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									Contents

02   Introduction
03   Overview
07   Economic Performance 2009-2010
09   Recent Policy Measures
20   Key Legislative Amendments
30   Budget Financials
31   Direct Taxes
37   Indirect Taxes
52   In the Pipeline

58   Abbreviations
    The Union Budget reflects continuity in the Government’s measured and balanced
    response to the global economic crisis. The timely and effective intervention through
    the stimulus packages insulated India’s economy from the crisis and was also
    instrumental in its quick recovery.
    A key feature of this budget is the balance that it strikes between fiscal prudence
    and the need for a calibrated roll back of these packages. Despite the absence
    of significant fiscal reform measures, the budget does send a clear signal on the
    government’s commitment to fiscal consolidation. The Finance Minister has given
    targets for lowering the fiscal deficit over the next three years – from 5.5% in 2010-11
    to 4.1% for 2012-13. He has also promised to present a road map within six months
    for reducing the domestic public debt – GDP ratio.
    The four-pronged strategy on agricultural sector, covering agricultural production,
    reduction in wastage of produce, credit support to farmers and thrust to the food
    processing sector is the need of the hour when the runaway inflation in food items has
    reached double digits.
    With 46% of the total plan allocation being made for infrastructure – both in rural and
    urban areas – this critical sector is getting the attention it deserves. The additional
    tax deduction proposed for individuals for investment up to Rs. 20,000 in long-term
    infrastructure bonds would further help generate funds for infrastructure development.
    The Finance Minister has recognised the importance and relevance of the financial
    sector and has shared the Government’s view that the private sector would have a
    greater role to play going forward. The Finance Minister stated that the RBI would
    consider allotting new banking licenses to private-sector companies and non-banking
    finance companies: this will help expand the reach of banking services to more areas.
    The proposal to set up a Financial Sector Legislative Reforms Commission along with
    measures for strengthening existing banks would create a financial sector equipped to
    cater to the requirements of a fast growing economy.
    The Finance Minister has done a tight ropewalk – while he has reduced the tax
    burden for 60% of tax payees by broadening the current tax slab, he has shown his
    commitment to reining fiscal deficit by his categorical refusal to issue oil or fertilizer
    bonds. The Finance Minister has shown confidence that the Direct Taxes Code
    will be implemented on 1 April 2011 and has been candid in saying that he would
    “endeavour” to introduce GST on that day.
    The balanced approach is also seen in the re-affirmation of the commitment to clarify
    and simplify the FDI regime. The reiteration of the Government’s policy as announced
    through Press Notes 2, 3 and 4 of 2009 on ownership and control of companies and
    indirect foreign holding is welcome.
    It is also a positive and forward looking budget with an ambitious but achievable target
    of double digit growth in GDP in the very near future. It is not surprising that the stock
    market has reacted very positively to the Budget speech.
    In totality, the Budget should provide a perfect platform for a return to the growth
    trajectory from which the global crisis had momentarily diverted India.




2
Direct Tax Code (DTC)
DTC proposed to be introduced from 1 April, 2011. As a consequence, no DTC
provisions have been incorporated in the Budget proposals.

Tax Rates
•   Corporate tax rates to remain unchanged. In case of a domestic company having
    total income exceeding INR 10 million, the surcharge is proposed to be reduced from
    10% to 7.5%. No change in surcharge proposed in case of foreign companies.
•   The effective MAT rate proposed to be increased from 16.99% to 19.93% in case
    of domestic companies, and from 15.84% to 19% in case of foreign companies.
•   The tax slabs for individuals/ HUF / AOPs proposed to be revised as follows:


Existing slab rates               Proposed slab rates
Income (INR)          Rate of tax Income (INR)     Rate of tax
0-160,000             Nil         0-160,000        Nil
Above 160,000-        10%         Above 160,000-   10%
300,000                           500,000
Above 300,000-        20%         Above 500,000-   20%
500,000                           800,000
Above 500,000         30%         Above 800,000    30%


1. In case of resident women (below 65 years of age) and resident senior citizens,
   the amount of INR 160,000 shall be replaced with INR 190,000 and INR 240,000,
   respectively.
2. The proposed changes in tax slabs would result in (maximum) savings of INR
   51,500.

International Tax
•   It has been clarified that technical services, even if rendered outside of India, can
    be taxed in India. The place of rendering of services is not the relevant criteria.
    What is relevant is the place of utilisation of services.
•   The benefit of presumptive tax under section 44BB of the Act may not be available
    to many service providers in the E&P sector.

Business Income
•   Section 40(a)(ia) is proposed to be amended retrospectively from AY 2010-11 to
    provide that no disallowance of any amount payable to a resident would be made
    where tax deducted at source at any time during the previous year has been
    deposited on or before the due date of filing the tax return. No such relaxation
    proposed for payments to non-residents / foreign companies.
•   100% deduction of capital expenditure (other than on land and goodwill) is
    proposed to be extended to building and operating new hotels of 2-star category
    or above anywhere in India.
•   Common carrier capacity condition under section 35AD providing for tax incentive
    for laying and operating cross-country pipelines to be aligned with the regulations
    specified by the PNG Regulatory Board.




                                                                         PricewaterhouseCoopers   3
    •   Existing weighted deduction available in respect of expenditure on scientific
        research on approved in-house R&D facility proposed to be increased from 150%
        to 200% for companies engaged in specified businesses.
    •   Weighted deduction of 125% proposed in respect of payments made to approved
        research associations undertaking research in social science or statistical research.
    •   Existing weighted deduction available in respect of contributions made to approved
        scientific research associations, universities, other institutions etc. proposed to be
        increased from 125% to 175%.
    •   The tax audit limit under section 44AB proposed to be increased from INR 4 million
        to INR 6 million in cases of persons carrying on business, and from INR 1 million to
        INR 1.5 million in cases of persons carrying on profession. Penalty for failure to get
        the accounts audited proposed to be increased from INR 0.1 million to INR 0.15
        million.
    •   In case of non-life insurance companies, any gain or loss on realisation of
        investments, as the case may be, shall be added or deducted if it is not credited
        to the profit and loss account. Any provision (unrealised loss) in the profit and
        loss account for diminution in the value of investments is not to be taken into
        consideration while computing the taxable income.

    Exemptions and Deductions
    •   In case of units in SEZs, the anomaly relating to the computation of profits eligible
        for the tax holiday was corrected last year in favour of the taxpayer. It is now
        proposed that the corrected formula be given a retrospective effect from the
        assessment year 2006-07.
    •   For availing the tax holiday (existing) in respect of business of hotels or convention
        centre in the National Capital Region, it is proposed to extend the date of
        functioning of the hotel or completion of the construction of convention centre from
        31 March, 2010 to 31 July, 2010.
    •   For availing the tax holiday (existing) for developing and building housing projects,
        it is proposed to increase the period allowed for completion of such housing
        projects (approved by local authority on or after 1 April, 2005) from 4 years to 5
        years. Further, the condition relating to built-up area of shops and commercial
        establishments included in the housing project has been relaxed. This has been
        proposed to be effective retrospectively from assessment year 2010-11.
    •   In case of individuals / HUF, deduction of INR 20,000/- has been proposed for
        investments made in notified long term infrastructure bonds. This deduction is in
        addition to the deduction available under section 80C.




4
Limited Liability Partnerships (LLP)
•   Conversion of a private company or an unlisted public company into an LLP would
    not attract capital gains tax subject to fulfillment of prescribed conditions. One
    such condition being that the total sales, turnover or gross receipts of the company
    being converted into LLP do not exceed INR 6 million in any of the 3 preceding
    previous years.
•   Any unabsorbed business loss / depreciation allowance of the company converted
    into the LLP would be eligible for carry forward and set-off in hands of the
    successor LLP.
•   Any unutilised MAT credit in the hands of the company would not be available to
    the successor LLP.

Other Income
•   Transfer of unlisted shares of a company to a firm / company without consideration
    or for inadequate consideration would be taxable income in hands of the recipient
    firm / company.
•   Under existing provisions, receipt of an immovable property without consideration
    or for inadequate consideration by an individual or HUF is taxable. It is proposed
    that such receipt of immovable property shall be considered taxable only if the
    property is received without consideration and shall exclude cases where the
    property is received for inadequate consideration.

Assessments and Appeals
•   Jurisdiction of Settlement Commission enlarged to entertain search cases,
    provided that additional income tax payable exceeds INR 5 million.
•   It is proposed to specifically provide that the High Court has power to admit
    an appeal even after the expiry of the period stipulated in the Act provided it is
    satisfied that there is sufficient cause in delay in filing of the appeal.

Miscellaneous
•   Interest on delay in deposit of tax deducted at source proposed to be increased
    from 12% per annum to 18% per annum.
•   Increase in threshold limits for TDS provisions on payments to residents.
•   Physical copies of TDS certificates to continue even after 31 March, 2010.




                                                                         PricewaterhouseCoopers   5
    Indirect Tax
    Goods And Services Tax (GST)
    The Finance Minister has announced the date of introduction of the dual Goods
    and Service Tax (GST) to be April 1, 2011. The Finance Minister has indicated that
    concerted efforts of the Empowered Committee and the Finance Commission in the
    last few months has lead to a broad consensus on the introduction of GST and has
    carved a platform for future discussions in finalizing the structure of GST and the
    modalities surrounding its introduction.
    As a step towards introduction of GST, various measures have been announced in the
    Union Budget. These include increase in the level of excise duty to 10% signifying a
    single rate of tax for goods and services, rationalization of duties and broadening of
    the tax base by way of introduction of new taxable services.

    Customs
    Budget 2010 has maintained the peak rate of Basic Customs Duty (BCD) on all
    non-agricultural products at 10%. However, a number of tariff changes have been
    introduced in relation to goods pertaining to specified sectors such as oil and gas,
    telecommunication, food and agriculture, healthcare and gems and jewellery.

    CENVAT
    The CENVAT rate has been increased from 8% to 10%.

    Service tax
    The rate of service tax continues at 10%. The Government has broadened the service
    tax base by introducing eight new categories of services and has expanded the scope
    of certain existing services.
    The Government has announced some service specific exemptions and rationalized
    the refund procedure especially for service exporters.

    Central sales tax
    The rate of CST is maintained at 2% for inter-State sale of goods against Form C




6
The Economic Survey 2009-10 (Survey) was released by the Ministry of Finance,
Government of India, on February 15, 2010. The Survey reflects on the last two
quarters of the previous FY (2008-09) when the growth rate slowed down to 6%
and gave rise to apprehensions as the full impact of the economic slowdown in the
developed world worked through the system.
However, there was turnaround in the second quarter of 2009-10 when the economy
grew by 7.9%. The Survey estimates that the GDP growth rate during 2009-10 would
be 7.2% - an impressive rate despite a decline of 0.2% in agricultural output. The
recovery in GDP growth is broad based as seven out of the eight sectors/sub-sectors
have shown a growth rate of over 6.5%.
The cyclical slowdown in the industrial sector, which began in 2007-08, got impacted
by the global slowdown. However, from June 2009 there were clear signs of recovery
with industrial sector growth at 8.2% during the FY against a 3.9% in 2008-09.
Led by the robust growth in telecom sector, core industries and infrastructure services,
spread across power, coal, ports, civil aviation and roads, showed signs of recovery
during the FY. Growth in electricity generation resulted in decline in the peak deficit
and the total energy deficit to 12.6% and 9.8% respectively during April –December
2009 from 13.8% and 10.9% during the corresponding period of previous FY. The
increased availability of gas from KG basin resulted in better utilisation of capacity.
The services sector has continued to grow rapidly, registering a growth of 8.7% in
2009-10 as against a growth of 9.8% during the previous FY.
The Gross Domestic Savings estimated at INR 18,115,850 million amounting to 32.5%
of GDP at market prices as against 36.4% in the previous FY. The decline is due to
the fall in rate of savings of the public sector and the private corporate sector. The
household sector savings remained at the same level.
The Gross Domestic Capital Formation at current prices increased from INR
18,658,990 million in 2007-08 to 19,443,280 million in 2008-09. As a result of the
external shock-led slowdown, the overall growth of investment in India plunged to
-2.4% during 2008-09. At a sectoral level, there has been a rebound in the growth
rate of investment in the agricultural sector which grew at 26% in 2008-09. There
was a decline in growth of investment in industrial sector during 2008-09 by 17.6%.
Investment in services sector grew by 19.4% during 2008-09.
The year on year WPI inflation has been fairly volatile during 2009-10 with it becoming
negative in June-August 2009, turning positive in September 2009 and reaching 7.3%
in December 2009. Inflation in food articles reached a peak of 19.2% in December
2009. Significant part of this inflation is on account of supply side bottlenecks in some
essential commodities and by the delayed and sub-normal monsoons.




                                                                       PricewaterhouseCoopers   7
    Reflecting the slowdown in GDP during 2008-09, growth in per capita income declined
    to 3.7% and recovered during 2009-10 to 5.3%. During 2009-10, the per capita
    income was INR 40,745 and consumption was at INR 23,626.
    The trade deficit during April-December 2009 fell by 28.2% to USD 76.2 billion as
    compared to USD 106 billion during the corresponding period of FY 2008-09. This
    was mainly on account of decline in oil imports. Merchandise exports on BoP basis
    posted a decline to 27% during April- September 2009 as against a growth of 48.1%
    in the corresponding period of 2008-09. Import payments declined by 20.6% during
    the period as against a sharp increase of 51% in previous FY. The decline in imports is
    mainly attributed to the base effect and the decline in oil prices.
    Net capital flow to India during April-September 2009 was USD 29.6 billion compared
    to USD 12 billion in previous FY. All components, except loans and banking capital,
    showed improvement during the period. FDI at USD 21 billion during the period
    remained almost at the same level as previous year.
    As of end-December 2009, the foreign exchange reserves were at USD 283.5 billion
    increasing from USD 252 billion at end-March. The RBI purchased 200 metric tonnes
    of gold from the IMF under its limited gold sales programme at a cost of USD 6.7
    billion during November 2009.
    The Indian Rupee has been strengthening against the US dollar. The average
    monthly exchange rate of the Rupee against the USD appreciated by 9.9% from
    March to December 2009 mainly on account of weakening of the US dollar in the
    international market.
    The performance of the economy during the last 12 months combined with an analysis
    of the economic trends over the last couple of years confirm the strong fundamentals
    of the Indian economy. The rate of savings and investments have reached levels
    unimaginable even 10 years ago. India is now unarguably one of the world’s fastest
    growing economies. As the demographic dividend begins to pay off in India with the
    working age group population rising over the next two decades, the savings rate is
    likely to rise further.
    The Indian GDP can be expected to grow around 8.5% with a full recovery breaching
    the 9% mark in 2011-12. Given the steadily improving fundamentals of the economy,
    the medium term prospects of the Indian economy are really strong and given
    improvements in infrastructure and reform in governance it is entirely possible for India
    to move into a double digit growth trajectory.




8
Inbound Investment
•   The DIPP has issued Press Note 6 (2009) clarifying the policy with respect to the
    Micro, Small and Medium Enterprises (MSME):
    –   FDI is now permitted in an MSME subject to the sectoral equity caps, entry
        routes and other relevant sectoral regulations. Prior to this amendment, FDI
        upto 24% was permitted in an SSI under the automatic route and any FDI
        beyond 24% required prior FIPB approval.
    –   FDI beyond 24% in an industrial undertaking (which is not a MSME)
        manufacturing reserved items, would continue to require prior FIPB approval
        along with an Industrial Licence which comes with a minimum 50% export
        obligation.
•   The DIPP has extended the deadline for compliance with the 49% composite
    foreign investment cap in commodity exchanges [as notified vide Press Note 2
    (2008)], from 30 September 2009 to 31 March 2010.
•   With a view to facilitate transfer of technology into the country, the Government
    of India has, vide Press Note 8 (2009) of 16 December 2009, permitted under the
    automatic route and without any restrictions, all payments for royalty, lumpsum
    fee for technology and payments for use of trademark/brand name.
•   Necessary amendments to Exchange Control Regulations are likely to be
    made shortly to give effect to the above. Further, an appropriate post reporting
    requirement to capture details of technology transferred, amount paid, etc. would
    be devised by the regulators within a period of three months.
•   With a view to simplify procedural requirements and to expedite foreign
    investment inflows, CCEA, on 11 February 2010, approved a proposal of the
    DIPP in relation to proposals that require prior approval of the CCEA. Presently,
    proposals involving total project cost exceeding INR 6 billion, are put up for
    CCEA’s consideration. Henceforth, proposals which involve total foreign equity
    inflow of more than INR 12 billion would be placed for CCEA’s consideration. As a
    further measure of policy rationalization, the Government has decided that:
    –   There will be no need for a fresh FIPB / CCEA approval in case of entities
        which earlier obtained a prior approval from FIPB / CCEA and subsequently
        the activity / sector is placed under the automatic route or sectoral caps have
        been removed or increased.
    –   In case where FIPB / CCEA has already granted an approval for any sector
        / activity; no further approval is to be obtained from FIPB / CCEA for
        enhancement of capital.
    –   In case where FIPB / CCEA has already granted an approval for any sector /
        activity with respect to Press Note 18/1998 or Press Note 1/2005; no further
        approval is to be obtained from FIPB / CCEA for undertaking further new
        venture in the same field.

