SEBI’s intervention in SREI v FITCH case

SEBI has recently filed a petition in the Calcutta HC stating that it want to intervene in the SREI v FITCH case. FITCH credit rating agency has downgraded the credit rating of SREI from AA- to A+ against which SREI Infrastructure finance has obtained a stay order from the Calcutta HC this April stating that they have already terminated the contract with FITCH and in the absence of any contract the credit rating agency cannot public its credit rating. Calcutta HC granted stay to SREI restraining FITCH to make the new credit rating public. In the mean time SREI has obtained an upgraded credit rating from another credit rating agency CARE.

                Now, SEBI has filed a petition to Calcutta HC seeking its permission to intervene into the case. SEBI has also asked court to remove its stay order stating the credit rating agency has a right to rate a security throughout its life even though the contract is terminated. It is pertinent to note that under SEBI (Credit rating agencies) Regulation a credit rating agency is bound to publish the credit rating of an issuer in print media and its own website failing which his license may be terminated.

                This kind of “Rating Shopping” has been very frequent these days in the absence of any regulatory protection for the credit rating agency and cash significant doubt on the future of credit rating agencies. In order to protect the business companies often switch to another credit rating agency which provides a higher credit rating than those which downgrades its credit rating. In India the companies can decide whether to accept or not the credit rating of an agency when they first apply for service but after its initial acceptance the agency can unilaterally modify the credit rating.

Congress Governed States likely to move with FDI in retail

The UPA2 is all set to move with FDI in multi brand retailing in congress led states. This seems to be a welcome move for a government which is suffering from an image of policy paralysis. Since FDI in retail does not require any parliamentary approval and is more state subject thus it seems to be the correct move from the government. But the million dollar question is it politically correct? Commerce Minister Anand Sharma has been making it very clear, as have other members of this government, that they are keen to push forward with FDI in multi-brand retail.

With West Bengal Chief Minister Mamta Banerjee giving a brain storming session to UPA 2 it is clearly evident that she acts as a NATURAL ally to NDA. Especially after a recent setback on presidential election candidature won’t this step of UPA provoke her? Who single handedly fought the battle against FDI in retail that led to rollback of FDI.

With monsoon session of parliament knocking on the door this could be a big issue. Especially when the Indo-Bangladesh constitution amendment bill has to be table by the UPA and for which Mamta Banerjee has already shown its distrust. Passing of constitutional amendment bill requires approval of 2/3 of the members. UPA -2 has already lost the last constitutional amendment poll in relation to giving lokpal a constitutional status and if this time also the result is same it could be a big trouble for the government. 

Post on Companies Bill

Please check my post on taxguru.in here is the link of the post -

http://taxguru.in/company-law/companies-bill-2011-higher-level-transparency-accountability.html#comment-510205

You may leave your comment here or at taxguru.in

Petrol Price

Petrol Price Analysis (Rs 2 roll back possible)



Govt and petrol cos are forcing there inability to reduce petrol price although the prices in international market is at 18months low due to weak rupee, but the fact is something different. Petrol cos can still reduce the prices by Rs. 2.37

Particulars	Basis when hike of Rs 7 was made	Current situation
1$ equal to	52	57
cost of 1 barrel ($)	107	91
cost of 1 barrel (Rs)	5,564	5,187
Cost per liter (1barrel = 159 lt)
	34.99	32.62
	Reduction Possible	2.37

Education in India - Opportunity or threat?

Introduction:

As per Webster’s 1828 dictionary Education means the bringing up, as of a child, instruction; formation of manners. Education comprehends all that series of instruction and discipline which is intended to enlighten the understanding, correct the temper, and form the manners and habits of youth, and fit them for usefulness in their future stations.

The quality of education plays a significant role in everyone’s life. In India we have large number of professionals passing out every year after a having the best of education. But is that the kind of education that will make a professional competitive in the corporate world? My opinion will not be affirmative.

Education structure in India:

The real difficulty is that people have no idea of what education truly is. We assess the value of education in the same manner as we assess the value of land or of shares in the stock exchange market. We want to provide only such education as would enable the student to earn more. We hardly give any thought to the improvement of the character of the educated. The girls, we say, do not have to earn; so why should they be educated? As long as such ideas persist there is no hope of our knowing the true value of education. (M. K. Gandhi True Education on the NCTE site)

The entire picture of prevailing education has been beautifully incorporated in the above words. The education teaches student how to score marks but does not teach him how to implement it.

