QBiz: Economy Blues; the Fineprint of Mauritius Tax Treaty & More

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5 min read
India’s retail  inflation accelerated in April. (Photo: Reuters)

1. Amended India-Mauritius Tax Treaty Only Covers Investments in Shares

The revamped India-Mauritius tax treaty will apply to only investments in shares and not to other instruments, details of the agreement released by Port Louis showed, according to The Economic Times.

Investors in mutual funds, derivatives and debt will likely escape tax as these instruments aren’t mentioned in the reworked double taxation avoidance agreement, said tax experts. The new protocol sets a lower tax rate on interest earned by taxpayers in Mauritius, when compared with India’s treaties with other countries. It also plugs a significant loophole that foreign entities used to avoid paying tax: sending staff to India via a Mauritius entity.

2. Retail Inflation Accelerates in April, IIP Rises Marginally in March: Livemint

India’s factory output barely grew in March and retail inflation accelerated in April, sending contradictory signals ahead of next month’s monetary policy review by the Reserve Bank of India (RBI).

The Index of Industrial Production (IIP) rose 0.1 percent in March, the Central Statistics Office (CSO) said on Thursday, against a 2 percent increase in February that had raised hopes of a recovery after three consecutive months of contraction, reports Livemint.

Data released separately by the CSO in the report showed that retail inflation accelerated to 5.39 percent in April from 4.83 percent in March, as food inflation quickened to 6.32 percent from 5.21 percent the previous month in the backdrop of water scarcity in states such as Maharashtra.

3. Diageo Submits Exit Deal with Mallya to Debt Tribunal: FE

British liquor major Diageo has submitted a copy of its agreement with liquor baron Vijay Mallya to the Debt Recovery Tribunal here, as directed by its presiding officer Justice CR Benakanahalli on 29 April.

In accordance with the $75 million (Rs 515 crore) exit deal, Diageo paid Mallya $40 million on 25 February and agreed to pay the balance $35 million over the next five years on the latter meeting certain conditions in the agreement, reports Financial Express.

As per the deal terms, Mallya resigned as chairman of Diageo-controlled United Spirits and agreed to not compete with it in the global beverages market, except in Britain for the next five years, the report adds.


4. Five-Year Plans out, 15-Year Vision Soon: BS

The National Democratic Alliance government at the Centre, led by Prime Minister Narendra Modi, has decided to get rid of the Nehruvian five-year plans, and replace them with 15-year vision documents, according to Business Standard.

These will be framed keeping in mind the country’s social goals and the sustainable development agenda. According to a senior official, the issue was discussed at length and a decision was taken at the highest level.

The NITI Aayog has been directed to prepare a vision document at the earliest. The current 12th Five-Year Plan will be terminated in the current financial year, 2016-17.

5. RBI Allows Foreign Banks to Invest up to 10 Percent in Local Private Lenders: ET

The Reserve Bank India (RBI) has allowed foreign banks to invest up to 10 percent in local private lenders and supranational institutions such as Life Insurance Corporation of India to take this to as much as 40 percent as part of a sweeping set of measures expected to help them shore up capital and possibly encourage consolidation in the sector.

The new steps announced by the central bank could even cover rescues led by overseas banks, marking a radical new direction in policy, reports The Economic Times.

The central bank also doubled the stake that individuals and institutions can acquire in private banks to 10 percent. Non-regulated, non-diversified and unlisted financial entities can acquire stakes of up to 15 percent.

6. Nestle India’s Net Profit Falls 19.13 Percent to Rs 259 Crore in Q4: Livemint

Maggi noodles has been back on the shop shelves for six months now, but Nestlé India hasn’t quite recouped the market share it lost because of the recall last year. Nestle’s India’s fourth quarter results bear this out, says Livemint.

Quarterly net profit fell 19.13 percent to Rs 259 crore from Rs 320 crore a year ago. Net sales declined 8.4 percent to Rs 2,295.57 crore from Rs 2,506.79 crore.

Nestlé India’s sales in the domestic market fell 8.7 percent from a year ago while exports dipped 4.8 percent.

Results for the quarter have been impacted by the Maggi Noodles issue in 2015. Maggi has clawed back to market leadership in the instant noodles category with a share of over 50 percent
Nestle India Statement

7. E-Commerce Companies Say GST Will Be Taxing for Customers: ET

A joint report by industry body Internet and Mobile Association of India (IAMAI) and consultancy Pricewaterhouse Coopers (PwC), published in The Economic Times, has identified and made 15 recommendations pertaining to online marketplaces and e-commerce under the proposed GST regime.

The e-commerce industry wants lower overall tax for the industry once the Goods and Services Tax (GST) Bill gets passed, so as to avoid an increase in costs for the end consumer.

The overall GST rate should be lower, especially since currently services are taxed at 14.5 percent, and any increase beyond 18 percent could make services extremely expensive for the end customer.
IAMIAI and PwC Report

One of the key concerns of e-commerce companies is the state value-added tax ( VAT).


8. Soon, Large Companies May Have to Pay More for Borrowing: Livemint

RBI has proposed that banks make additional provisions, put aside extra capital when companies borrow more than a certain amount, reports Livemint.

If a new set of proposals by the Reserve Bank of India (RBI) take force, large companies like Tata Motors, Essar Steel India, Reliance Communications and even a highly rated entity like Bharti Airtel may have to pay more for borrowing, starting in the next financial year.

RBI, which is trying to curb the banking sector’s exposure to large corporate entities, is proposing that banks make additional provisions and put aside extra capital when companies borrow more than a certain amount from banks.

RBI cited “high concentration of credit risk” in the banking sector while making these proposals in a discussion paper it put up on Thursday.

9. IFC in Talks with Indian Stressed Asset Managers: Livemint

The International Finance Corporation (IFC), the private-sector investment arm of the World Bank, is in talks with asset managers to assess potential investment opportunities in India’s bad-loan market, three people were quoted saying by the Livemint.

IFC, like many others, is assessing whether the attempt to clean up bank balance sheets provides an opportunity for patient capital that may be able to play a role in reviving troubled assets.

An active investor in the Indian financial services sector, IFC already has an equity stake in Encore Asset Reconstruction Company and is also a partner in a stressed asset platform with Apollo Global Management.  

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