Outbound Investment
•   W.e.f. 2 March 2010 on-line reporting system for outbound investment will be
    operationalised in a phased manner. While Indian companies would continue to
    file Form ODI as hitherto in physical form to the AD, the AD now has to file initially,
    Part I (Sections A to D), II and III of form ODI for overseas investments covered
    under the automatic route on-line to the RBI. UIN can now be generated on-line
    by the AD. However, subsequent remittances should be made and reported on-
    line in Part II, only after receipt of the letter, confirming the UIN from RBI.




                                                                          PricewaterhouseCoopers   9
     External Commercial Borrowings (ECB)
     •   RBI in January 2009 decided to consider proposals for ECB beyond prescribed
         all-in-cost ceilings under the approval route until 30 June 2009 which was further
         extended till 31 December 2009. This facility has been discontinued w.e.f. 1
         January 2010.
     •   In January 2009, RBI had permitted corporates engaged in the development of
         integrated township, as defined in Press Note 3 (2002) to avail of ECB, under the
         approval route, until 30 June 2009. This period then got extended to 31 December
         2009 and has been given a further extension of one year upto 31 December 2010.
     •   Until December 2009, NBFCs exclusively involved in the financing of the
         infrastructure sector, were permitted to avail of ECBs from multilateral / regional
         financial institutions and Government owned development financial institutions
         for on-lending to borrowers in the infrastructure sector under the approval route.
         Such NBFCs have now been allowed to avail of ECB from the recognized lender
         category including international banks under the approval route, subject to
         complying with the prescribed prudential standards and the borrowing entities fully
         hedging their currency risk.
     •   W.e.f. December 2009 eligible borrowers in the telecommunication sector have
         been permitted to avail of ECB for the purpose of payment for Spectrum allocation
         under the automatic route. Further, the payment for spectrum allocation may
         initially be met out of Rupee resources by the successful bidders, to be refinanced
         with a long-term ECB, under the approval route, subject to certain conditions.
     •   Effective from February 2010, requests of the borrower relating to change in terms
         and conditions relating to drawdown, repayment schedules, currency of borrowings
         etc. would not require any prior RBI approval as the power to approve these have
         been delegated to the concerned AD Bank subject to some prescribed conditions.

     Foreign Currency Convertible Bonds (FCCBs)
     •   Indian companies had been allowed to buyback their FCCBs both under the
         automatic route and approval route until 31 December 2009. RBI has decided to
         discontinue this facility with effect from 1 January 2010.
     •   In November 2008, the Government had amended the pricing norms for FCCBs
         issued under ‘Issue of FCCB and Ordinary shares (Through Depository Receipt
         Mechanism) Scheme’. Now with a view to align the conversion price of the
         FCCBs issued under the amended pricing norms with the FCCBs issued prior
         to amendment, the Government has allowed revision in the conversion price of
         FCCBs effective from 15 February 2010. A window of 6 months has been provided
         to the issuing companies to revise the conversion price as per the new pricing
         norms and the revision would be subject to the following conditions:

         –   The revision of price and consequent issue of shares shall not breach FDI limits.
         –   Issuing company to take prior approval from the Board and the shareholders.
         –   A fresh agreement shall be entered by the company with FCCB holders in terms
             of renegotiation of the conversion price.
         –   Prior approval from RBI is required to revise the conversion price.




10
New Guidelines on Business / Employment Visa requirements
The Government of India, through the DIPP, issued a letter dated 20 August 2009
clarifying visa requirements in respect of foreign personnel coming into India for
executing projects / contracts in India. Further, clarifications were issued by the
Ministry of Home Affairs on 25 September 2009. The MHA has issued clarifications in
the form of Frequently Asked Questions as per which:
•   Foreign nationals coming into India for executing projects / contracts in India will
    henceforth have to come only on employment visas.

•   All foreign nationals in India on business visas and engaged in project / contract
    execution work were required to leave India upon the expiry of business visas or
    31 October 2009, whichever was earlier, and required to obtain employment visas
    from their respective countries of origin in order to continue working on projects /
    contracts in India.
•   Business visa would be issued only to foreign businessmen who want to visit for
    bona fide business purposes on satisfaction of conditions as specified in the FAQs.
•   Employment visas would be issued to skilled or qualified professionals appointed
    on a contract or employment at a senior level. Employment visas would not be
    granted for jobs for which a large number of qualified Indians are available and
    which are of routine, ordinary or clerical nature.
•   The eligibility criteria and duration of business and employment visas has also been
    specified. Importantly, foreign nationals coming to India for attending technical
    meetings, board meetings or general meetings for providing business services
    support would be eligible for obtaining business visas.

Insurance
•   IRDA has, vide circular dated 4 August 2009, required all companies seeking
    registration to obtain a certificate on their level of preparedness for compliance
    with prescribed requirements in relation to Investment Risk Management Systems
    and Processes. All insurers are required to have a quarterly audit of investment
    transactions and related systems as prescribed.
•   In order to ensure reasonable charges for policy holders, IRDA has vide its circular
    dated 22 July 2009 mandated an overall cap on the charges of insurance products
    based on the difference between gross and net yield of the particular product.
•   IRDA vide circular dated 12 November 2009 has prescribed a requirement for all life
    insurers to submit information in respect of health insurance policies issued on a
    half yearly basis, starting 1 April 2010.
•   IRDA vide its circular dated 24 August 2009 has reviewed the extant Anti-Money
    Laundering (AML) guidelines for insurers based on the recommendations of
    Financial Action Task Force (FATF). The existing guidelines provide for additional
    compliances/ measures in terms of KYC norms, vigilance of transactions involving
    high risk customers/ large transactions to be complied by all insurers on or before
    31 October 2009.
•   In order to ensure protection of investors, policyholders and other stakeholders,
    IRDA has
    –   vide its circular dated 28 January 2010 has directed all insurers to publish
        specified financial statements in newspaper/ company’s website effective from
        the period ending 31 March 2010.




                                                                         PricewaterhouseCoopers   11
         –   vide its circular dated 8 August 2009 issued detailed guidelines on Corporate
             Governance effective 1 April 2010 addressing major structural elements of
             Corporate Governance such as governance structure, composition, role/
             responsibility of board of directors, disclosures in financial statements, etc.

     •   IRDA has mandated collection of PAN from persons purchasing insurance policies
         with annualized premiums exceeding INR 100,000 per policy with effect from 1
         September 2009.
     •   With a view to promote combined products of term life insurance products offered
         by life insurance companies along with standalone health insurance products
         offered by non-life insurance companies under a single umbrella, IRDA has vide
         its circular dated 23 December 2009 issued Guidelines on Health plus Life Combi
         Products.

     Pension Funds
     Tier II Account operational w.e.f 1 December 2009
     •   On 1 May 2009, the PFRDA launched the New Pension System (NPS) for all
         Indian citizens. Under NPS, two types of account are available to the subscribers
         viz., Tier-I account where one may contribute savings for retirement into a non-
         withdrawable account and Tier-II account which is a voluntary savings account
         from which one is free to withdraw his savings.
     •   While Tier I account was made available from 1 May 2009, the facility of Tier II
         account has been made available with effect from 1 December 2009 to all citizens
         of India including Government employees who are mandatorily being covered
         under the NPS.
     Infrastructure
     •   In order to scale up PFRDA’s existing infrastructure to roll-out NPS for all citizens,
         PFRDA has appointed 29 Points of Presence (i.e., point of contact / collection
         points for citizens) and 6 Pension Fund Managers.

     Mutual Funds
     •   To empower investors and ensure greater transparency in commission payments
         and load structures, SEBI has vide its circular dated 30 June 2009 issued
         guidelines effective 1 August 2009 providing:
         –   Nil entry loads applicable on mutual fund schemes. Investors to pay upfront
             commission directly to distributor.
         –   Exit load capped at a maximum of 1% of redemption proceeds to be maintained
             in a separate account to be used for payment of commissions to distributors
             and other marketing and selling expenses.
         –   Distributors to disclose all commissions payable to them for different
             competing schemes.
         –   No distinction amongst unit holders based on amount of subscription.

     •   In order to enhance the reach of mutual fund schemes through existing
         infrastructure of stock exchanges, SEBI has, vide circular dated 13 November
         2009, permitted mutual fund transactions over recognized stock exchanges
         through registered stock brokers who would be required to obtain AMFI
         certification.




12
•   SEBI has, vide circular dated 16 September 2009, mandated systems audit for
    Mutual Funds once every two years.
•   Filing fee for Mutual Fund schemes has been reduced from 0.0005% to 0.00025%
    w.e.f. 1 July 2009 for schemes where SID has been submitted to SEBI on or after 1
    July 2009.
•   SEBI vide its circular dated 15 December 2009 has made certain amendments to
    the existing circular on Launch of Additional Plans under existing schemes and
    has permitted mutual funds to launch additional plans as part of any existing
    open ended scheme by way of an addendum containing the relevant material
    information, provided such plans are consistent with the existing schemes.

Venture Capital
•   To bring parity between Domestic Venture Capital Funds (DVCFs) and Foreign
    Venture Capital Investors (FVCIs), SEBI vide its circular dated 3 July 2009 has
    mandated FVCIs seeking registration to obtain a minimum aggregate firm
    commitment of USD 1 million from investors.
•   SEBI has prescribed a revised format for quarterly reporting by FVCI and DVCFs
    effective quarter ending 31 March 2010. New format requires additional disclosure
    of information regarding fund commitments, details of Indian investment in debt,
    equity and VCFs, etc.
•   Application and registration fees in connection with FVCI registration process has
    been reduced from USD 5000 to USD 2500 and from USD 20,000 to USD 10,000
    respectively.

Portfolio Management
•   Portfolio managers have been advised to submit their monthly report in the
    prescribed format by 5th of the following month and to report the assets under
    management as on the last day of the month for the purpose of this report.
•   With respect to the Portfolio Managers’ obligation to segregate the client funds/
    portfolio from their own funds, it has been clarified by SEBI vide its circular dated
    23 June 2009 that portfolio managers can maintain the client funds in a separate
    bank account subject to prescribed conditions.
•   SEBI vide its circular dated 31 July 2009 has additionally prescribed the
    requirement to furnish information regarding services proposed to be rendered
    by portfolio managers along with a copy of the draft agreement with client and a
    statement of net worth in revised form.

NBFCs
Infrastructure Finance Companies
•   RBI has, on 12 February 2010, introduced a fourth category of NBFCs -
    ‘Infrastructure Finance Companies’ (‘IFCs’) (in addition to Asset Finance
    Companies, Loan companies and Investment Companies).
•   An IFC has been defined as Non Deposit taking NBFC that fulfills the following
    criteria:
    –   Minimum of 75% of its total assets should be deployed in infrastructure loans;
    –   Net owned funds of INR 3 billion or above;




                                                                         PricewaterhouseCoopers   13
         –   Minimum credit rating ‘A’ or equivalent rating by any other accrediting rating
             agencies;
         –   CRAR of 15% (with a minimum Tier I capital of 10%).
     •   IFCs can exceed the existing prescribed credit concentration norms as under:
         –   in lending to any single borrower - by 10% of its owned fund; and any single
             group of borrowers - by 15% of its owned fund;
         –   in lending and investing (loans/investments taken together) by 5% of its owned
             fund to a single party; and 10% of its owned fund to a single group of parties.
     •   RBI has also advised that banks’ exposure to IFCs shall be risk weighted as per the
         ratings assigned to them and such exposure shall not exceed 15% of the banks’
         capital funds as per latest audited balance sheet with a provision to increase it upto
         20% on account of funds being on-lent by IFCs to infrastructure sector.

     Other Changes
     •   RBI vide its circular dated 18 September 2009 has permitted NBFCs to undertake
         IRF transactions subject to prescribed RBI/SEBI guidelines for the purpose of
         hedging their underlying exposures. Participating NBFCs required to submit half
         yearly data in the prescribed format.
     •   To ensure continuity in ‘fit and proper’ character of the management of NBFCs, RBI
         has mandated prior approval for any takeover/acquisition/merger/amalgamation
         resulting in change in control of a deposit taking NBFC.
     •   RBI has made it mandatory for NBFCs having FDI to submit an Auditors Certificate on
         half yearly basis (every September and March) certifying compliance with the existing
         terms and conditions of FDI. The certificate is to be submitted to the concerned
         Regional Office within a month from the close of the half year to which it pertains.

     Foreign Institutional Investors (FIIs)
     •   Under the new bidding platform for allocating debt investment limits to FII/Sub-
         accounts, SEBI vide its circular dated 15 December 2009 has prescribed that no
         single entity shall be allocated more than INR 3 billion of the government debt
         investment limit.
     •   The registration and renewal fee payable by FIIs and their sub-accounts for every
         block of 3 years has been reduced from USD 10,000 to USD 5000 and USD 2000
         to USD 1000 respectively.

     Financial Markets
     •   RBI has issued the Interest Rate Futures (Reserve Bank) Directions, 2009, key
         highlights of which are as follows:
         –   Contract to be on 10-year notional coupon bearing Government of India security.
         –   Notional coupon to be 7% p.a. with semi-annual compounding.
         –   Residents have been permitted to purchase IRFs to hedge exposure on interest
             rate risk.
         –   FIIs have been permitted to trade in IRFs subject to compliance with the overall
             investment limits.
         –   Banks and other agencies falling under the purview of a regulatory authority
             have been permitted to trade in IRFs subject to prior approval from the
             relevant regulator.




14
Banking
•   RBI has been continuously monitoring the liquidity and monetary conditions in
    recent periods. Such measures instituted by RBI during the period April 2009 to
    March 2010 include:
    –   CRR for all scheduled commercial banks is proposed to be increased from 5%
        as on 31 March 2009 to 5.5%/ 5.75% w.e.f. 13 February 2010/ 27 February
        2010 respectively.
    –   SLR increased from 24% as on 31 March 2009 to 25% w.e.f. fortnight beginning
        7 November 2009.
•   In view of the revision of Anti Money Laundering guidelines, RBI has advised banks
    and other financial institutions to maintain a proper record of transactions involving
    receipts from non-profit organizations greater than INR 1 million and non-account
    based customer transactions greater than INR 50,000.
•   Banks have been permitted to voluntarily create specific provisions in respect of
    NPAs at a rate higher than the prescribed rates based on a policy approved by the
    board of directors. Such additional specific provision for NPAs not to be reckoned
    as Tier II capital.
•   RBI has advised Banks to assess the group risk of borrowal accounts falling under
    the purview of real estate sector. Further, while assessing loan requirements, banks
    are required to carefully analyse the financial credentials/ viability of the borrowers
    on a consolidated group basis.
•   In line with international practices, RBI has permitted banks to issue subordinated
    debt for raising Tier II capital with call and step up options subject to conditions
    including that such call and step up options are exercisable not before 5 years with
    prior RBI approval and step up not to be more than 50 bps.
•   RBI has instructed that the tenor of loans granted by scheduled commercial banks
    to Housing Finance Companies for on-lending is required to be co-terminus with the
    housing loan granted by HFCs in order for the loans to qualify as priority sector lending.

Real Estate
•   The Ministry of Housing and Urban Poverty Alleviation unveiled the Model Real
    Estate (Regulation of Development) Act (‘the Model Act’) on 23 September 2009.
    As per the Model Act, Builders are required to:
    –   Seek registration for their projects with the prescribed Real Estate Regulatory
        Authority before commencing marketing (registration shall be valid for three
        years with a provision of two yearly renewals).
    –   Furnish bank guarantee amounting to 5% of the total project cost which could
        be encashed by the regulator in the event of default in completion of project.
    –   Provide the proposed advertisements and names of brokers to the regulator.
    –   Enter into an agreement of sale with the prospective buyers before accepting
        advance/s.
All allottees shall be entitled to claim refund in the event of default. Also, in such a case,
the regulator has the power to appoint an alternate agency to complete the project.




