect from 15th July 2013.

The Reserve Bank of India (RBI) has said that no fresh/additional Post Dated Cheques (PDC)/ Equated Monthly Installment (EMI) cheques (either in old format or new CTS-2010 format) shall be accepted in locations where the facility of ECS/RECS (Debit) is available. The existing PDCs/EMI cheques in such locations may be converted into ECS/RECS (Debit) by obtaining fresh ECS (Debit) mandates. Further, Section 25 of the Payment and Settlement Systems Act, 2007 accords the same rights and remedies to the payee (beneficiary) against dishonor of electronic funds transfer instructions under insufficiency of funds as are available under Section 138 of the Negotiable Instruments Act, 1881. Considering the protection available, there is no need for banks to take additional cheques, if any, from customers in addition to ECS (Debit) mandates.

It has been observed by all Chartered Accountants that the compliance of service tax law is not adequate and there is a widespread misunderstanding and in a number of cases non compliance is for tax avoidance. After the amendment of service tax law with effect from 1st July, 2012 introducing service tax on all the services except those which are either in the negative list or are in the exempted list of services, the compliance of service tax law has become especially important. The central government has recently amended the service tax law providing powers to service tax officials to even arrest the defaulting tax payers, where tax avoided for payment is in excess of Rs 50 Lakhs. The recent arrest of Managing Director of a mid size Courier Agency based in Kolkata is only an example of the approach of the department. Dire consequences are to follow for economic offenders. Even the finance minister exhorted and issued a terse alert in this regard lately.

The government of India has also brought in a special scheme for voluntary disclosure and payment of service tax liability to cover the period from 1st October 2007 to 31st December 2012, without payment of penalty and interest up to 31st December 2013, being the last date for furnishing necessary details to the service tax department and payment of service tax under the Service tax Voluntary Compliance Encouragement Scheme (VCES) 2013. A further time is allowed under the scheme permitting for staggered payment (payment in installment).

The profession of Chartered Accountants has always played the role of professional contributing towards nation building and has ensured and guided all their clients for better and better compliance of various tax laws. The voluntary disclosure scheme under service tax law is an important opportunity to meet the expectations of the government, society and the clients. The chartered accountants in practice as well as those who are in employment may proactively consider to -

1. Update their legal knowledge about the provision and requirement of service tax law as well as voluntary disclosure scheme.
2. Review the books of account and financial statements of their clients, during the process of audit/accounting to explore the need for a detailed service tax audit.
3. Obtain a special assignment of service tax audit of their clients to cover an appropriate period for review.
4. Identify & list out all major deficiencies in compliance of service tax law and in terms of discussion & decision of the clients, it maybe appropriate to advise the clients to take benefit of voluntary disclosure scheme under service tax law.
5. Complete all the formalities for filing the necessary returns and payment of tax in accordance with the service tax law so as to ensure that the clients are not put to unnecessary inconvenience or harassment besides prosecution, penalty & arrest.

The Indian Economy is posing newer and fresh challenges every day. In the economic scenario, more
particularly on the front of current account deficit (adverse balance of payments), substantial devaluation of Rupee in terms of foreign exchange rates and substantial reduction in growth rate of industrial and service sector are areas of major concern. Stalled infrastructure projects, under utilization of available human capital, lapses in legal provisions, rising inflation and consequent financial crunch are collectively hampering the growth of the economy in the desired manner.

The Government has recently finalised the appointment of Mr. Raghuram Rajan, former IMF chief economist and chief economic advisor in the finance ministry as the new Governor of the Reserve Bank of India. Mr. Rajan is a well known economist and has been playing a key role in the economic strategy and policy of Government of India in the recent past. Mr. Rajan is very famous having predicted the US economic crisis well in advance, when the other economists in USA defied any likelihood of such crisis happening.
A well renowned economist with an excellent academic and professional background is now going to be at the helm of the economic and financial regulation and the Indian economy has major expectations from him -

• To control current account deficit by bringing in such policies that increase inflows of foreign exchange substantially and can reduce the outflows.
• To provide adequate liquidity to the financial sector, industry, infrastructure, service sector and other important organs of the economy in order to enable them to have adequate resources at a very reasonable cost. The rate of interest and availability of credit are both important areas to be addressed with a fresh thinking.
• The growth rate of infrastructure sector, industry as well as service sector has suffered severely due to sluggish decision making, uncertainty arising out of excessive charges of corruption and resultant lack of will on the part of bureaucrats and politicians to take the right decision at right time. This area can be only partly addressed by the Reserve Bank of India and has to be mainly addressed by our political leaders.
• To curb import of gold and other consumer items, which are not really required to be imported? This has to be achieved in a strategic manner in view of WTO commitment.
• The financial sector is also expecting larger and deeper reforms. The availability of all latest financial products as well as availability of reasonable cost credit are very important to bring inclusive growth and more particularly the growth of agriculture sector, rural sector, Tribal, hand workers, small and medium enterprises has to be planned, incentivised and implemented in the economy.
• The role of new private sector banks, to be licensed by Reserve Bank of India could be the crucial in implementing the vision of the Government. The national and international reach of the Indian banking sector can be achieved only with growth of existing players in the financial sector and incubating new private sector banks as well as public financial institutions to meet the increasing requirement of channelizing the savings of the Indian economy to highly productive uses, is possible only by the deep routed, highly efficient and effective financial sector framework, institutions and banks.