The second part of the extract deals with ignorance of woman being educated. Many people contest that this thing has changed and now women are getting equal opportunity to be educated as the men’s are but is that really true? I would say it is true but not exhaustively. When we talk about metropolitan city these things stand true but when we talk about urban areas it’s still the same. As per a research conducted only 3% of woman’s in urban areas are educated.

The key thing about Indian education system is that education structure here does not make a student prudent about how to apply the things which they have learnt in his area of work.

Infosys Technologies has its training campus at Mysore specially formed to fill the gap left inadequate college education.

It is not the only one: Tata Consultancy Services has a faculty development programme in 150 engineering colleges,

Problems of Education Structure:

The education structure prevailing in India creates a number of problems for a professional who enters into the corporate field after obtaining his qualifications. In India a student is more indulged with his course module till the age of twenty or twenty one which in turn makes him little aware about real world. Recently Goldman Sachs has counted the lack of quality education as one of the 10 factors holding India back from the rapid economic growth.

Total educated population	1,776,654
Without any specific level	353,224
Below Primary	239,962
Primary	461,505
Middle	291,362
Metric / Higher Secondary / Diploma	347,664
Graduate and above	82,913

Statistics from Madurai

In addition to that very few people turn up in our society from primary level education to higher level education. Nearly 45% of the population are without any specific education.

In most of the Schools/ colleges the curriculum has not changed since decades. Most of the things which are thought in school levels have either been abolished from real world or has little significance.

Education in India vs. Education in other Countries

The fundamentals of education does not change with the change in country what changes is how they are being taught. If we compare the education system between India and U.K. / USA we can feel the level of difference. In the B-schools of USA like Harvard Business School, Stanford Graduate School of Business, Yale School of Management and others, the curriculum is designed in a way that would prepare students to handle practical situations in the ever-changing corporate world. Hands on training and plenty of practical classes are included in the education pattern at US management schools.

In B-schools of India, equal emphasis is given on theory as well as practical sessions. The IIMs offer the highest quality of education. Other institutions like XLRI, IIFT, Institute of Management Sciences and Institute of Finance & International Management offer a good quality of education so as to make the students industry ready

What about high schools? The condition is pathetic. Things are taught which has abolished long back. On the other hand western countries give more emphasis on goal oriented teaching.

The flexibility of the American education system is its greatest strength and also its greatest weakness. Students there can change their major (i.e. field of study) midway through college. This usually means that students in the US receive more exposure to a variety of subjects and hence, are more aware of their career options and opportunities. However, the downside is that they can avoid taking courses which are hard in their major.

“Of all the big issues challenging corporates, education is the starting point,” said Dilep Rajnekar, chief executive of Azim Premji Foundation

Education in India – Opportunity or Threat?

The answer to this question cannot be a simple one. Education in India is a threat to certain extent if the present system of education continues to be the part of our society at the same time it can turn out to be an opportunity if necessary gaps are filled in.

Opportunity here lies in the students who are keen towards education. As per a survey conducted there has been a nearly 80% rise in the number of enrollment in the primary school between 1995 and 2005.

When it comes to threat of education in India the point is very clear, if the same structure of theoretical education continues the education will turn up a real threat for India. And as stated earlier education is the heart and soul of the entire economy thus it will not only affect the student’s fraternity but also the entire nation will come under its umbrella.

So what can be done?

Instead of completely changing the education system we need to revive the education system by incorporating more of the practical oriented education right from the secondary level so that a student can cope of with the change environment in the near future. The following things can be incorporated –

ü Interactive teacher and student environment

ü Classroom seminars or debates on topics beyond course

ü Assignments on current issues

ü Proper technological guidance.

Recently it was announced by the education minister that he will change the education pattern to make it more life oriented. In addition there is a target of granting autonomy to nearly 10% of the colleges by the end of 11^th plan).

Impact of Education in the skills of professional in the corporate world:

Every year large number of professionals enters the corporate world through various stream but very few gets the desired level of success and skill. What’s the reason? Are the provided with different education? No. Then why is it that only 20-22% people get the desired level of success. The answer is the gap between learning and implementing. The skill can be attained by the professional only if they are passed through a balanced education system which gives them the platform of both practical and theoretical education.

Conclusion:

Thus education being the foundation of our society should be more structured and life oriented. If proper education complimented with proper training will make a person adaptive to ever changing situations. This will not make them like a “tool box” which has all the tools (education) but is incapable of being without the master (skill).