                                                                            PricewaterhouseCoopers   15
     Civil Aviation
     •   A Civil Aviation Regulation Group (CARG) has been set up in DGCA to ensure that
         the policies issued or amended are not inconsistent with the provisions of any
         legislation/ requirements and will also examine its applicability and legality.
     •   The Ground Handling policy announced by the DGCA in September 2007 has
         come into force w.e.f. 31 December 2009. Airline operators or other ground
         handling service providers not covered under this policy shall not be allowed to
         undertake self handling or third party handling with effect from 1 January 2011 or
         till further orders, whichever is earlier.
     •   DGCA has provided guidelines for grant of Operating Authorisation to Foreign Airlines
         under Bilateral Air Services Agreements (BASA), which provides that upon designation
         of an airline by one party, the other party shall issue the Operating Authorisation to the
         designated airline. Requisite information / documents need to be furnished at least 60
         days prior to the proposed date of commencement of air services.
     •   DGCA has, vide AIC 8 of 2009 dated 22 July 2009, issued the guidelines for grant
         of permission to operate scheduled international air transport services by Indian
         Air Transport Undertakings. This AIC supercedes the earlier guidelines. Eligibility
         criteria for the applicant are: -
         i.   valid permit for operation of scheduled air transport services;
         ii. minimum five years’ experience of continuous operation of domestic scheduled
             air transport services; and
         iii. fleet of at least twenty aircraft.

     Defence
     Amendments to DPP 2008 effective 1 November 2009
     •   Under the existing procedure, RFPs under the ‘Buy and Make’ Category are
         issued to foreign OEMs. In order to facilitate formation of JVs or alliances for co-
         production with Indian companies and increasing indigenisation, a new category
         of acquisition ‘Buy and Make (Indian)’ has been introduced wherein RFPs can be
         issued to Indian vendors including an Indian company forming JV / establishing
         production arrangement with foreign OEM, followed by licensed production /
         indigenous manufacture in the country. In such a case the Indian vendor would
         need to comply with minimum 50% indigenous content on cost basis.
     •   Other significant amendments are as follows:
         –    The 15 year Long Term Perspective Plan of the armed forces outlining
              technology perspective and capability roadmap is to be made public with a view
              to facilitate capability building in the Indian defence industry.
         –    Industry representation will be invited during the review process of procurement
              proposals while seeking Acceptance of Necessity.
         –    Offsets will not be applicable to “Option Clause” cases where the same was not
              envisaged in the original contract.
         –    Vendors will be permitted to change offset partners to enable fulfillment of the
              offset obligation on a case to case basis. However, no change will be permitted
              in respect of the offset components or value after signing of the offset contract.




16
    –   The Request for Information (RFI) may also seek Transfer of Technology (ToT)
        aspects to include range and depth of ToT and the key technologies identified
        by DRDO.
    –   The role of independent monitors (IMs) has been defined and enlarged to enable
        them to scrutinize complaints with regards to violation of Integrity Pact.
End Use Agreement with USA
India and US have signed the Agreement on the end-use monitoring arrangements
that will henceforth be referred to in letters of acceptance for Indian procurement of
US defence technology and equipment. A Technical Safeguards Agreement, which will
permit the launch of civil or non-commercial satellites containing US components on
Indian space launch vehicles was also signed.

Education
Indian Supreme Court halts University de-recognition move
The Supreme Court of India has stayed the move by the Ministry of Human Resource
Development (MHRD) to de-recognize 44 ‘Deemed Universities’ across India on the
grounds that such institutions lacked infrastructure and expertise. The Supreme Court
has directed the 44 deemed universities to present their case.

Information & Broadcasting
Guidelines for Headend-in-the-Sky (HITS) operators
MIB has issued guidelines which prescribe HITS services will be provided by
prescribed eligible service providers. HITS Broadcasting Service is a system of
distribution of TV programs in C band or Ku Band wherein all the pay channels are
downlinked to a central facility and again uplinked to a satellite after encryption of
channels.
HITS operator can either contract with different broadcasters for buying the content,
aggregating the same and then uplink with its own encryption to a satellite hired by
him or it can merely provide passive infrastructure facility to consortium of cable
operators/MSO’s.
Some features of the Guidelines include: -
•   HITS operators need to uplink from India, and not permitted to provide signals
    directly to subscribers.
•   FDI limited to 74%, prior FIPB approval required if FDI beyond 49%.
•   Cross ownership restrictions of 20% prescribed to avoid vertical integration and
    promote competition.
•   Non-refundable entry fee of INR 100 million and refundable bank guarantee of INR
    400 million.
Uplinking and Downlinking of TV channels
Reference MIB’s letter to TRAI dated 8 October 2009 on review of process for
grant of uplinking and downlinking permissions, and in light of pending TRAI’s
recommendations on this matter, MIB has issued a notice to temporarily suspend
receipt of fresh applications w.e.f. 18 January 2010. Under these guidelines
applications which have been received before 8 October 2009 will, however,
continue to be processed. This has been issued on account of limited spectrum and
transponder capacities available for satellite TV channels.




                                                                        PricewaterhouseCoopers   17
     Telecom
     •   With effect from 21 August 2009, ILD and NLD service providers have been allowed
         to access the subscribers directly also for the purpose of provision of International
         and National Long Distance Voice Service through Calling Cards only. Provision of
         other Intelligent Network such as tele-voting and toll free services and value added
         services such as SMS/MMS, ring tones etc through calling cards is not allowed to
         ILD service providers.
     •   The commercial CUG VSAT license has been amended effective 22 September
         2009 to allow sales return on “payable” basis rather than on “actually paid” basis
         while computing the adjusted gross revenue.
     •   Effective December 2009, all UAS, CMTS, Basic, ISP, VSAT, MNP and INSAT
         Mobile Satellite System Reporting service licensees are required to apply to
         DoT for obtaining security clearance before placing the final purchase order
         for procurement / upgradation of equipment / software for provisioning of
         telecommunication services under the license.
     •   DoT issued a press release dated 23 July 2009 imposing the following conditions
         on a UAS licensee:
         –   3 year lock in period for Promoter’s (holding at least 10% shareholding) equity;
         –   lock-in shall not apply in pursuance of enforcement of pledge by the lending
             financial institution in the event of default committed by the licensee company;
         –   in case of issue of fresh equity within the lock-in period, the declaration of
             dividend and/or special dividend shall be barred.
     •   DoT vide its press release dated 31 December 2009 has extended the time-line for
         implementation of MNP in the entire country to 31 March 2010 against the earlier
         deadline of 31 December 2009. Subsequently, TRAI has also issued notification
         dated 28 January 2010 for enforcement of the Regulations contained under the
         MNP Regulations, 2009 by 31 March 2010.

     Mining
     Increase in Royalties
     With a view to simplifying assessment and collections and to enhance royalty accruals
     to State Governments, a new royalty regime was introduced and notified for major
     minerals on 13 August 2009. It is expected that State annual royalty revenues will go
     up from about INR 24 billion to INR 45 billion.

     Power
     Power Market Regulations 2010
     The Central Electricity Regulatory Commission (CERC) issued the Power Market
     Regulations on 20 January 2010 with the aim of developing the Indian electricity
     industry, promoting competition, protecting interests of consumers and enhancing
     supply of electricity. These Regulations will be applicable to various types of inter-state
     contracts, whether these are transacted directly, through electricity traders, on power
     exchanges or other exchanges. They will govern spot contracts, term ahead contracts,
     derivatives and other electricity related contracts as specified in the Regulations.




18
Mega Power Projects Policy
The Union Cabinet on 1 October 2009 approved modifications to the Mega Power
Projects Policy with a view to encourage technology transfer and indigenous
manufacturing in the field of super critical power equipment. The key modifications
are as under:
•    Existing condition of privatization of distribution by power purchasing states is
     replaced by the condition that power purchasing states shall undertake to carry out
     distribution reforms as laid down by the Ministry of Power.
•    Removal of conditions requiring inter-state sale of power for getting mega
     power status.
•    15% price preference available to domestic bidders in case of cost plus projects of
     PSUs will not apply to tariff based competitively bid projects of PSUs.
•    Benefits of Mega Power Policy to be extended to super critical projects to be to be
     awarded through international competitive bidding with the mandatory condition of
     setting up indigenous manufacturing facility, provided they meet the eligibility criteria.
•    Only basic custom duty of 2.5% would be applicable on brown field expansion of
     existing mega projects.

New Regulations Fixing The Trading Margin For Inter-State Trading
In Electricity
The Central Electricity Regulatory Commission has issued new regulations fixing the
trading margin for inter-state trading in electricity effective 12 January 2010. Main
features of the new regulations are as below:
i.   Trading margin shall apply only to short term buy/ short term sell contracts for inter-
     state trading.
ii. Trading margin ceiling - 4 paise per unit if the sell price of electricity is less than or
    equal to INR 3 per unit; 7 paise per unit in case the sell price of electricity exceeds
    INR 3 per unit.
iii. If more than one trading licensees are involved in a chain of transactions, the
     ceiling on trading margin shall include the trading margins charged by all the
     traders put together.




                                                                            PricewaterhouseCoopers   19
     FEMA
     Establishment of branch office / liaison office in India by foreign entities
     The RBI w.e.f 1 February 2010 modified the procedure related to opening of Branch
     office (“BO”) and liaison office (“LO”) in India by foreign entities, the annual filings to be
     done by such entities as well as the closure of such offices.
     However, there would be no change as regards LO / BO of foreign banks and
     insurance companies.
     1. Set-up of new BO / LO
        The RBI has prescribed eligibility criteria viz. track record, net worth etc. for a
        foreign entity to set-up BO / LO in India.
        Applications for setting up a BO / LO would now need to be submitted to RBI
        through a designated Authorised Dealer Category–I bank (“AD”) (applicant’s
        potential banker in India), whereas earlier such applications were submitted directly
        to the RBI.
     2. Set-up of additional offices or undertaking additional activities
        Application for establishing additional BO / LO or for undertaking additional
        activities (other than those approved by RBI) would also need to be submitted to
        the RBI through an AD (earlier directly to RBI).
        The foreign entity would need to justify the requirement of an additional office, if
        the number of offices exceeds four (i.e. one BO / LO in each zone viz. East, West,
        North and South).
     3. Extension of validity period of LOs
        All requests for extension granted to LOs would now be considered by ADs (earlier
        by the RBI). Compliance of conditions prescribed in the approval, submission of
        annual activity certificates would be examined while considering such request.
        However, LOs of Non-Banking Financial Companies (“NBFCs”) and entities
        engaged in construction and development sectors (excluding infrastructure
        development companies) will not be granted extensions. Such LOs will have
        to be closed down or converted into joint venture / wholly owned subsidiary in
        conformity with the extant foreign direct investment policy.
     4. Closure of BO / LO
        ADs now delegated power to consider request for closure of BO / LO and
        permitting remittance of winding-up proceeds subject to submission of requisite
        documents.
        In cases where the AD is not satisfied with the documents submitted, the
        applications would be forwarded for the RBI’s approval.
     5. Submission of annual activity certificate (“AAC”)
        The AAC, as at the end of 31 March would need to be submitted to the AD (earlier
        to RBI) by BO / LO, on or before 30 April with a copy to the Directorate General
        of Income-tax (International Taxation), New Delhi. In case of multiple BO/LOs, a
        combined AAC for all offices would have to be submitted by the Nodal office of the
        BOs / LOs.
        Further, the BO / LO would now need to provide its PAN in AAC. AD to report any
        adverse comments in the AAC to the RBI.
     6. Unique Identification Number
        In order to provide a uniform framework, RBI would allot a Unique Identification
        Number (“UIN”) to all existing and new BOs / LOs. UIN needs be quoted in future
        references to RBI.
        A.P. (DIR Series) Circulars No. 23 and 24 dated 30 December 2009.




20
Direct Receipt of salary outside India by person on deputation to India
Foreign nationals resident in India / Indian citizens employed with foreign company
on deputation to the office / branch / subsidiary / joint venture in India of such foreign
company are allowed to receive 100 % (earlier only 75%) of his salary (net of India
taxes) from foreign company for the services rendered in India, by credit to his bank
account opened outside India.
Notification No. FEMA 199/2009-RB dated 30 September 2009

Remittance of salary outside India by foreign national taking up
employment in India
Citizens of a foreign state resident in India being in employment with an Indian
company are permitted to open, hold and maintain a foreign currency account with
a bank outside India and remit the whole salary received in India in Indian Rupees to
overseas bank account, subject to payment of income tax in India.
Notification No. FEMA 199/2009-RB dated 30 September 2009

Realisation and Repatriation of export proceeds of goods and software
The RBI has extended the permission granted in relation to realization and repatriation
to India of the amount representing full value of export of goods or software within
twelve months from the date of export, up to 30 June 2010.
(AP (DIR Series) Circular No. 70 dated 30 June 2009

Exchange Earner’s Foreign Currency Account – Clarification
RBI has clarified that all category of foreign exchange earners (including SEZ
developers) are allowed to credit 100% of their specified foreign earnings to the EEFC
Account.
A.P. (DIR Series) Circular No. 22 dated 29 December 2009

Acquisition and transfer of immovable property in India – definition of
PIO widened
A person of Indian origin (“PIO”) is permitted to acquire and transfer specified
immovable property in India, subject to compliance with prescribed conditions. In this
context, the definition of PIO has been widened to include an individual whose mother
or grandmother was a citizen of India by virtue of the Constitution of India or the
Citizenship Act, 1955.
Notification No. FEMA 200/2009-RB dated 5 October 2009

Loans to Non Residents / third party against security of Non Resident
(External) Rupee Accounts [NR (E) RA / Foreign Currency Non Resident
(Bank) Accounts [FCNR(B)] -Deposits
Authorised Dealer Category–I and Authorised Banks are permitted to grant loans
up to INR 10 million (earlier up to INR 2 million) against the security of funds held in
Non-Resident (External) Rupee Account and Foreign Currency Non-Resident (Bank)
account deposits
AP (DIR Series) Circular No. 66 dated 28 April 2009

Advance remittance for Import of Services
RBI has clarified that the benefit of increased limit (USD 0.5 million or its equivalent)
for advance remittance for all admissible current account transactions for import
of services without bank guarantee is not available to public sector company or
a department / undertaking of the Government of India / State Governments.
Accordingly, such entities would need to obtain a prior approval from the Ministry of




                                                                         PricewaterhouseCoopers   21
     Finance, Government of India for making such advance remittances exceeding USD
     100,000 or its equivalent without a bank guarantee.
     A.P. (DIR Series) Circular No. 10 dated 5 October 2009

     Issue of Bank Guarantee on behalf of Service Importers
     ADs are permitted to issue guarantees for an amount of USD 500,000 or its equivalent
     (as against USD 100,000 earlier) in favour of a non-resident service provider, subject to
     compliance with the prescribed conditions.
     The benefit of the above liberalisation is not available to public sector company or a
     department/undertaking of the Government of India/State Governments. Accordingly,
     such entities would need to obtain a prior approval from the Ministry of Finance,
     Government of India for issue of guarantee for an amount exceeding USD 100,000 or
     its equivalent.
     A.P. (DIR Series) Circular No. 11 dated 5 October 2009

     Advance remittance for import of rough diamonds
     Advance remittance for import of rough diamonds to specified mining companies is
     permitted without any limit and without any bank guarantee or standby letter of credit,
     subject to compliance with specified conditions. The RBI has now included Namibia
     Diamond Trading Company (PTY) Ltd (NDTC) in the list of aforesaid specified mining
     companies.
     A.P. (DIR Series) Circular No. 21 dated 29 December 2009

     Guidelines on trading in currency futures in recognized stock exchanges
     The RBI has permitted the recognized stock exchanges to offer currency futures
     contracts in the currency pairs of EURO-INR, JPY-INR and GBP-INR in addition to the
     USD-INR contracts. Persons resident in India can now trade in the aforesaid currency
     futures.
     A.P. (DIR Series) Circulars No. 27 dated 19 January 2010

     Export and Import of currency
     Any person resident in India may take outside India (other than to Nepal and Bhutan) or
     having gone out of India on a temporary visit, may bring into India (other than to and from
     Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India
     notes up to an amount not exceeding INR 7,500 per person (earlier INR 5,000 per person) .
     A.P. (DIR Series) Circular No. 30 dated 1 February 2010

     Issue of Indian Depository Receipts (IDRs)
     The RBI has issued a circular to operationalise the Indian Depository Receipts (“IDR”)
     Rules.
     Eligible Issuers
     •   Listed foreign companies satisfying prescribed eligibility criteria, like pre-issue paid-
         up capital and free reserves of at least USD 50 million, minimum average market
         capitalisation of at least USD 100 million during last three years in domestic country,
         good financial track records etc.
     •   Foreign banks and overseas financial companies operating in India through
         branches or subsidiaries with the approval of sectoral regulator(s).- eg. RBI incase
         of foreign banks.