From October Life Insurance Corporation, which accounts for 83 per cent of the market share, will levy service tax of around 3 per cent on all non- nit-linked products beginning October 1. This means if the annual premium for your money-back policy from LIC is Rs 10 lakhs, you will have to pay an additional Rs 30,000.

The Government of India has said that the services received by a unit in Special Economic Zones (SEZ) for the authorized operations would get the service tax exemption. The Government has also said that the exemption shall be proved by way of refund of service tax paid on the specified services received by the Special Economic Zone (SEZ) unit or the developer and used for the authorized operations.

The finance ministry has exempted drug makers from the excise duty on repacking or relabeling to ensure smooth transition to new drug price regime. This exemption would be available for 45 days after the prices of the essential drugs are notified by the National Pharma Pricing Authority (NPPA).

Commodity Transaction tax (CTT) Rules, 2013 has been introduced on all transactions on the commodity exchanges except in respect of 23 specified (exempted) agricultural products, with effect from July 1, 2013.

The Central Board of Direct Taxes (CBDT) has said that only those profits from Special Economic Zones (SEZs), STPs and Export Oriented Units (EOUs) (eligible businesses) that remain after adjusting for losses from other sources (ineligible businesses) can be claimed as a deduction from the taxable income. The CBDT has also clarified that only that much of losses from various sources of income that remain after setting them off against profits that are eligible as a deduction (say, from an SEZ unit) can be carried forward.

The finance ministry has said that the benefit of deducting one and a half times the spending on skill development of employees when businesses calculate their taxable income will be available only if spent on new recruits. According to the rules the revenue department notified on July 15 for granting the benefit of weighted deduction of 150% of the spending on skill development projects to companies, spending on existing employees will not be eligible if their training starts after six.

Professionals including lawyers, doctors, film actors, singers, interior decorators, architects and company secretaries, among others, whose total gross receipts/turnover exceeds Rs 1 crore and/or
whose professional annual fee income exceeds Rs 25 lakhs in a fiscal will have to mandatory e-file the tax audit report from the assessment year 2013-14. According to the latest directions issued by the
Income Tax Department, all such assesses will need to appoint a Chartered Accountant (CA) who will undertake the tax audit and e-file the same with digital signature. Any violation or inability to e-file the same will attract a penalty of 0.5% of the turnover/gross receipts of the assessee subject to a maximum penalty of Rs 1,50,000.

The Supreme Court has said that ownership of minerals should be vested with the owner of the land & not with the government. A three-judge bench, headed by R M Lodha has said that there was no law in the country which declared that the state was the owner of sub-soil or mineral wealth. They are of the opinion that there is nothing in the law which declares that all sub- oil mineral wealth rights vest in the state. On the other hand, the ownership of sub-soil/mineral wealth should normally follow the ownership of the land, unless the owner of the land is deprived of the same by some valid process. Referring to various Acts regulating extraction of underground natural resources, the Bench said the laws did not anywhere declare the proprietary right of the state. It rejected the argument that individual owners could not claim any proprietary right on the sub-soil resources as Section 425 of the Mines and Minerals (Development and Regulation) Act, 1957, prohibited carrying out of any mining activity in this country except in accordance with a permit, license or mining lease.

The Rajya Sabha clears Companies Bill, in a move of replacing the 57- years old Companies Act, 1956. Following are the new features added in the Companies Bill by the Upper House of Parliament:-

• One person Company: Any individual can float one person company, a major boost to micro entrepreneurs.
• Corporate Social Responsibility (CSR): The Companies need to earmark 2 per cent of their net profits towards CSR every year.
• Rotation of Auditors: Compulsory rotation of individual auditors in every five years and for audit firms in every 10 years in listed companies.
• Secretarial Audit: Now mandatory for Listed Companies.
• Class Action Suits: Shareholders and Depositors can now file class action suits.
• Gender Equality in Boards: One Woman Board Seat Mandatory.

The UPA Government's claims of major liberalization of Foreign Direct Investment (FDI) norms may boil down to just one sector - telecom. Any increase in cap in the civil aviation sector has been ruled out, while the fate of the insurance sector depends on the Insurance Bill getting Parliament's nod.

In an effort to bring more clarity in Foreign Direct Investment (FDI) policy, the Government has approved new definition of 'control' of an Indian company. The new definition will be used for calculating the direct and indirect foreign investment in a company. Normally control would mean anyone having more than 50 per cent shares will steer the company. The new definition of control includes the right to appoint majority of directors. It also includes "control of the management or policy decisions by virtue of shareholding or management right or shareholder agreement or voting agreement." This new definition will come into effect from the date of notification. A decision in this regard was taken in the meeting of Cabinet Committee on Economic Affairs (CCEA).

A consensus seems to have emerged within the government over FDI in Brownfield pharma with the Foreign Investment Promotion Board (FIPB) clearing six FDI proposals worth Rs 855 crore in its meeting. DIPP recently diluted its stance in favour of approving Brownfield FDI proposals if the target Indian company's domestic market share is below a threshold.