Highlights of Companies Bill 2009

The following are some of the major highlights of Companies bill 2009 as presented -

(i) the basic principles for all aspects of internal governance of corporate entities and a framework for their regulation, irrespective of their area of operation, from incorporation to liquidation and winding up, in a single, comprehensive, legal framework to be administered by the Central Government. In doing so, the Bill also seeks to harmonise the Company law framework with the sectoral regulations;

(ii) easy transition of companies operating under the Companies Act, 1956, to the new legal framework as also from one type of company to another, freedom with regard to the numbers and layers of subsidiary companies that a company may have, subject to disclosures in respect of their relationship and transactions or dealings between them;

(iii) a new entity in the form of One Person Company (OPC), empowering the Government to provide for a simpler compliance regime for OPC and small companies and retention of the concept of Producer companies, while providing a more stringent regime for companies with charitable objects to check misuse;

(iv) application of the successful e-Governance initiative of the Ministry of Corporate Affairs (MCA-21) to all the processes involved in meeting compliance obligations. Company processes may also be carried out through electronic mode;

(v) speedy incorporation process, with detailed declarations and disclosures about the promoters, directors, etc., at the time of incorporation. Every company director would be required to acquire a unique Director Identification Number;

(vi) relaxation of restriction limiting the number of persons in associations or partnerships etc., to a maximum of one hundred, with no ceiling as to associations or partnerships formed by professionals regulated by special Acts;

(vii) duties and liabilities of the directors and every company to have at least one director resident in India. The Bill also provides for independent directors to be appointed on the Boards of such companies as may be prescribed, along with attributes determining independence.;

(viii) statutory recognition to audit committee, remuneration committee and stakeholders relationship committee of the Board and the Chief Executive Officer (CEO), the Chief Financial Officer (CFO) and the Company Secretary to be as Key Managerial Personnel (KMP);

(ix) companies not to be allowed to raise deposits from the public except on the basis of permission available to them through other special Acts. The Bill prohibits insider trading by company directors or Key Managerial Personnel and declares it as an offence with criminal liability;

(x) recognition of both accounting and auditing standards. The role, rights and duties of the auditors have been defined so as to maintain integrity and independence of the audit process. Consolidation of financial statements of subsidiaries with those of holding companies is proposed to be made mandatory;

(xi) a single forum for approval of mergers and acquisitions along with a simple and shorter merger process for holding and wholly owned subsidiary companies or between two or more small companies as well as recognition of cross border mergers. Concept of deemed approval also provided in certain situations;

(xii) a framework for enabling fair valuations in companies for various purposes. Appointment of valuers is proposed to be made by an audit committee or in its absence by the Board of Directors;

(xiii) claim of an investor over a dividend or a benefit from a security not claimed for more than a period of seven years not to be extinguished, and Investor Education and Protection Fund (IEPF) is to be administered by a statutory authority;

(xiv) shareholders associations or group of shareholders to be enabled to take legal action in case of any fraudulent action on the part of company and to take part in investor protection activities and 'Class Action Suits';

(xv) a revised framework for regulation of insolvency, including rehabilitation, liquidation and winding up of companies and the process to be completed in a time bound manner;

(xvi) consolidation of fora for dealing with rehabilitation of companies, their liquidation and winding up in the single forum of National Company Law Tribunal and appeal to National Company Law Appellate Tribunal with suitable transitional provisions. The nature of the Rehabilitation and Revival Fund as provided in the Companies (Second Amendment) Act, 2002 is to be replaced by Rehabilitation and Insolvency Fund with voluntary contributions linked to entitlements to draw money in a situation of insolvency;

(xvii) a more effective regime for inspections and investigations of companies while laying down the maximum as well as minimum quantum of penalty for each offence with suitable deterrence for repeated defaults. In case of fraudulent activities, provisions for recovery and disgorgement have been included;

(xviii) levy of additional fee in a non-discretionary manner for procedural non-compliance, such as late filing of statutory documents, to be enabled through rules. Defaults of procedural nature to be penalised by levy of monetary penalties by the adjudicating officers not below the level of Registrars. The appeals against orders of adjudicating officers are to lie with designated higher authorities;

(xix) special Courts to deal with offences under the Bill. Company matters such as mergers and amalgamations, reduction of capital, insolvency including rehabilitation, liquidations and winding up are proposed to be dealt with by the National Company Law Tribunal.

Source: ICSI

Goods and Services tax

What is GST?