22
Eligible Investors
•   Persons resident in India as defined under Foreign Exchange Management Act, 1999
    (FEMA).
•   FIIs (including sub-accounts) and NRIs, subject to the compliance with Foreign
    Exchange Management (Transfer or issue of security by a person resident outside
    India) Regulations, 2000.
    Issuance of IDRs
•   IDRs to be denominated in Indian Rupees and issued through a Domestic
    Depository, subject to compliance with IDR Rules and SEBI Guidelines.
•   The issue proceeds of IDRs to be immediately repatriated outside India.
•   IDRs to be listed on any recognised Stock Exchange in India.
    Transfer of IDRs
•   Persons resident in India can freely transfer IDRs through recognised stock
    exchanges in India.
•   FIIs (including sub-accounts) and NRIs can transfer IDRs, subject to compliance with
    Foreign Exchange Management (Transfer or issue of security by a person resident
    outside India) Regulations, 2000.
    Redemption of IDRs
•   There is no restriction on FIIs (including sub-accounts) and NRIs to hold the
    underlying shares.
•   Listed Indian companies and Indian Mutual Funds, registered with SEBI can sell or
    continue to hold the underlying shares, subject to compliance with Foreign Exchange
    Management (Transfer or Issue of Any Foreign Security) Regulations, 2004.
•   Other persons resident in India (including resident individuals) need to sell the
    underlying shares within 30 days of the conversion.
    Other Conditions
•   Automatic fungibility of IDRs is not permitted.
•   Minimum lock-in period of one year (from the issue date) has been prescribed before
    IDRs can be redeemed into underlying equity shares.
A.P. (DIR Series) Circular No. 5 dated 22 July 2009

Opening of Diamond Dollar Accounts
Firms and companies dealing in purchase/ sale of rough or cut and polished
diamonds/ precious metal jewellery plain, minakari and/ or studded with/ without
diamond and/ or other stones, with a track record of at least 2 years (earlier 3 years) in
import/ export of diamonds/ coloured gemstones/ diamond and coloured gemstones
studded jewellery/ plain gold jewellery and having an average annual turnover of
INR 30 million (earlier 5 million) or above during preceding three licensing years, are
allowed to open Diamond Dollar Accounts.
A.P. (DIR Series) Circular No. 13 dated 29 October 2009

Companies Act
•   Forms prescribed for reporting/filings with RoC have been amended vide various
    amendments in Companies (Central Government’s) General Rules and Forms, 1956
    (Forms 1,1AA,1AD, 5, 8, 10, 17,19, 20, 20A, 23C, 24, 24B, 25A, 44, 49, 61 and 67).




                                                                          PricewaterhouseCoopers   23
     •   The Companies (Accounting Standards) Rules, 2006 have been amended vide
         Companies (Accounting Standards) Amendment Rules, 2009 inserting a new
         clause 46 addressing the exchange differences arising on reporting long term
         foreign currency monetary items in relation to depreciable capital assets.
     •   Companies (electronic Filing and Authentication of documents) Rules, 2006 have
         been amended to ease out the norms for physical submission of documents in
         case of payment of stamp duty in electronic mode.
     •   The Scheme for Filing of Statutory Documents and other Transactions by
         Companies in electronic mode has been amended providing for collection of stamp
         duty through MCA’s portal and dispensation of physical filing of documents.
     •   Reporting requirements for IDRs have been amended vide The Companies (Issue
         of Indian Depository Receipts) (Second Amendment) Rules, 2009.

     Limited Liability Partnership (‘LLP’) Policy Changes
     •   LLP Rules, 2009 were amended by LLP (Amendment) Rules 2009, to provide that
         all applications relating to conversion of a firm or a company into LLP should be
         made to the Company Law Board pending the constitution of Tribunal under the
         Companies Act, 1956.
     •   LLP Rules, 2009 were further amended by LLP (Amendment) Rules 2010 vide
         Notification dated 11 January 2010 to provide for the following:
         – Changes in Rules 10, 12 and 21 which relate to designated partner’s identification
           number, incorporation of LLP and filing of the partnership agreement.
         – Modifications in Form 1 (Application for name approval), 2 (Incorporation
           Document), 3 (information relating to LLP Agreement or any change there in), 4
           (notice of admission or cessation of partners), 5 (notice of change of name), 6
           (intimation of change in particulars by partner to LLP) and 7 (application for DPIN).
         – Fee for change in the name has been reduced from existing INR 10,000 to INR
           5,000.
         These amendments came into effect from 15 January 2010.
     •   Various sections of Companies Act, 1956 relating to winding up were made applicable
         to LLP with certain modifications vide a notification dated 6 January 2010.

     Education
     The Right of Children to Free and Compulsory Education Act, 2009
     Government has notified the “Right of Children to Free and Compulsory Education
     Act, 2009” which provides for free and compulsory education of all children in the age
     group of six to fourteen years.
     Key features of the Act:
     • All schools mandated to admit free students in the proportion that the government
        aid received by them bears to its expenses.
     •   Private unaided schools to admit a minimum of 25% (in Class I) from economically
         disadvantaged sections for which it will be reimbursed by the government to
         the extent of lesser of per-child-expenditure incurred by the State, or the actual
         amount charged.




24
•   All schools (other Government-established schools) to obtain a certificate of
    recognition from the prescribed authority by making an application.
•   Responsibilities of Central & State governments, parents, schools and teachers
    defined in the Act.

Income Tax
Deduction under section 80 IB(10) of the Income tax Act, 1961 (“the Act”)
The Central Board of Direct Taxes (“CBDT”) has clarified that the deduction under
section 80 IB (10) of the Act in respect of undertaking developing and building housing
projects can be claimed on a year to year basis, where the assessee is showing profits
from partial completion of the project every year.
Income deemed to accrue or arise in India – Withdrawal of circular no 23
Earlier, the CBDT issued Circular No. 23 dated 23 July 1969 in respect of income
accruing or arising through or from any business connection in India. This circular
provided clarification in questions regarding applicability of the provisions of Section 9
of the Act in the following specific situations:
•   Non-resident exporter selling goods from abroad to an Indian importer,
•   Non-resident company selling goods from abroad to its Indian subsidiary,
•   Sale of plant and machinery to an Indian importer on an installment basis,
•   Foreign agents of Indian exporters,
•   Non-resident person purchasing goods in India,
•   Sale by a non-resident to Indian customers either directly or through agents,
•   Extent of profit assessable under section 9 of the Act.
Subsequently, the CBDT had issued certain clarification in Circular No. 163 dated 29
May 1975 and Circular No. 786 dated 7 February 2000.
The CBDT has now issued Circular No. 7 of 2009 dated 22 October 2009 withdrawing
the above three Circulars with immediate effect. The reason cited for the withdrawal
was that the three Circulars were interpreted by some tax payers to claim relief, which
is not in accordance with the provisions of Section 9 of the Act and which is against
the intention behind the issue of the three Circulars.
CBDT notifies revised procedure for furnishing of information for making
remittances to non-residents
The person making a payment to a non-resident needs to obtain a certificate from
a chartered accountant in Form No. 15CB, except in cases where a certificate from
the tax officer regarding the withholding tax on the payments has been obtained. The
remitter will access the income tax authority’s website to electronically upload the
remittance details in Form No.15CA. The information to be furnished in Form 15CA is
to be filled in using the information contained in Form 15CB. The duly signed forms are
required to be submitted in duplicate to the RBI, who in turn will forward a copy to the
tax officer concerned.




                                                                        PricewaterhouseCoopers   25
     Applicability of withholding tax in the case of transactions made by
     TPAs with hospitals etc.
     The CBDT has clarified that the services rendered by hospitals to various patients
     are primarily medical services and therefore the provisions of section 194J of the Act
     are applicable on payments made by Third party Administrators (“TPAs”) to hospitals
     etc. Therefore, TPAs who are making payment on behalf of insurance companies to
     hospitals for settlement of medical / insurance claims etc. under various schemes,
     including cashless schemes, are liable to withhold tax under section 194J of the Act
     on all such payments to hospitals etc.
     Revised Valuation Rules for perquisites
     The Finance Act, 2009, has withdrawn the levy of Fringe Benefit Tax (“FBT”) on
     expenditure incurred by an employer on or after 1 April 2009. Consequently, the
     employee benefits which were subject to FBT have been brought back within
     the ambit of perquisites. The relevant rules required to compute the valuation of
     perquisites were notified by CBDT. The new rules are largely in line with the old
     rules, as were prevalent prior to the introduction of the FBT regime, except for a few
     perquisites which are discussed below:
     Accommodation
     The definition of salary has now specifically excluded lump-sum payments received
     at the time of termination of service or superannuation or voluntary retirement. Thus,
     payments like gratuity, severance pay, leave encashment, voluntary retrenchment
     benefits, commutation of pension and similar payments would not be considered in
     determining the value of the housing perquisites provided by the employer.
     Motor Car
     The perquisite value of a motor car provided by an employer and used by the
     employee both for his official and personal use has been enhanced by 50% (i.e. INR
     600 / 800 per month depending on the engine capacity of the car). Also, the perquisite
     valuation for an employer-provided chauffeur in such cases has been increased by
     50% (i.e. INR 300 per month).
     Employee Stock Options
     The valuation of shares and specified securities in relation to employee stock options
     have been brought under Rule 3 itself, and Rules 40C and 40D will no longer be
     applicable. Valuation norms as provided in Rule 40C and 40D have been incorporated
     into Rule 3, except that the valuation of perquisite would now be done on the exercise
     date, rather than the vesting date.
     Double Taxation Avoidance Agreements (“DTAA”)
     India notified the DTAA signed with the following countries for avoidance of double
     taxation
     • Myanmar
     • Tajikistan
     • Council of Ministers of Montenegro.
     The Cabinet has approved the Agreement for avoidance of double taxation and
     prevention of fiscal evasion with respect to taxes on income and on capital DTAA
     between India and Albania.




26
Alternative Dispute Resolution Panel (“DRP”)
• Form 35A would be used for the purposes of filing objections with DRP.
• The objections shall be filed in paper book form in quadruplicate, accompanied by
  four copies of the draft assessment order, as well as any other evidence relied upon.
• The panel may, at its discretion, either accept or reject objections that are not
  accompanied by relevant documents.
• Besides factual and procedural details required in Form 35A, the following specific
  details are required:
   – Grounds of objection
   – Facts as submitted to the tax officer
   – Facts as modified by the tax officer and whether the tax payer wholly agrees with
     those modifications. If not, reasons along with the documentary evidence needs to
     be supplied
   – Legal arguments submitted to the tax officer
   – Case laws relied upon, legal argument relied upon, case laws relied upon by the
     tax officer
   – Any additional new cases which the tax payer may like to rely upon
   – Factual and legal arguments against the addition proposed by the tax officer
• Additional evidence relied upon by the tax payer (not submitted earlier to the tax
  officer) needs to be filed through a separate application along with its reasons.
• While hearing the objections, the panel shall not be confined to the grounds set forth
  in the objections but may even enhance the additions made by the tax officer.
• After the issue of directions, if any mistake or error is apparent within, the panel
  may, suo moto, or upon application from the tax payer or the tax officer, rectify
  that mistake or error, and also direct the tax officer to modify the assessment order
  accordingly.
• Any appeal against the assessment order passed in pursuance of the directions of
  the panel shall be filed before the Tribunal in form no 36B.

Others
• The cost inflation index for Financial Year 2009-10 relevant to assessment year (“AY”)
  2010-11 is notified to be 632.
• A recent Circular issued by CBDT clarifies that any installment of advance tax paid in
  respect of fringe benefits for AY 2010-11 shall be treated as advance income tax paid
  by assessee for AY 2010-11. The Circular also clarifies that the assessee can adjust
  the sum against its advance tax obligation in respect of income for AY 2010-11 or in
  case of loss, etc. claim such payment as refund as advance tax paid in AY 2010-11.




                                                                         PricewaterhouseCoopers   27
     Customs Law
     Scope of Focus Market Scheme (FMS) expanded
     The incentive under the FMS was increased from 2.5% to 3% of the FOB value of
     export. Further 26 new markets were added to the FMS.
     Scope of Focus Product Scheme (FPS) expanded
     To promote export of high value added manufactured products, the incentive under
     FPS was increased from 1.25% to 2% of FOB value of exports and a large number of
     new products were also included under FPS from August 2009.
     EPCG scheme at Zero duty introduced for technology up-gradation
     To aid technology up-gradation of the export sector, exporters of engineering and
     electronic products, basic chemicals and pharmaceuticals, apparels and textiles,
     plastic, handicrafts, chemicals and allied products and leather and leather products
     were allowed to import capital goods at zero customs duty under EPCG scheme from
     August, 2009. The Scheme is valid till 31 March 2011.
     Validity of Duty Entitlement Passbook (DEPB) Scheme extended
     To impart stability to the policy regime, the validity of the DEPB Scheme was extended
     till 31 December 2010.
     • Customs Duties increased on iron ore and concentrates
     • The export duty on iron ore and concentrates was increased from 5% to 10% in
       December, 2009 and an export duty @ 5% was imposed on iron ore fines.
     Rules notified for determination of origin of goods under Korea and
     ASEAN Foreign Trade Agreements (FTAs)
     The Central Government has notified the rules for determination of origin of goods and
     issuance of certificates of origin (COO) under the Korea FTA and ASEAN FTA. These
     rules were made effective 1 January 2010.
     Customs duty exemption granted to imports made under Korea FTA and
     ASEAN FTA
     Partial/ full exemptions ware granted from customs duty to specified goods imported
     under Korea FTA and under ASEAN FTA. These exemptions were made effective
     1 January 2010. Under ASEAN FTA only Singapore, Thailand and Malaysia were
     included in the exemption notification.

     Excise Law
     Advance ruling scheme extended to Public Sector Undertakings
     The advance ruling scheme was extended to Public Sector Undertakings also from
     September 2009.
     Cenvat Credit Rules amended to provide a simplified formula to
     determine credit in respect of goods cleared from 100% EOU to DTA.
     Cenvat Credit Rules, 2004 were amended to provide a simplified formula to determine
     the credit available in respect of goods cleared from a 100% EOU to the DTA.
     Henceforth, DTA units can avail CENVAT credit of excise duties equivalent to the CVD
     and ADC portion of duty including education cesses paid on such clearances.
     EOU allowed to sell 90% similar goods within the overall entitlement of
     50% for DTA sale
     100% EOU which are manufacturing and exporting more than one product were
     allowed to sell any of these products in Domestic Tariff Area (DTA) upto 90% of the
     FOB value of exports of such products instead of the existing 75% of the FOB value
     of exports, within the overall DTA sales entitlement of 50% of the FOB value of total
     exports of the unit.




28
Sales tax/VAT Laws
Various States have recently amended the slab of tax rates under the State VAT laws,
deviating from the guidelines laid down by the Empowered Committee on VAT which
prescribed uniform State VAT rates. The following are the major amendments:
• Amendment in VAT rates for goods taxable at 4%
   In the States of Assam, Chhattisgarh, Delhi, Madhya Pradesh and Punjab the rate
   of VAT on goods taxable @ 4% other than declared goods has been increased from
   4% to 5%. In Uttar Pradesh and Gujarat an Additional Tax at the rate of 0.5% and
   1% respectively has been levied on goods taxable at 4% (except declared goods).
• Amendment in VAT rates for goods taxable at 12.5%
   In the States of Assam the rate has been increased from 12.5% to 13.5%. In
   Andhra Pradesh the rate has been increased from 12.5% to 14.5%. In Chhattisgarh
   and Rajasthan the rate has been increased from 12.5% to 14%. In Uttar Pradesh
   and Gujarat an Additional Tax at the rate of 1% and 2.5% respectively has been
   levied on goods taxable at 12.5%.

