The most awaited Cross Border Tax judgment in the matter of Vodafone is out and the Supreme Court of India has today set aside the Bombay High Court Judgment asking Vodafone to pay Income tax of USD 2 Bn. 

Director General of Audit, New Delhi has published Service Tax Audit Manual, 2010.  As per the guidelines, tax payers whose annual service tax payment (including cash and CENVAT) was Rs.3 crore or more in the preceding financial year may be subjected to mandatory audit each year.  It is preferable that Audit of all such Units is done by using Computer Assisted Audit Program (CAAP) techniques.  The frequency of audit for other taxpayers would be as per following norms:-

i. Taxpayers with Service Tax payment above Rs.3 crores (Cash + CENVAT) (MANDATORY UNITS) – to be audited every year.

ii. Taxpayers with Service Tax payment between Rs.1 crore and Rs.3 crores (Cash + CENVAT) – to be audited once every two years.

iii. Taxpayers with Service Tax payment between Rs.25 lakhs and Rs.1 crore (Cash + CENVAT) – to be audited once every five years.

iv. Taxpayers with Service Tax payment upto Rs.25 lakhs (Cash + CENVAT) – 2% of taxpayers to be audited every year.

The Audit selection guidelines, therefore, would apply to the non-mandatory taxpayers, forming part of the discretionary workload.  These taxpayers should be selected on the basis of assessment of the risk potential to revenue.  This process, which is an essential feature of audit selection, is known as Risk Assessment.  It involves the ranking of taxpayers according to a quantitative indicator of risk known as a “risk parameter”.  It is also suggested that the taxpayers whose returns were selected for detailed scrutiny, may not be taken up for Audit that year, to avoid duplication of work.  Similarly, the taxpayers who have been selected for Audit, may not be taken up for detailed scrutiny of their ST-3 Returns during that year.

In a move which could improve the fund flow and provide some stability to the choppy Indian bourses, the finance ministry has relaxed norms for foreign nationals and foreign institutional investors (FIIs) to obtain Permanent Account Numbers (PAN) that could also double as KYC (know your customer) compliance for any investment they make in Indian stocks.

Till now, FIIs or foreign nationals had to obtain a PAN and separately meet KYC requirements prescribed by the market regulator before investing in stocks. The tax obligation on any transaction is twice the due amount if they fail to mention PAN.

In the revised rules that come into effect from October 1, a foreign national will have to only produce either his/her citizenship number or taxpayer identification number to obtain a PAN.

The government is making amendments in Rule 114 and Form 49A of the Income Tax Rules and has proposed to introduce a new Form 49AA. While Form 49A will be used for Indian citizens, the other is for foreign nationals and FIIs.

Earlier rules stipulated that citizenship or taxpayer identification number would not be accepted as proof of identity in case of foreign nationals seeking PAN card. The applicant is required to take prescribed documents to an officer of Indian Embassy or High Commission where he is a resident to get them attested.

The revised guidelines ensure that a foreign national or an FII need not make rounds of Indian Embassies or High Commissions anymore. They can get copies of their documents attested by recognized authorities in their respective countries.

Several countries and trade and industry organizations had represented the finance ministry seeking changes in the rules, in particular documents to be accepted as proof of identity and address and their attestation.

The department of economic affairs and the central board of direct taxes (CBDT) also worked on harmonizing the requirements of PAN and meeting KYC obligation.

(Speech by Deepak Mohanty, Executive Director, Reserve Bank of India, delivered at the Motilal Nehru National Institute of Technology (MNNIT), Allahabad on 13th August 2011)

I thank the Motilal Nehru National Institute of Technology (MNNIT) for giving me this opportunity to address this distinguished gathering. I propose to speak on inflation which is a matter of concern to all of us. What is inflation? Simply put, inflation is the sustained increase in the overall price level. Relative change in prices of goods and services is a desirable attribute of market economy as it reflects productivity changes as well as demand and supply conditions. However, when this process transforms into an acceleration of the overall price level, we need to worry as inflation imposes many socio-economic costs.

The headline wholesale price index (WPI) inflation averaged 9.6 per cent in 2010-11 as compared with 5.3 per cent per annum in the previous decade. Similarly, the average consumer price inflation, measured by the consumer price index for industrial workers (CPI-IW), was even higher at 10.5 per cent in 2010-11 as compared with 5.9 per cent per annum in the previous decade. Moreover, this elevated level of inflation also persisted through the first quarter of 2011-12. In response to inflationary pressures, the Reserve Bank has raised the policy repo rate 11 times bringing it up from a low of 4.75 per cent in March 2010 to 8.00 per cent by July 2011. It is expected that inflation should come down towards the later part of this year.

Why has inflation been so high and persisted for so long? This is the theme of my talk today. In my presentation, I propose to address the following questions: Is India an outlier among major countries in terms of recent inflation performance? Has the inflation process changed? What are the causal factors – global and domestic as well as supply and demand? I will conclude with some thoughts on managing the inflation dynamics on the way forward.

July is also the month when one has to file his or her annual income tax returns for the previous year ended in March. 31^st July is the last date to file tax returns for individuals and those whose accounts are not subject to any audit.

Digital Signature Certificate made mandatory w.e.f 1st July 2011 for Firms and Individuals whose accounts are required to be audited u/s 44 AB of the Income Tax Act’ 1961.

As per the amendments in the income tax rules, coming into effect from July 1, quoting PAN  will be mandatory for any payment of Rs five lakh or more for purchase of bullion or jewellery.

The Finance Act, 2011 has introduced with effect from April 1, 2011, Point of Taxation Rules in which, these rules will determine the point in time when the services shall be deemed to be provided. The general rule will be that the time of provision of service will be the earliest of the following dates:
i. Date on which service is provided or to be provided
ii. Date of invoice
iii. Date of payment

The government has decided to levy tax on the interest obtained on Post Office savings schemes from the current financial year.

The Securities and Exchange Board of India (SEBI) launched a centralised web-based complaints redress system (SCORES) on Wednesday.