The Goods and Services Tax (GST) is a full fledge value added tax (VAT) system on the supply of goods or services in India. France was the first country to introduce this value added tax system in 1954 devised by a public servant.
Adoption Of GST in other countries:
Different countries have different structures of GST. The countries which have a centralized government control results in a more effective implementation of GST. The countries like Brazil and Canada which has a dual (Central and State) government have adopted GST in a different manner. The different models of GST are discussed as under-
(1) Australian Model: In Australia GST is a federal tax, collected by the Centre and distributed to the states. But India is a heterogeneous country and there is no chance that states may allow the Centre to collect all the taxes while they become just spending institutions;

(2) Canadian Model: The GST in Canada is dual between the Centre and the states and has three varieties:
(i) Federal GST and provincial retail sales taxes (PST) administered separately - followed by the largest majority;
(ii) Joint federal and provincial VATs administered federally (Harmonious Sales Tax - HST); and
(iii) Separate federal and provincial VAT administered provincially (QST) - only for Quebec as it is like a breakaway province.

Proposed structure Of GST in India:

In India due to the presence of dual govt. the proposed structure is related to that of Canadian model. In India a dual GST is proposed whereby a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be levied on the taxable value of every transaction of supply of goods and services. The transaction which will take place between two states will be subjected to inter state GST. In India the introduction of GST will lead to a substitution of all the Indirect Tax by a single tax known as GST. The following are the proposed features of GST-
What are taxable under GST?:
All the goods are services are proposed to be taxed under GST. This means that there will be no separate laws for goods and services. However the goods and services which will be available for taxation under GST will be subjected to certain exemptions which will be stated in the draft law.
Applicability of both CGST and the SGST on all transactions:- A transaction of ’supply of goods’ will attract both the CGST & SGST as applicable on goods. Similarly, a ‘supply of service’ will attract both the CGST & SGST as applicable on services.
Applicability of other indirect taxes : It is proposed that the taxes to be subsumed under CGST will include Central Excise Duty (CENVAT), Service Tax and Additional Duties of Customs (Basic custom duty will continue to be lived) and the taxes to be subsumed under the SGST will include Value Added Tax, Central Sales Tax, Purchase Tax, Entertainment Tax, Luxury Tax, Octroi, Lottery Taxes, Electricity Duty and State surcharges relating to supply of goods and services.
The taxes under GST will be collected at each stage of production on the value added.
Refund of un-utilised CC on inputs and input services :-It is envisaged that under the proposed Dual GST model there would be refund of unutilized accumulated CCs at the end of each fiscal year and that refunds would not be restricted only to those relating to exports.
Status of Software Technology Parks/ 100% Export Oriented Units/Special Economic Zone units:-Typically, in view of the common list of exemptions, the exemption would extend to both the CGST and the State GST. With regard to the position on the Software Technology Parks/ 100% Export Oriented Units/Special Economic Zone units, it is envisaged that the status quo will remain.
Taxation of Inter-State sale transactions: Presently, inter-State sales are subject to Central Sales Tax (CST), which is origin based i.e. the state from which the goods were sold was subjected to CST but under GST regime there is no place for CST and inter state GST will be charged by the destination state i.e the state to which the goods are sold. This removes one of the major drawbacks of CST that it is not available for setoff with VAT. Thus in thegoods selling state it will be zero rated.
Registrations under GST :- The position in this regard is not clear at present. However it is expected that there will be fresh registration for dealers

Difference between existing tax and GST:
There are large number of difference between existing sales tax structure and GST however some of them are discussed below-

(1) Under proposed GST there will be only one tax structure in place of the multiple taxes which are levied by central and state government at present.
(2) The taxes will be available for setoff with each other under GST where as in the present sales tax system the taxes charged by Central government are not available for setoff with the taxes charged by state government.
(3) There will be no cascading effect of taxes on the goods transacted between the two states which was one of the drawbacks of the existing tax system
(4) The prices of the goods and services will gradually reduce due to simplified systm

Hurdles in Implementation of GST in India

(1) Implementation of GST calls for effecting widespread amendments in the Constitution and the various constitutional entries relating to taxation. In the current scenario it is difficult to visualise constitutional amendments of such far reaching implications going through, more so in view of the fact that sharing of legislative powers is such an essential element of our federal polity and it may be perceived to be a basic feature of the Constitution;
(2) Services have to be appropriately integrated in the tax network;
(3) Under GST it is proposed that there will be only one or two tax rates ranging between 12-16% this might lead to increase in price of some goods substantially.
(4) Another contentious issue that is bound to crop up in this regard is the manner of sharing of resources between the Centre and the states some states might face severe revenue crises.

CONCLUSION: Thus implementation of GST is necessary for the growth of the economy. However, proper steps should be taken for its implementation so that it can be effectively followed. The structure of proposed GST will be clearer when the white paper on GST will be presented.