Service Tax Law
Export of Services Rules, 2005 amended to expand the meaning of
‘India’
The definition of ‘India’ under the Export of Services Rules, 2005 was amended to
include installations, structures and vessels in the entire Continental Shelf of India and
the Exclusive Economic Zone of India.
Export of Services Rules and Taxation of Services (provided from
outside India and received in India) Rules amended
Export of Services Rules, 2005 and Taxation of Services (provided from outside India
and received in India) Rules, 2006 were amended so as to include the new services
introduced by the Finance Budget 2009-10.
Service Tax on new services made effective
Service tax on following new services was imposed w.e.f. 1 September 2009:
• Services in relation to transport of coastal goods and goods through National
  waterways and inland waters
• Services provided in relation to transport of goods by rail
• Cosmetic and plastic surgery service
• Legal consultancy service




                                                                        PricewaterhouseCoopers   29
     The following table sets out the Key Budget Financials:
                                              (INR in crores)
                                              2008-2009      2009-2010      2009-2010      2010-2011*
                                              Actuals        Budget         Revised        Budget
                                                             Estimates      Estimates      Estimates
      1. Revenue Receipts                         540,259        614,497         577,294         682,212
      2. Capital Receipts^                        343,697        406,341         444,253         426,537
      3. Total Receipts (1+2)^                    883,956       1,020,838      1,021,547       1,108,749
      4. Non-Plan Expenditure                     608,721        695,689         706,371         735,657
      5. Plan Expenditure                         275,235        325,149         315,176         373,092
      6. Total Expenditure (4+5)                  883,956       1,020,838      1,021,547       1,108,749
      7. Revenue Expenditure                      793,798        897,232         906,355         958,724
      8. Capital Expenditure                        90,158       123,606         115,192         150,025
      9. Revenue Deficit (7-1)                    253,539        282,735         329,061         276,512
         As a percentage of GDP                      4.5%           4.8%            5.3%            4.0%
      10. Fiscal Deficit (6 - (1+Recoveries       336,992        400,996         414,041         381,408
          of Loans+Other receipts)
         As a percentage of GDP                      6.0%           6.8%            6.7%            5.5%
      11. Primary Deficit (10-Interest            144,788        175,485         194,541         132,744
          payments)
         As a percentage of GDP                      2.6%           3.0%            3.2%            1.9%
     *GDP for BE 2010-11 has been projected at Rs. 69,34,700 crore assuming 12.5% growth over the ad-
     vance estimate of 2009-10 (Rs 61,64,178 crore) released by CSO.
     ^Does not include receipts in respect of Market Stabilization Scheme, which will remain in the cash
     balance of the Central Government and will not be used for expenditure.



     Where the Rupee comes from




     Where the Rupee goes to




30
Direct Tax Code (DTC)
• The Government proposes to introduce the DTC from 1 April, 2011. As a
  consequence, the Budget proposals do not incorporate the DTC provisions.

Tax Rates
• Corporate tax rates are proposed to remain unchanged. In case of a domestic
  company having total income exceeding INR 10 million, the surcharge is proposed
  to be reduced from 10% to 7.5%. No change in surcharge has been proposed in
  case of foreign companies.
• The MAT rate is proposed to be increased from 15% to 18%. The effective MAT
  rates (after considering the reduction in surcharge rate) are as follows:

     Total Income                             Existing              Proposed
                                       Domestic    Foreign     Domestic Foreign
     Taxable income < INR 10 million   15.45%      15.45%      18.54%      18.54%
     Taxable income > INR 10 million   16.99%      15.84%      19.93%      19.00%


• As a result of reduction in the surcharge rate applicable to domestic companies, the
  effective DDT rate would stand reduced from 16.99% to 16.61%.
• The tax slabs for individuals/ HUF/ AOPs are proposed to be revised as follows:


            Existing slab rates               Proposed slab rates
     Income (INR)        Rate of tax   Income (INR)          Rate of tax
     0-160,000           Nil           0-160,000             Nil
     Above               10%           Above                 10%
     160,000-300,000                   160,000-500,000
     Above               20%           Above                 20%
     300,000-500,000                   500,000-800,000
     Above 500,000       30%           Above 800,000         30%


   i.   In case of resident women (below 65 years of age) and resident senior citizens,
        the amount of INR 160,000 shall be replaced with INR 190,000 and INR
        240,000, respectively.
   ii. The proposed changes in tax slabs would result in maximum savings of INR
       51,500.

International Tax
• Section 9(1) provides for situations where income is deemed to accrue or arise in
  India. Vide Finance Act, 1976, a source rule was provided in section 9(1) through
  insertion of clauses (v), (vi) and (vii) for income by way of interest, royalty or fees for
  technical services respectively. It was provided, inter alia, that in case of payments
  as mentioned under these clauses, income would be deemed to accrue in India to
  non-residents under the circumstances specified therein.
• The Supreme Court in Ishikawajima-Harima Heavy Industries Ltd., Vs DIT (2007)
  [288 ITR 408] held that for section 9(1)(vii) to apply, not only should services be
  utilized in India, but they should also be rendered in India. If the services are not
  rendered in India, they cannot be taxed. Vide the Finance Act, 2007 an explanation
  was inserted in the Act to overcome the Ishikawajima-Harima decision.




                                                                           PricewaterhouseCoopers   31
     • Inspite of the Explanation inserted in 2007, the Courts have generally been holding
       that the twin conditions prescribed in Ishikawajima-Harima must be fulfilled before
       any payment for technical services can be taxed in India. To explicitly overcome the
       decision of Ishikawajima-Harima and the subsequent Court decisions, it has now
       been specifically clarified that technical services, even if rendered outside of India,
       can be taxed in India. The place of rendering of services is not the relevant criteria.
       What is relevant is the place of utilization of services.
     • It is proposed that fees for technical services rendered in connection with the
       prospecting for, or extraction or production of mineral oils, will not be eligible for
       presumptive taxation @ 4.223% on gross basis. This may increase the tax burden
       of many oil and gas service providers to 42.23% on net basis.

     Business Income
     • The Act provides for disallowance of certain payments to residents if the tax
       deducted on the same is not deposited during the previous year. However, in case
       the deduction of tax is made during the last month of the previous year, no such
       disallowance is made if the tax is deposited on or before the due date of filing of
       return. It is now proposed that no disallowance will be made if the tax deducted
       at source at any time during the previous year is deposited on or before the due
       date of filing the tax return. This amendment is proposed with retrospective effect
       from FY 2009-10. No such relaxation has been made on payments made to non-
       residents / foreign companies.
     • The tax audit limit under section 44AB is proposed to be increased from INR 4
       million to INR 6 million in case of persons carrying on business, and from INR 1
       million to INR 1.5 million in case of persons carrying on profession. Further, penalty
       for failure to get the accounts audited proposed to be increased from INR 0.1
       million to INR 0.15 million.
     • Presently, weighted deduction of 125% is available in respect of payments made
       to a university, college or other institution to be used for research in social science
       or statistical research. This deduction is now also proposed to be extended to any
       research association having social science or statistical research as their object.
     • It is also proposed to enhance the weighted deduction on payments made to
       national laboratories, research associations, colleges, universities and other
       institutions, for scientific research, from 125% to 175%.
     • Companies engaged in certain businesses are allowed weighted deduction of
       150% of the expenditure (not being expenditure in nature of cost of any land or
       building) incurred on scientific research on an approved in-house research and
       development facility. In order to further incentivise in-house research, it is proposed
       to increase this weighted deduction to 200%.
     • In view of the high employment potential in hotel sector, it is proposed to extend
       investment linked tax incentive in respect of capital expenditure (other than on
       land, goodwill and financial instrument) incurred for the purposes of the business
       of building and operating new hotels of 2 Star category or above anywhere in India,
       where the hotel starts functioning on or after April 01, 2010.
     • One of the conditions for availing the investment linked incentive in respect of
       the business of laying and operating a cross-country natural gas or crude or
       petroleum oil pipelines network is that not less than one-third of the total pipeline
       capacity is made available for use on common carrier basis. The PNG Regulatory




32
   Board however has specified a common carrier capacity condition of ‘one-third’
   for a natural gas pipeline network and ‘one-fourth’ for petroleum product pipeline
   network of entity’s own requirement and contracted capacity. It is proposed to align
   the proportion of the common carrier condition to that under the PNG regulations.
• General Insurance Companies (Non-Life insurance) are currently taxed under
  section 44 read with the First Schedule of the Income-tax Act. According to existing
  rule 5 of the first schedule, the income from Non-Life business is taken as profit
  before tax and appropriations as per the P&L Account of the Company prepared
  in accordance with the IRDA regulations subject to certain adjustments. It is now
  proposed that rule 5 of the First Schedule will be amended so that
   – Realized gains on investments, if not credited to P&L A/c to be added to total
     income. Similarly, realized losses on investments, even if not debited to P&L A/c,
     to be allowed as deduction
   – Provision for diminution in value of investments debited to P&L A/c to be added
     to total income

Exemptions and Deductions
• For availing the tax holiday for developing and building housing projects, it
  is proposed to increase the period allowed for completion of such housing
  projects (approved by local authority on or after April 01, 2005) from 4 years to
  5 years. Further, condition relating to the built up area of shops and commercial
  establishments included in the housing project has been relaxed. This has been
  proposed to be effective retrospectively from April 01, 2010.
• Business of hotels or the business of building, owning and operating convention
  centre located in National Capital Region are currently eligible for 5 year tax holiday.
  At present, the deduction is available provided that such hotel starts functioning or
  the convention centre is constructed on or before March 31, 2010. For providing
  more time for these facilities to be set up for Commonwealth Games, it is proposed
  to extend the date to July 31, 2010.
• In case of individuals / HUF, deduction upto INR 20,000/- has been proposed for
  investments made in notified long term infrastructure bonds. This deduction is in
  addition to the combined deduction of upto INR 0.1 million available under sections
  80C, 80CCC and 80CCD. The benefit of this deduction is currently proposed only
  in relation to investments made during the FY 2010-11.
• Earlier, the formula for computation of profits derived from exports in case of
  units located in SEZs was the amount which bears to the profits of SEZ unit, the
  same proportion as the export turnover of the SEZ unit bears to the total turnover
  of the business carried on by the assessee. This formula was perceived to be
  discriminatory in so far as those assessees were concerned who had multiple
  units in both SEZ and domestic tariff area (DTA) vis-à-vis those assessees who
  were having units in the SEZ only. Accordingly, words “by the undertaking” were
  substituted for “by the assessee” by the Finance (No.2) Act, 2009, with effect
  from assessment year 2010-11. In order to make the amendment effective for
  earlier years as well, it has now been proposed that the amended formula which
  has removed the discrepancy will apply to the assessment year 2006- 07 and
  subsequent assessment years.




                                                                        PricewaterhouseCoopers   33
     Limited Liability Partnerships (LLP)
     • It is proposed that the transfer of assets on conversion of a private company or
       an unlisted public company into an LLP shall not be regarded as a transfer for the
       purposes of capital gains tax on fulfillment of following conditions:-
        iii. the total sales, turnover or gross receipts in business of the company do not
             exceed INR 6 million in any of the three preceding previous years;
        iv. the shareholders of the company become partners of the LLP in the same
            proportion as their shareholding in the company;
        v.   no consideration other than share in profit and capital contribution in the LLP
             arises to the partners;
        vi. the erstwhile shareholders of company continue to be entitled to receive
            at least 50% of the profits of LLP for a period of 5 years from the date of
            conversion;
        vii. all assets and liabilities of the company become the assets and liabilities of the
             LLP; and
        viii. no amount is paid, either directly or indirectly, to any partner out of the
              accumulated profit of the company for a period of 3 years from the date of
              conversion
     • It is also proposed to allow carry forward and set-off of business loss and
       unabsorbed depreciation of the company to the successor LLP which fulfills the
       above mentioned conditions. However, if the stipulated conditions are not complied
       with, the benefit availed shall be taxable in the hands of the successor LLP as
       business income in the previous year in which the requirements are not complied
       with.
     • To ensure tax neutrality, corresponding provisions have been introduced for
       providing the manner of computation of actual cost/cost of acquisition in the
       hands of successor LLP and imposing restrictions on the amount of aggregate
       depreciation allowable to the predecessor company and the LLP.
     • It is clarified that the MAT credit available to a predecessor company shall not be
       allowed to the successor LLP.
     • Deduction in respect of unamortised expenditure on voluntary retirement scheme
       will be allowed in the hands of LLP from the year of conversion for the unexpired
       period.

     Other Income
     • Under the existing provisions of section 56 (Income from other sources), any sum
       of money or any property in kind which is received without consideration or for
       inadequate consideration (in excess of INR 50,000/-) by an individual or an HUF
       is taxable in the hands of recipient. However, receipts from relatives or on the
       occasion of marriage or under a will are outside the scope of this provision.
     • In order to curb the practice of transferring unlisted shares at prices below their
       fair market value, it is proposed to tax transactions relating to transfer of unlisted
       shares of a company to a firm or to a company, without or for an inadequate
       consideration, with effect from June 01, 2010. The same would be taxable in the
       hands of the recipient firm / resident company, subject to any treaty benefits as
       may be available to any foreign recipient firm / company.




34
• Presently, any receipt of property in kind by an individual / HUF is considered
  taxable if received without or for inadequate consideration. The scope of the term
  ‘property’ is proposed to be clarified to include only specified ‘capital assets’. As a
  consequence, ‘business assets’ are now sought to be excluded from the definition
  of property. It is also proposed to include bullion within the meaning of property
  with effect from June 01, 2010.
• Under the existing provisions, receipt of immovable property without consideration
  or for inadequate consideration by an individual or HUF is taxable. It is now
  proposed that such receipt of immovable property shall be considered taxable only
  if the property is received without consideration and shall exclude cases where the
  property is received for inadequate consideration.
• For the purposes of valuing immovable property transferred without adequate
  consideration, it is proposed to amend section 142A(1) to allow the Assessing
  Officer to make a reference to the Valuation Officer for an estimate of the value of
  property for the purposes of section 56(2).

Assessments, Appeals and Settlement Commission
• It is proposed that an application before the Settlement Commission can be made
  in cases where proceedings for assessment or reassessment result from search or
  requisition of books of account or other documents or any assets. This is subject
  to the condition that the additional amount of income-tax payable on the income
  disclosed in the said application exceeds INR 5 million.
• Under the existing provisions of the Act, the Settlement Commission shall pass an
  order within 12 months from the end of the month in which the application is made.
  It is proposed that in respect of applications filed on or after 1st June, 2010, the
  Settlement Commission shall pass the orders within 18 months from the end of the
  month in which the application is made.
• It is proposed to specifically provide that the High Court has power to admit
  an appeal even after the expiry of the period stipulated in the Act provided it is
  satisfied that there is sufficient cause in delay in filing of the appeal.




                                                                        PricewaterhouseCoopers   35
     Miscellaneous
     • It is proposed to simplify and rationalise the provisions relating to tax deduction at
       source. In this regard, the threshold limits for non-deduction of tax are proposed to
       be increased from 1 July, 2010, as follows :


      Section   Nature of Payment                     Existing          Proposed threshold
                                                      threshold limit   limit of payment
                                                       of payment (INR) (INR)
      194-B     Winnings from lottery or crossword               5,000              10,000
                puzzle, in an amount exceeding
      194-BB    Winnings from horse race, in an                  2,500               5,000
                amount exceeding
      194-C     Payment to Contractors                          20,000              30,000
                 • For single transaction                       50,000              75,000
                 • For aggregate of transactions
                  during the financial year
      194-D     Insurance commission (aggregate                  5,000              20,000
                payments during the financial year)
      194-H     Commission on Brokerage (aggregate               2,500               5,000
                payments during the financial year)
      194-I     Rent (aggregate payments during the            120,000             180,000
                financial year)
      194-J     Fee for professional or technical               20,000              30,000
                services (aggregate payments
                during the financial year)


     • Under section 201(1A), delay in deposit of tax deducted at source, or failure to
       deduct tax at source, results in levy of interest @ 1% per month (12% per annum)
       from the date tax was deductible till the date the same is actually paid. It is
       proposed that with effect from 1 July 2010, the rate of interest shall be as follows:
        a. 1% per month (12% per annum) from the date tax was deductible (but not
           deducted) upto the date on which such tax has actually been deducted; and
        b. 1.5% per month (18% per annum) from the date the tax is actually deducted
           upto the date when the same is actually paid.
     • Under the existing provisions of sections 203 and 206C, the requirement of
       furnishing certificate for TDS / TCS was dispensed with w.e.f. April 1, 2010.
       Considering the fact that the TDS / TCS certificate constitutes an important
       document for the deductee / collectee, it is proposed that the deductor / collector
       shall continue to issue physical TDS / TCS certificates even after 31 March, 2010.
       The intention appears to be to avoid hardship which the taxpayer sometimes face
       by not being able to claim the TDS amounts due to non-availability of requisite data
       in the online systems of the Tax Department.




36
General
The Finance Minister has announced the date of introduction of the dual Goods
and Service Tax (GST) to be April 1, 2011. The Finance Minister has indicated that
concerted efforts of the Empowered Committee and the Finance Commission in the
last few months has lead to a broad consensus on the introduction of GST and has
carved a platform for future discussions in finalizing the structure of GST and the
modalities surrounding its introduction.
As a step towards introduction of GST, various measures have been announced in the
Union Budget. These include increase in the level of excise duty to 10% signifying a
single rate of tax for goods and services, rationalization of duties and broadening of
the tax base by way of introduction of new taxable services.
Budget 2010 has maintained the peak rate of Basic Customs Duty (BCD) on all non-
agricultural products at 10%. The general CENVAT rate has been increased from
8% to 10% in order to reduce the fiscal gap. The rate of service tax continues at
10%. The Government has broadened the service tax base by introducing eight new
categories of services and has expanded the scope of certain existing services. The
Government has announced some service specific exemptions and rationalized the
refund procedure especially for service exporters. The rate of CST is maintained at 2%
for inter-State sale of goods against Form C.

I. Customs Duties
Direction
Budget 2010 has maintained the peak rate of Basic Customs Duty (BCD) on all
non-agricultural products at 10%. However, a number of tariff changes have been
introduced in relation to goods pertaining to specified sectors such as oil and gas,
telecommunication, food and agriculture, healthcare and gems and jewellery.

Details of proposals
Tariff
• A concessional rate of 5% BCD has been imposed on the following goods:
  – projects notified for import under the Project Import Scheme, namely:
     • digital head end projects
     • monorail projects for urban public transport
     • projects for installation of mechanized food grain handling systems and pallet
       racking systems in mandis and warehouses for food grains and sugar
     • cold storage, cold room (including farm level pre-cooling) or industrial projects
       for preservation, storage or processing of goods relating to specified sectors
  – machinery, instruments, apparatus and appliances, control gear, transmission
    equipment and auxiliary equipment and components for setting up of a solar
    power generation project or facility, subject to specified conditions.
  – specified machineries and raw material for use in the agricultural sector
• The concessional rate of 5% BCD on specified machinery or equipment for use in
  the plantation sector has been extended till 31st March 2011.
• The rate of BCD on the following goods has been reduced to NIL
  – promotional material imported in the form of Electronic Promotion Kits (EPK) /
    Beta Cams on a Free of Cost basis
  – truck refrigeration units
  – tunnel boring machines for hydro electric projects, subject to prescribed
    conditions
  – geo thermal ground source heat pumps
                                                                       PricewaterhouseCoopers   37
       – specified raw materials and consumables for use in the manufacture of sports
         goods for export, upto 3% of the FOB value of exports in the preceding year
       – gold ores and concentrates for use in manufacture of gold
       – specified goods for manufacture of electrically operated vehicles, subject to
         prescribed conditions (valid till 31st March 2013)
       – varieties of compostable polymer or bioplastics, subject to prescribed conditions
       – specified goods for manufacture of orthopedic implants
       – parts, components and accessories for manufacture of mobile handsets and sub-
         parts for the manufacture of such parts and components of mobile handsets
       – parts or components for manufacture of battery chargers and hands free
         headphones of mobile handsets
       – specified goods and raw materials for manufacture of excisable goods
       – specified capital goods for manufacture of information technology products /
         electronic hardware, subject to prescribed conditions
       – electrical energy other than that removed from a Special Economic Zone (SEZ) to
         the Domestic Tariff Area (SEZ) or the non-processing area of the SEZ
     • BCD at the rate of 16% has been imposed on electrical energy removed from an
       SEZ to the DTA or the non-processing areas of the SEZ (effective from 26th June
       2009)
     • BCD on the following goods has been reduced from 10% to 2%
       – rhodium
     • BCD on the following goods has been reduced from 10% to 5%
       – magnetrons of up to 1000KW for use in manufacture of domestic microwave
         ovens
       – Naphtha
       – Liquified Natural Gas (LNG)
       – Propane, Butane and Natural Gas
       – Petroleum Coke
     • BCD on the following goods has been reduced from 70% to 30%
       – uncrushed long pepper
     • BCD on the following goods has been reduced from 30% to 20%
       – Asafoetida
     • BCD on the following goods have been increased from 2.5% to 7.5%
       – High Speed Diesel (HSD)
       – motor spirit (Petrol)
     • The rate of BCD on the following goods has been increased from NIL to 5%:
       – crude petroleum oil
     • The BCD exemption extended on the following items has been withdrawn:
       – spare parts of hearing aids
       – specified medical equipment and parts and accessories thereof




38
  – life saving medical equipment including accessories spare parts or both used
    other than for personal use
  – petroleum products other than specific notified varieties
• The rate of BCD on the following goods has been reduced from 7.5% to 5%:
  – goods required for medical surgical, dental or veterinary use and parts and
    accessories thereof
• The rate of BCD on the following goods has been reduced from 5% to 4%:
  – hospital equipment, apparatus, and appliances including spare parts and
    accessories, subject to prescribed conditions
• Others
  – BCD on gold bars and other forms of gold (excluding jewellery) has been
    increased from Rs. 200 per ten grams and Rs. 500 per ten grams to Rs. 300 per
    ten grams and Rs. 750 per ten grams, respectively.
  – BCD on silver increased from Rs. 1000 per kilogram to Rs. 1500 per kilogram
  – BCD on platinum increased from Rs. 200 per ten grams to Rs. 300 per ten grams
• With effect from 27th February 2010, the following goods have been exempted from
  the levy of the additional duty of customs in lieu of sales tax/ VAT under Section 3(5)
  of the Customs Tariff Act, 1975:
  – all pre-packaged goods intended for retail sale in India and indicating the retail
    sale price
  – wrist watches, pocket watches and other watches including stop watches
  – telephones for cellular networks or other wireless networks
  – parts, components and accessories for manufacture of mobile handsets and sub-
    parts of such parts and components, subject to prescribed conditions (valid till
    31st March 2011)
  – parts or components for manufacture of battery chargers and hands free
    headphones of mobile handsets, subject to prescribed conditions (valid till 31st
    March, 2011)
  – garments and clothing accessories, excluding parts thereof
  – gold ore for use in manufacture of gold, subject to condition
  – specified goods for manufacture of electrically operated vehicles (valid till 31st
    March 2013)
  – carbon black feed stock
  – waste paper and paper scrap
  – geothermal ground source heat pumps
  – specified goods for medical, surgical dental or veterinary purposes and parts
    required for manufacture thereof
  – all goods required for digital head end projects notified under the Project Import
    Scheme
  – all goods imported for installation of machanised food handling systems and
    pallet racking systems in mandis and warehouses for foods grains and sugar
    when imported under the Project Import Scheme
  – digital headend projects
  – electrical energy (effective from 26th June 2009)



                                                                       PricewaterhouseCoopers   39
     • The following goods have been exempted from the additional duty of customs
       under Section 3(1) of the Customs Tariff Act, 1975:
       – Tunnel boring machines for hydro electric projects, subject to prescribed
         conditions
       – promotional material imported in the form of Electronic Promotion Kits (EPK) /
         Beta Cams on a Free of Cost basis
       – projects for installation of mechanized food grain handling systems and pallet
         racking systems in mandis and warehouses for food grains and sugar
       – parts, components and accessories for manufacture of mobile handsets and sub-
         parts for the manufacture of such parts and components of mobile handsets
       – parts or components for manufacture of battery chargers and hands free
         headphones of mobile handsets
     • Condition of commercial exploitation in relation to exemption on packaged software
       has been removed
     • The additional duty of customs under Section 3(1) of the Customs Tariff Act, 1975
       on the following goods has been increased from 8% to 10%:
       – goods imported under the Project Import Scheme for the following projects:
         • LNG re-gasification plants
         • fertiliser projects
         • coal mining projects
         • power generation projects
         • power transmission, sub-transmission or distribution projects
       – articles of stores onboard vessels or aircrafts
       – machinery, instruments, apparatus and appliances for renovation or
         modernisation of fertiliser plants and parts and raw materials thereof
       – spare parts, raw materials or consumable stores for maintenance of fertiliser
         plants
       – specified goods for setting up of crude petroleum refinery
       – all goods for renovation of or modernisation of a power generation plant
       – all goods imported by a manufacturer supplier for manufacture and supply of
         machinery & equipment to a power generation plant
       – golf cars
     • A concessional rate of 4% additional duty of customs under Section 3(1) of the
       Customs Tariff Act, 1975 has been imposed on the following goods:
       – specified essential goods for manufacture of electrically operated vehicles,
         subject to prescribed conditions
       – hospital equipment, apparatus, and appliances including spare parts and
         accessories, subject to prescribed conditions
       – life saving medical equipment including accessories spare parts or both imported
         for personal use




40
• Additional duty of customs under Section 3(1) of the Customs Tariff Act, 1975, at a
  concessional rate of Rs. 140 per 10 grams of gold content, has been imposed on
  the following goods:
  – gold ores and concentrates for use in manufacture of gold
• With effect from 27th February 2010, motion pictures, music, gaming software for
  use on gaming consoles printed or recorded on cinematographic films or other
  media, but excluding such goods in pre-packaged form for retail sale, have been
  exempted from that portion of the BCD and the additional duties of customs under
  Section 3 of the Customs Tariff Act, 1975, which is leviable on the value of such
  motion picture, music or software.
• The ceiling limit for import of commercial samples has been enhanced from Rs.
  1,00,000/- to Rs. 3,00,000/- for the purpose of exemption from the additional duties
  of customs under Section 3 of the Customs Tariff Act, 1975, subject to specified
  conditions.

Non-Tariff
• Section 127 B of the Customs Act, 1962, is proposed to be amended so as
  to enable the importer, exporter or any other person to file an application for
  settlement commissioner cases to any kind of dispute under the Customs Act.
• Sec 127 C of the Customs Act, 1962, is proposed to be amended to vest the power
  to the Settlement Commission to extend the time frame to pass an order by a
  further period of three months.
• Notification No. GSR 118(E) dated. 1st March 2002 and GSR 92(E) dated. 1st March
  2006 have been amended retrospectively w.e.f. 26th June 2009, so as to levy Basic
  Customs Duty @16% on electrical energy removed from Special Economic Zone to
  Domestic Tariff Area or non processing area of Special Economic Zone.

II. CENVAT
Direction
• Median ad valorem rate of 8% has been enhanced to 10%

Details of proposals
Tariff
• New cess called “clean energy cess” (as duty of excise) is proposed to be imposed
  on coal, lignite and peat produced in India. The rate, effective date and rules and
  procedures in respect thereof shall be notified after the enactment of the Finance
  Bill, 2010.
• Notes to Chapter 68 (articles of stone & cement) and 76 (aluminium tubes
  and pipes) have been amended to prescribe certain process as amounting to
  ‘manufacture’.
• Section 3 of the Medicinal & Toilet Preparation Act is amended to exclude goods
  manufactured in a Special Economic Zone – effective from the enactment of the
  Finance Bill, 2010.
• Rate of abatement on toilet preparations covered under Medicinal and Toilet
  Preparation Act is reduced from 40% to 35%.




                                                                     PricewaterhouseCoopers   41
     • Small Scale exemption under Central Excise would be available in respect of
       plastic containers and plastic bottles bearing a brand name or trade name, whether
       registered or not, of another person, for use as packing material by such person
       whose brand name such goods bear.
     • Excise duty on DTA clearances of plain gold and silver jewellery manufactured by a
       100% EOU is increased from Rs. 500 to Rs. 750 per 10 gram for gold jewellery and
       from Rs. 1000 to Rs. 1500 per kg. for silver jewellery.
     • Increase in excise duty rate by 2% on large cars, multi utility vehicles and sports
       utility vehicles and chassis thereof (earlier 20%)
     • Basic excise duty has been raised on all forms of tobacco and tobacco products,
       other than those which are already fully exempt.
     • Increase in duty on cement and clinker
     • Duty on Motor Spirit (commonly known as petrol) and HSD (Diesel) increased by Re.
       1 per litre
     • Central excise exemption provided to goods used for the installation of coal
       storage, cold room or refrigerated vehicle, for the preservation, storage, transport or
       processing of agricultural produce has been extended to apiary, horticulture, dairy,
       poultry, aquatic and marine produce and meat.
     • Central excise exemption on parts, components and accessories of mobile
       handsets, including cellular phones has been extended to parts of accessories,
       namely battery chargers and hands-free head phones of these devices.
     • Condition of commercial exploitation in relation to exemption on packaged software
       has been removed
     • Excise duty exempted on the following categories of goods
       – Betel nuts commonly known as ‘supari’
       – Self-loading or self-unloading trailers & semi-trailers for agricultural purpose
       – Goods supplied to mega power projects from which supply of power has been
         tied up through tariff based competitive bidding or a mega power project
         awarded to a developer on the basis of such bidding
       – Polyester based infusion resin, hand layup resin, gel coat and hardener used for
         the manufacture of rotor blades for wind operated electricity generator
       – All machineries and components required for initial setting up of solar power
         generating project or facilities
     • Excise duty reduced on the following categories of goods
       – duty reduced from 8% to 4% on
          • Latex rubber thread
          • Corrugated boxes/cartons manufactured from bought out Kraft paper without
            having the facility to manufacture Kraft paper in the same factory
          • LED lights / lighting fixtures




42
• Excise duty increased on the following categories of goods
  – duty increased from Nil to 4% on
     • Umbrella cloth panel
     • AV gas
     • Mosquito nets impregnated with insecticides
     • Micro-processor for computer (other than motherboard), Floppy disk drive,
       Hard disk drive, CD-ROM drive, DVD Drive, DVD Writers, Flash Memory and
       Combo Drive meant for external use with a computer or laptop as a plug-in
       device
     • Electrically operated vehicles, including two and three wheeled electric motor
       vehicles and battery operated cars
     • Blood glucose monitoring system (Glucometer) and test strips
  – duty increased from 4% to 10%
     • Baby & clinical diapers and sanitary napkins
     • Open top sanitary (OTS) cans
     • Goggles, other than those for correcting vision

Non Tariff
• Second proviso to Rule 3(5) of the CENVAT Credit Rules, 2004, has been
  substituted to provide for accelerated depreciation at specified rates for reversing
  the CENVAT credit availed on computer and computer peripherals on clearance
  from the factory after being put to use.
• The CENVAT Credit Rules, 2004 has been amended to allow removal of jigs,
  fixtures, moulds and dies without reversal of credit for the purpose of use in the
  manufacture of goods by another manufacturer. Earlier this facility was available
  only in relation to the removal of above goods to the job worker for production on
  behalf of supplier of goods.
• Benefit of full CENVAT credit on input and input service used in the manufacture
  of exempted goods has been extended to supplies made to a power project from
  which power supply has been tied up through Tariff based competitive bidding and
  to a power project awarded to a developer through Tariff based competitive bidding
  in terms of Notification No. 6/2006-C.E. dated 1st March 2006.
• Rule 15 of the CENVAT Credit Rules, 2004, has been substituted to create parity in
  penal provisions for wrong availment of credit in respect of inputs, capital goods
  and input services.
• Owing to increase in rate of central excise duty, abatement percentage has been
  increased from 50% to 55% in respect of Pan Masala and Chewing Tobacco.
• Form A notified under 5/2006-CE(NT) for the purpose of claiming refund of CENVAT
  credit of inputs and input services used in relation to export of goods and services
  under Rule 5 of the CENVAT Credit Rules, 2004 has been amended to provide the
  information in a specified format, certified by a person authorised by the Board
  of Directors, if the refund claimed is less than Rs. 5 lakhs and by the chartered
  accountant auditing the annual accounts for the purpose of Companies Act, 1956
  or the Income Tax Act, 1961 in case of refund of more than Rs. 5 lakhs.
  (Above changes to be effective from 27th February, 2010)




                                                                       PricewaterhouseCoopers   43
     • Unmanufactured tobacco, bearing a brand name and chewing tobacco has been
       notified under Section 3A of the Central Excise Act, 1944, for the purpose of levy of
       central excise duty on basis of capacity of production.
       (Above changes to be effective from 8th March 2010)
     • Rule 8(1) of the Central Excise Rules, 2002,has been amended to provide for
       payment of duty on monthly basis rather than quarterly basis in respect of SSI unit
       whose aggregate value of clearances does not exceed Rs. 4 crores.
     • Rule 11(5) of the Central Excise Rules, 2002, has been omitted to dispense with the
       pre-authentication of central excise invoice.
     • Second proviso to clause (a) of Rule 12(1) of the Central Excise Rules, 2002,has
       been omitted to align the due date of filling quarterly returns by SSI units with the
       due date for non-SSI units by 10th of the month following the quarter.
     • Proviso has been inserted in clause (a) to Rule 4(2) of the CENVAT Credit Rules,
       2004, to allow 100% CENVAT credit on capital goods in one installment in the year
       of receipt of capital goods in the factory of SSI units.
      (Above changes to be effective from 1st April, 2010)
     • An explanation is being inserted in sub-section 2B of Section 11A of the CE Act,
       1944, to clarify that that no penalty shall be imposed if duty along with interest is
       paid before issuance of show cause notice in cases not involving fraud, collusion or
       willful misstatement or suppression of facts.
     • Section 32E of the Central Excise Act, 1944, has been amended to remove the
       prohibition on filling of application for the settlement of cases where an assessee
       admits short levy of tax in respect of which proper records are not maintained.
     • Proviso has been inserted in Section 32F of the Central Excise Act, 1944,
       empowering the Settlement Commission to extend the time limit of nine months by
       another three months for disposal of application.
     • Clause (xiiia) has been inserted in Section 37 of the Central Excise Act, 1944,
       empowering the Central Government to make rule providing for deterrent actions
       through the withdrawal of certain facilities to curb evasion of duty.
     • The Central Excise Rules, 1944, the CENVAT Credit Rules, 2001, the CENVAT Credit
       Rules, 2002 and the CENVAT Credit Rules, 2004, have been amended retrospectively
       w.e.f. 1st September 1996 to 31st March 2008 to provide for reversal of credit or
       payment of equivalent amount attributable to inputs used in or in relation to excisable
       goods on which no central excise duty is payable. This provision is applicable to
       disputes pending as on the date of the enactment of the Finance Bill, 2010.

     III. Service Tax
     Direction
     • Rate of service tax continues at 10%
     • Applicability of service tax extended to 8 new categories of services and scope of
       certain existing services enlarged
     • Extension of territorial jurisdiction to specified activities in Continental Shelf and
       Exclusive Economic Zone
     • Rationalisation of refund procedures for service exporters




44
Details of proposals
• Applicability of service tax extended with effect from 27th February 2010 to all
  services provided for construction of installations, structures and vessels located
  in the exclusive Economic Zone and the Continental Shelf of India. Also, any
  service provided to or provided by such installations, structures and vessels
  is brought under service tax net. Notification no.1/2002 dated 1st March 2002
  rescinded.
• Chargeability of service tax has been extended to the following 8 new categories
  of services:
  – services of promoting, marketing or organizing of games of chance including
    lottery, bingo or lotto (hitherto excluded from taxable service of ‘Business
    Auxiliary Service’)
  – health services provided by hospital, nursing home or multi-specialty clinic
    to employees of any business entity or a person covered by health insurance
    scheme provided the payment is made directly by the business entity or
    insurance company
  – services provided for maintenance of medical records of employees of a
    business entity
  – services of promoting or marketing of a brand of goods, services, event or
    business entity
  – services of permitting commercial use or exploitation of any event
  – services provided by Electric Exchanges approved by Central Electricity
    Regulatory Commission
  – Services provided in relation to two types of copyright namely, cinematographic
    films and sound recording not covered under the existing taxable service
    ‘Intellectual Property Right (IPR)’. However, copyright on original literary,
    dramatic, musical and artistic work would continue to remain outside the scope
    of service tax.
  – special services such as providing preferential location, external or internal
    development of complexes on extra charges provided by a builder to the
    prospective buyers, however, services of providing vehicle parking space would
    not be subjected to tax
    (Above changes will come into effect from a date to be notified after enactment
    of the Finance Bill, 2010)
• The scope of some existing categories of taxable services has been amended as
  follows:
  – taxable service of ‘Airport Services’, ‘Port Services’ and ‘Other Port Services’
    has been amended to include all services provided within the port, without the
    pre-condition of obtaining an authorization from the port / airport authorities
  – taxable service of ‘Commercial Training or Coaching Service’ has been
    amended retrospectively from 1-Jul-2003 by clarifying that the term
    ‘commercial’ means any training or coaching, provided for a consideration,
    whether or not for profit
  – taxable service of ‘Construction of Complex’ and ‘Commercial or Industrial
    construction’ would be deemed to be a taxable service unless the whole
    consideration is paid after the completion of the construction by the prospective
    buyer.




                                                                      PricewaterhouseCoopers   45
       – ‘Sponsorship Service’ amended to include sponsorship pertaining to sports
       – scope of ‘Air Passenger Transport Services’ expanded to include domestic
         journeys and international journeys in any class
       – auction by government under the taxable service of ‘Auctioneer’s service’
         clarified to mean auction of government property and not when the government
         acts as an auctioneer
       – the definition of ‘Renting of immovable property service’ is amended
         retrospectively from 1st June 2007 to explicitly define ‘renting’ itself as a taxable
         service and its scope is amplified to include the rent for vacant land provided for
         construction in relation to business or commerce
       – the scope of ‘Information Technology Software Service’ is expanded to cover all
         cases irrespective of its use in business or commerce
       – the taxable service of ‘Management of Investment under ULIP service’ is
         amended to provide that value of taxable service shall be the actual amount
         charged for management of funds under ULIP or maximum charges fixed by
         IRDA, whichever is higher
     • Section 73(3) of Finance Act, 1994, is proposed to be amended to clarify that no
       penalty shall be imposed where service tax along with interest has been paid before
       issuance of notice by the department.
       (Above changes will come into effect from a date to be notified after the enactment
       of the Finance Bill, 2010)
     • Exemption from service tax w.e.f. 27th February 2010 has been provided to:
       – packaged IT software, pre-packed in retail packages for single use provided
         that either customs duty (in case of imports) or excise duty (in case of domestic
         production) has been paid on the entire amount received from the buyer
       – transport of food grains and pulses by road by a ‘Goods Transport Agency’
       – notified Central or State Seed Testing Laboratories/Agency for providing the
         services of ‘Technical testing and Analysis’ and ‘Technical Inspection and
         Certification’
       – all Services provided for transmission of electricity
       – Erection, Commissioning or Installation of Mechanized Food Grain Handling
         Systems, Equipment for setting up or substantial expansion of cold storage,
         units for processing of agricultural, apiary, horticultural, diary, poultry, aquatic and
         marine or meat products
       – ‘Online Information and Database Retrieval service’ and ‘Business Auxiliary
         Service’ provided by Indian news agencies
     • Exemption to vocational training institute under the taxable service of ‘Commercial
       training or coaching service’ restricted to those industrial training institute/
       centre affiliated to the National Council for Vocational Training offering courses
       in designated trades as notified under the Apprentices Act, 1961 (Effective 27th
       February 2010)
     • Exemption of service tax withdrawn w.e.f. 27th February 2010 for Group Personal
       Accident Scheme provided by Government of Rajasthan to its employees under
       ‘General Insurance Service’.
     • With effect from 1st April 2010, general exemption for ‘Transport of goods by rail’ is
       being restricted only to transport of certain specified goods. For others, abatement
       from gross value of freight charges of 70% is granted




46
• Service Tax Valuation Rules amended to provide deduction of statutory taxes on air
  passengers, levied by any Government
• Export of Services Rules, 2005, amended w.e.f. 27th February 2010 to relax usage
  requirements by omitting the condition of “services provided from India and used
  outside India”
• Criteria for the following taxable services amended in Export of Service Rules, 2005,
  w.e.f. 27th February 2010:
  – Mandap Keeper Service to fulfill the criterion of location of immovable property
    outside India
  – Chartered Accountant service, Cost Accountant service and Company Secretary
    service to fulfill the criterion of location of recipient outside India
• Identical changes have been made in Taxation of Services (Provided from outside
  India) Rules, 2006, in relation to the above mentioned services.
• Changes made in Notification No. 5/2006 CE (NT) to align with the terms used
  in CENVAT Credit Rules, 2004, with retrospective effect. Also, it is mandatory to
  submit prescribed details signed by statutory auditor in cases of refund in excess
  of five lakhs or by a person authorised by the Board of Directors in case of refunds
  less than five lakhs per quarter.

IV. Central Sales Tax
Details of proposals
• Section 6(A)(3) has been inserted to grant power to re-assess by the assessing
  authority or revise the assessment order by the higher authority with regard to
  transactions of stock transfer or consignment transfer. The reassessment/revision
  proceedings would be done in accordance with the General Sales Tax Law.
• Section 18A under new Chapter VA has been inserted enabling filing of appeal to
  the highest appellate authority of the state against orders under Section 6A(2) or
  Section 6A(3).
• Section 20 (1) has been substituted with a new provision enabling filing of appeal
  to the Central Sales Tax Appellate Tribunal against the order passed by the highest
  appellate authority, who should as far as practicable decide the appeal within 6
  months.
• Section 22 has been amended to enlarge the power of the Central Sales Tax
  Appellate Authority to direct State to refund the CST paid or direct State to transfer
  the refundable amount to the State to which tax is due.



Swings In Customs Duty Rates (Illustrative)
 Goods on which duty reduced from 10% to 5%
 Goods                            Existing Rate (%)   New Rate (%)
 Liquified Petroleum Gas,         10                  5
 Naptha, Propane, Butane and
 Natural Gas
 Magnetrons for use in manufac-   10                  5
 ture of microwave ovens




                                                                       PricewaterhouseCoopers   47
     Goods on which duty reduced from 10% to 2%
     Goods        Existing Rate (%)       New Rate (%)
     Rhodium      10                      2

     Goods on which duty reduced from 70% to 30%
     Goods                  Existing Rate (%)     New Rate (%)
     Uncrushed Long         70                    30
     pepper

     Goods on which duty reduced from 30% to 20%
     Goods         Existing Rate (%)      New Rate (%)
     Asafoetida    30                     20


     Goods on which duty reduced from 7.5% to 5%
     Goods                       Existing Rate (%)       New Rate (%)
     Goods required for     7.5                          5
     Medical, surgical,
     dental or veterinary
     use and parts & acces-
     sories thereof.


     Goods on which duty reduced from 5% to 4%
     Goods                        Existing Rate          New Rate (%)
                                  (%)
     Hospital Equipment,          5                      4
     apparatus and
     appliances including
     spare parts and
     acccessories


     Goods on which duty increased from NIL to 5%
     Goods                   Existing Rate (%)       New Rate (%)
     Crude Petroleum Oil     NIL                     5



     Goods on which duty increased from 2.5% to 7.5%
     Goods                    Existing Rate (%)        New Rate (%)
     High Speed Diesel        2.5                      7.5
     Motor Spirit             2.5                      7.5
     commonly known as
     Petrol


     Goods on which duty increased from 5% to 10%
     Goods                   Existing Rate (%)           New Rate (%)
     Other specified         5                           10
     petroleum products




48
Miscellaneous
Goods                    Existing Rate (Rs.)         New Rate (Rs.)
Gold bars,               200/per ten grams           300/ per ten grams
Gold, in any other form 500/per ten grams            750/per ten grams
(excluding jewellery)
Silver, in any form      1000/per kilo               1500/per kilo
(excluding jewellery)
Platinum                 200/per ten grams           300/per ten grams




Swings In Excise Duty Rates (Illustrative)

Goods on which duty reduced from 16% to 10%
Goods                                Existing Rate (%) New Rate (%)
Goods covered under the Medicinal 16                       10
& Toilet Preparations Act


Goods on which duty reduced from 8% to 4%
Goods                            Existing Rate (%)    New Rate (%)
Latex rubber thread              8                    4
Corrugated boxes and cartons     8                    4
LED lights                       8                    4


Goods On which duty increased from 4% to 10%
Goods                           Existing Rate (%)     New Rate (%)
Open top sanitary (OTS) cans    4                     10
Goggles, other than those for   4                     10
correcting vision




                                                                          PricewaterhouseCoopers   49
     Increase in rate of cement & clinker
     Goods                                            Existing Rate         New Rate
     a. In case of mini-cement plant
     1. Cement cleared in packaged form -
     i. of RSP not exceeding Rs. 190 per 50 kg        Rs. 145 per tonne     Rs. 185 per tonne
        bag or of per tonne equivalent RSP not
        exceeding Rs. 3800
     ii of RSP exceeding Rs. 190 per 50 kg bag or     Rs. 250 per tonne     Rs. 315 per tonne
        of per tonne equivalent RSP exceeding Rs.
        3800
     2. Cement cleared other than in packaged         Rs. 170 per tonne     Rs. 215 per tonne
        form
     b. Other than mini-cement plant
     1. Cement cleared in packaged form -
     i. of RSP not exceeding Rs. 190 per 50 kg        Rs. 230 per tonne     Rs. 290 per tonne
        bag or of per tonne equivalent RSP not
        exceeding Rs. 3800
     ii. of RSP exceeding Rs. 190 per 50 kg bag or    8% of the retail      10% of the retail sale
         of per tonne equivalent RSP exceeding Rs.    sale price            price
         3800
     2. Cement cleared other than in packaged         8% or Rs. 230 per     10% or Rs. 290 per
        form                                          tonne, whichever      tonne, whichever is
                                                      is higher             higher
     Cement clinker                                   Rs. 300 per tonne     Rs. 375 per tonne



     Change in rate of tobacco product
                                             Existing Rate   New Rate
     Non-filter cigarette length in mm            (Rs. Per 1000)
     -- Not exceeding 60                              819                  669
     -- exceeding 60 but not exceeding 70            1323                 1473
     Filter cigarette length in mm
     -- Not exceeding 60                              819                  669
     -- exceeding 60 but not exceeding 70             819                  969
     -- exceeding 70 but not exceeding 75            1323                 1473
     -- exceeding 75 but not exceeding 85            1759                 1959
     -- others                                       2163                 2363
     -- Cigarette of tobacco substitutes             1208                 1408
     Basic Excise duty on cigars, cheroots             8% 10% or Rs. 1227
     and cigarillos of tobacco                            per thousand,
                                                          whichever is
                                                          higher
     Additional Excise duty on cigars,               1.6% 1.6% or Rs. 246
     cheroots and cigarillos of tobacco                   per thousand
                                                          whichever is
                                                          higher




50
Goods on which exemption has been withdrawn and duty re-imposed
Goods                                       Existing Rate (%)     New Rate (%)
Maize Starch and Tapioca Starch                    Nil                  4
Blood glucose monitoring system                    Nil                  4
(Glucometer) and test strips
Patent ductus arteriosus / atrial septal           Nil                  4
defect occlusion devices
Mosquito nets impregnated with                     Nil                  4
insecticides
AV gas                                             Nil                  4
Miscroprocessor for computer (other                Nil                  4
than motherboard), Floppy disk drive,
Hard disk drive, flash drive, CD/DVD and
Combo Drive meant for external use



Miscellaneous
Goods                              Existing Rate (%)     New Rate (%)
Refined gold made from gold        8                     Rs. 280 / ten grams
ore or concentrate
Potato Starch                      8                     4




                                                                               PricewaterhouseCoopers   51
     Companies Bill, 2009
     Companies Bill, 2009 was tabled before the Parliament on 3 August 2009. While the
     Bill proposes procedural simplification on several fronts, some of the noteworthy
     changes proposed are listed below:
     • Key managerial personnel who will be accountable for all corporate actions, defined
       to mean the Managing Director, the Chief Executive Officer or the Manager and
       where there is no Managing Director or Manager, a whole-time director or directors
       the Company Secretary and the Chief Financial Officer.
     • Removal of restrictions on Managerial Remuneration.
     • Removal of shares with differential voting rights.
     • Companies not to be allowed to raise deposits from the public except banking
       companies, NBFCs or such other companies as the Central Government may
       specify after consultation with RBI.
     • Mandatory consolidation of financial statements of subsidiary companies.
     • Flexibility to conduct Board meetings via video conferencing maintaining books of
       accounts in electronic form.
     • Every listed company with such paid-up capital as may be prescribed to appoint
       minimum of 33% independent directors.
     • The Bill defines Directors’ duties. It recognises insider trading by Directors/ Key
       Managerial Personnel as an offence with criminal liability.
     • Scope of mergers and amalgamations has been enlarged to include:
        – Compromises or arrangements with creditors and members including take-over
          offers and the scheme of debt restructuring together with valuation of shares and
          other properties;
        – Mergers and amalgamation of companies including merger by absorption or
          merger by formation of new company;
        – Cross-border amalgamations;
        – NCLT is the single forum for approvals.
     • Shareholder associations/ groups to be enabled to take legal action in case of any
       fraudulent action on the part of the company and to take part in investor protection
       activities and class action suits.
     • Constitution of Special Courts for speedy trial of offences under the Bill.
     • Introduction of “Small Company”, “One Person Company” and “Dormant Company”
       concepts.
     • In case of winding-up, a Company Liquidator to be appointed by the Tribunal from a
       panel maintained by the Central Government.




52
Income Tax
The Government released the draft Direct Taxes Code which will replace the Income
Tax Act 1961, for public debate on 12 August 2009. The Code, aiming to simplify the
existing income tax law, is designed to provide stability in the tax regime based on
well-accepted principles of taxation and best international practices. In the foreword,
the Code mentions that its thrust is to improve the efficiency and equity of the tax
system by eliminating distortions in the tax structure, introducing moderate levels of
taxation and expanding the tax base. Some of the key changes proposed by the new
Code are :
• Reduction in the tax burden both for individuals and companies with (tax rate for
  Indian companies proposed to be reduced to 25%).
• Minimum alternate tax (MAT) on the basis of gross assets replacing the tax on book
  profits (proposed to be 2% on the value of gross assets for all companies other than
  banking companies).
• Removing distinction between long-term capital gains and short-term capital gains
  thereby resulting in capital gains being taxable at the normal tax rates.
• Introduction of branch profits tax for foreign companies.
• Introduction of general anti-avoidance measures.
• Advance pricing arrangement for Transfer Pricing.
• Introduction of thin capitalization rules.
• Extension of dispute resolution mechanism to certain residents.
• Increase in withholding tax rates (such as, from existing 10% to 20% in case of
  royalty and fee for technical services, respectively).
Since release of the draft Code, corporates, industry bodies and other associations
have made representations before the Government suggesting appropriate changes to
the draft Code before it is legislated. As of now the target date for introduction of the
Code is with effect from the financial year beginning 1 April 2011.

Indirect Taxes
Goods and Services Tax (GST)
The Empowered Committee of the State Finance Ministers (‘EC’) on 10 November
2009 released the First Discussion Paper on the proposed GST in India. In the
discussion paper the Government indicated that GST shall have two components,
one levied by Centre (Central GST or CGST) and the other levied by States (State GST
or SGST). The CGST & the SGST would be applicable on all transactions of goods
and services made for a consideration except for exempted goods and services,
goods which are outside the purview of the GST and transactions which are below the
prescribed threshold limits.
The input tax credit (ITC) for the CGST and SGST would operate in parallel and
would be available for utilization only against the output payment of CGST and SGST
respectively. Both CGST and SGST will be levied on import of goods and services into
the country. The incidence of tax will follow the destination principle. Full and complete
set-off will be available on the GST paid on import of goods and services.
The Central Government has indicated their comments in the Discussion Paper on 25
January 2010. We will perhaps have to await another paper from the EC taking into
account the comments of Central Government and which would delineate the rate
schedules for both the CGST and the SGST as well as lay down a roadmap for the
introduction of the dual GST, possibly during the financial year 2010-11.




                                                                        PricewaterhouseCoopers   53
     Inbound Investments
     The Government is planning to issue a single comprehensive Press Note
     consolidating the entire regulatory framework relating to Foreign Investment. At
     present the Foreign Investment policy and regulatory framework comprises several
     components, viz. Press Notes issued by DIPP, FEMA and the Regulations and
     Circulars issued under FEMA by RBI.
     A draft of this consolidated Press Note has been put up for public comments. It is
     proposed that this Press Note will be brought into effect on 1 April 2010 and will be
     reissued every six months, to incorporate changes effected in the intervening period
     and set out the current regulatory framework prevailing as on that date.

     Banking
     • The recent global financial crisis has underlined the need to put in place an
       appropriate prudential framework for regulating banks’ off-balance sheet activities.
       In this context, RBI has released a discussion paper on regulation of Off-Balance
       Sheet Activities of Banks dated 8 January 2010 inviting public comments.
     • RBI to give additional banking licenses to private sector players and NBFCs.

     Financial Markets
     • In light of recent developments in the domestic and international financial markets,
       RBI has vide its circular dated 12 November 2009 issued draft guidelines on Over
       the Counter (OTC) Foreign Exchange Derivatives and Hedging Commodity Price
       Risk and Freight Risk Overseas for public comments. The key proposals in the draft
       guidelines are as follows:
        – Importers and exporters having foreign currency exposures in trade transactions
          permitted to write covered call and put options both in foreign currency-rupee
          and cross currency and also receive premia. As a result, the facility of zero cost
          structures/cost reduction structures is also proposed to be withdrawn.
        – AD Category I banks permitted to offer plain vanilla cross currency options to
          residents (other than AD Category- I banks), who transform their rupee liability to
          a foreign currency liability.
     • Presently, the issuance of Non-Convertible Debentures (NCDs) is not regulated by
       SEBI or Government of India. Since such instruments have systemic implications,
       RBI proposes to come out with guidelines for issuance of NCDs with a maturity
       period of less than one year, draft of which was released by RBI for public
       comments on 3 November 2009.

     Information & Broadcasting
     • Based on MIB’s reference, TRAI has invited comments from stakeholders on the
       following two matters:-

        – Revisions to TRAI’s earlier recommendations on foreign investment limits in
          Broadcasting (as issued in April 2008) in view of the new framework prescribed
          by DIPP for calculating direct and indirect foreign investment vide Press Notes 2
          and 4 (2009 series).
        – Modifications to the present Uplinking and Downlinking guidelines, in view of the
          issues detailed by MIB in its letter to TRAI on 8 October 2009.
     • Policy guidelines on Mobile Television Services are expected to be issued soon
       based on the comments given by the MIB to TRAI’s recommendations.




54
• MIB has invited comments from stakeholders on proposed amendments to the press
  and Registration of Books Act, 1867. The key amendment proposed is to include
  “Publication” i.e. newspaper, magazines, journals, newsletter within the ambit of the
  Act, including their electronic replicas.

Telecom
• The schedule for 3G & BWA auction process has been announced and auctions are
  related to commence in April 2010.
• TRAI is in the process of issuing a recommendation paper on spectrum management
  consolidating comments from various stakeholders on the consultation paper dated
  16 October 2009. The consultation paper discussed issues such as spectrum
  requirement and availability, licensing and M&A issues, spectrum trading and sharing,
  license fee, etc.
• TRAI has issued the Mobile Number Portability (‘MNP’) Regulations dated 23
  September 2009 to lay the basic business process framework for implementation of
  MNP in India. The regulations seek to lay down clear eligibility conditions for porting
  of mobile numbers, define rights and obligations of the stake holders, procedure to
  be followed, time limits, etc.

Retail Sector
• The Ministry of Agriculture has formulated a Model Law on agricultural marketing
  for guidance and adoption by State Governments. Agriculture Produce Marketing
  Committee (APMC) Model Rules based on this Model Law are under formulation in
  consultation with States.
• ECBs to be allowed for setting up cold storage, for preservation or storage of
  agricultural and allied produce, marine products and meat.
• With a view to reducing wastages in the distribution system as also prices in the retail
  sector, the Government is proposing to take a view on opening up of this sector.

Education
Foreign Educational Institutions (Regulation of entry and operations,
maintenance of quality and prevention of commercialisation) Bill 2009
A Bill to allow and regulate entry of foreign education institutes in India whether set up
independently or in collaboration with an Indian partner/ education provider is expected
to be placed before the Parliament soon. The Bill has the following key features:-
• FEIs proposing to award degrees and diplomas would be required to seek
  notification from the Central Government as a Foreign Education Provider (FEP).
• Eligibility criteria for FEPs includes track record of 10 years in home country and
  maintenance of a corpus of INR 100 million.
• Upto 75% of the income received from the corpus can be used by the FEP for
  development purposes.
• Government empowered to exempt a FEI from any conditions prescribed for
  notification having regard to reputation or international standing of the applicant,
  subject to conditions, such as FEI investing a minimum 51% of the total investment
  required to establish the institution and surplus generated from educational
  activities in India to be reinvested in the growth and development of the institution.




                                                                         PricewaterhouseCoopers   55
     National Commission for Higher Education and Research Bill, 2010
     (NCHER)
     This Bill proposes creation of NCHER which will supercede regulatory bodies like the
     AICTE and University Grants Commission (UGC). All universities / institutions of higher
     education will need to seek authorisation from the NCHER to enable them to award
     any degree or diploma in higher, technical and professional education.

     The Foreign Trade (Development and Regulation) Amendment
     Bill, 2009
     The Foreign Trade (Development and Regulation) Amendment Bill, 2009, is being
     reviewed by a Parliamentary Standing Committee. The Bill seeks to amend the Foreign
     Trade (Development and Regulation) Act, 1992 with a view, interalia, to:-
     • Provide a statutory provision for safeguard measures enabling imposition of
       Quantitative Restrictions (QRs);
     • Bring in tighter export or trade control in the case of dual-use goods and related
       technologies and to provide enabling provisions for establishing controls as in the
       Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful
       Activities) Act, 2005;
     • Bring “technology” and “services”, including financial services, within the ambit of
       the Act for the purpose of administering incentive schemes and other provision of
       the Foreign Trade Policy.

     Mines and Minerals (Development and Regulation) Act, 2010
     Ministry of Mines updated and released a draft of the proposed Mines and Minerals
     (Development and Regulation) Act, 2010 to provide for scientific development of
     mines and minerals under control of the Central Government and regulation of
     activities connected therewith. It is expected to be placed before the Parliament in
     the Budget Session.

     National Mission on Enhanced Energy Efficiency (NMEEE)
     Proposed by the Ministry of Power and the Bureau of Energy Efficiency, NMEEE was
     approved for formation by the Prime Minister’s Council on Climate Change and is
     expected to be in place 1 April 2010. NMEEE seeks to upscale efforts to create a
     market for energy efficiency which is estimated to be around INR 740 billion. It will
     create a conducive regulatory and policy regime to foster innovative and sustainable
     business models to unlock this market.
     The flagship of the NMEEE is the Perform Achieve and Trade (PAT) initiative which is
     a market based mechanism to enhance cost effectiveness of improvements in energy
     efficiency in energy-intensive large industries and facilities, through certification of
     energy savings that could be traded.

     Major Ports Regulatory Authority Act, 2009
     A committee set up by the Ministry of Shipping has finalized the draft Major Ports
     Regulatory Authority Act, 2009. This Act will be supercede the provisions currently
     enshrined in the Major Port Trusts Act, 1963 in so far as the working of Tariff Authority
     for Major Ports is concerned.




56
Clinical Establishments (Registration and Regulation) Bill
The ‘Clinical Establishments (Registration and Regulation) Bill, 2010’ has been
approved by the Cabinet and expected to be tabled soon in the Parliament. This Bill
aims to:
• provide a framework for the registration and regulation of clinical establishments in
  the country;
• improve the quality of health services by prescribing minimum standards of facilities
  and services which may be provided by them;
• categorise and classify different clinical establishments depending on their
  geographical location as well as services offered;
• initiate the process for the creation of a national registry of clinical establishments
  existing in the country.

Biotechnology Regulatory Authority
A bill providing for establishment of “National Biotechnology Regulatory Authority”
(NBRA) is expected to be introduced soon in the Parliament. The NBRA would regulate
the research, manufacture, importation and use of genetically modified organisms and
products derived thereof.

National Green Tribunal
The Union Cabinet has approved the draft National Green Tribunal Bill, 2009 which
provides for setting up of a National Green Tribunal (NBT) which shall have jurisdiction
over all civil cases where a substantial question relating to environment is involved.
The NBT would provide for relief and compensation to victims of pollution and other
environmental damage. It shall endeavour to dispose of applications and appeals
within six months of filing.

Amendments to Copyright Act, 1957
The Union Cabinet has approved introduction of a Bill to amend the Copyright Act,
1957. Amendments are being made to bring the Act in conformity with the World
Intellectual Property Organisation (WIPO) Internet Treaties, namely WIPO Copyright
Treaty (WCT) and WIPO Performances and Phonograms Treaty (WPPT) which have set
the international standards in these spheres. The amendments would provide clarity,
remove operational difficulties and address the newer issues that have emerged in the
context of digital technology and the internet.

New Auto Hubs
The railway budget announced setting up of ten locomotive and automobile ancillary
hubs under the public-private partnership model.

National Mission for Delivery of Justice and Legal Reforms
The Government has approved setting up of the National Mission for Delivery of
Justice and Legal Reforms to help reduce legal backlog in courts.




                                                                         PricewaterhouseCoopers   57
     3G       3rd Generation mobile telephony standards
     AAC      Annual Activity Certificate
     AAR      Authority for Advance Rulings
     AD       Authorized Dealer
     ADC      Additional Duty of Customs
     ADRs     American Depository Receipts
     AERA     Airports Economic Regulatory Authority of India
     AGR      Adjusted Gross Revenue
     AIC      Aeronautical Information Circulars
     AICTE    All India Counsel for Technical Education
     AMFI     Association of Mutual Funds of India
     AML      Anti Money Laundering
     AOP      Association of Person
     AS       Accounting Standard
     ASBA     Applications Supported by Blocked Amounts
     ASEAN    Association of South East Asian Nations
     BASA     Bilateral Air Services Agreements
     BCD      Basic Customs Duty
     BO       Branch Office
     BoP      Balance of Payments
     BRAI     Broadcast Regulatory Authority of India
     BWA      Broadband Wireless Access
     CARG     Civil Aviation Regulation Group
     CBDT     Central Board of Direct Taxes
     CBM      Coal Bed Methane
     CCEA     Cabinet Committee on Economic Affairs
     CCI      Competition Commission of India
     CE Act   Central Excise Act, 1944
     CENVAT   Central Value Added Tax
     CERC     Central Electricity Regulatory Commission
     CET      Common Entrance Test
     CFT      Combating Financing of Terrorism
     CIC      Credit Information Companies
     CMTS     Cable Modem Termination Systems
     CRA      Credit Rating Agency
     CRAR     Capital to Risk Weighted Assets Ratio
     CRR      Cash Reserve Ratio
     CSDL     Central Securities Depository Ltd
     CST      Central Sales Tax
     CTH      Customs Tariff Heading
     CUG      Closed User Group
     CVD      Countervailing Duty
     DCC      Domestic Call Centre
     DDT      Dividend Distribution Tax
     DEPB     Duty Entitlement Passbook
     DFIA     Duty Free Import Authorization
     DFRC     Duty Free Replenishment Certificate
     DGCA     Directorate General of Civil Aviation




58
DIP    Disclosure and Investor Protection                   IDRs     Indian Depository Receipts
DIPP   Department of Industrial Policy & Promotion          IFC      Infrastructure Finance Company
DoT    Department of Telecommunications                     IIFCL    India Infrastructure Finance Company Limited
DPIN   Designated Partners Identification Number            ILD      International Long Distance
DPP    Defence Procurement Procedure                        IM       Independent Monitor
DRDO   Defence Research and Development Organisation        IMF      International Monetary Fund
DRP    Dispute Resolution Panel                             INR      Indian National Rupees
DTA    Domestic Tariff Area                                 INSAT    Indian National Satellite
DTAA   Double Tax Avoidance Agreement                       IPLC     International Private Leased Circuit
DTC    Direct Tax Code                                      IPTV     Internet Protocol Television
DTH    Direct To Home                                       IRDA     Insurance Regulatory and Development Authority
DVCF   Domestic Venture Capital Fund                        IRF      Interest Rate Futures
EC     Empowered Committee of the State Finance Ministers   ISP      Internet Service Provider
ECB    External Commercial Borrowings                       IT       Information Technology
ECNs   Electronic Contract Notes                            IT Act   Income-tax Act, 1961
EEFC   Export Earner’s Foreign Currency                     ITC      Input Tax Credit
EHTP   Electronic Hardware Technology Park                  ITES     Information Technology Enabled Services
EOUs   Export Oriented Units                                JPY      Japanese Yen
EPCG   Export Promotion Capital Goods Scheme                JV       Joint Venture
ESOS   Employee Stock Option Scheme                         KYC      Know – your – Customers
EUR    European Union Euro                                  LIBOR    London Interbank Offered Rate
FATF   Financial Action Task Force                          LLP      Limited Liability Partnership
FBT    Fringe Benefit Tax                                   LNG      Liquified Natural Gas
FCCB   Foreign Currency Convertible Bonds                   LO       Liaison Office
FCEB   Foreign Currency Exchangeable Bonds                  LoP      Letter of Permission
FCo    Foreign Company                                      M&A      Mergers and Acquisitions
FDI    Foreign Direct Investment                            MAT      Minimum Alternate Tax
FEIs   Foreign Educational Institutions                     MCA      Ministry of Corporate Affairs
FEMA   Foreign Exchange Management Act                      MHA      Ministry of Home Affairs
FEP    Foreign Education Provider                           MHRD     Ministry of Human Resource Development
FII    Foreign Institutional Investors                      MIB      Ministry of Information and Broadcasting
FIPB   Foreign Investment Promotion Board                   MMS      Multimedia Messaging Service
FMS    Focus Market Scheme                                  MNP      Mobile Number Portability
FOB    Free on Board                                        MNP      Mobile Number Portability
FPS    Focus Product Scheme                                 MoA      Memorandum of Association
FTA    Foreign Trade Agreement                              MRP      Maximum Retail Price
FVCI   Foreign Venture Capital Investor                     MSME     Micro, Small and Medium Enterprises
FY     Financial Year                                       MSO      Multi System Operator
GBP    Great Britain Pound                                  MVNO     Mobile Virtual Network Operator
GDP    Gross Domestic Product                               NAV      Net Asset Value
GDRs   Global Depository Receipts                           NBFCs    Non Banking Financial Corporations
GST    Goods and Service Tax                                NBRA     National Biotechnology Regulatory Authority
HFC    Housing Finance Companies                            NCDs     Non Convertible Debentures
HITS   Head – End in the Sky                                NCHER    National Commission for Higher Education and Research

HUF    Hindu Undivided Family                               NCLT     National Company Law Tribunal

I&B    Information and Broadcasting                         NCP      National Consumer Policy

ICAI   Institute of Chartered Accountants of India




                                                                                                            PricewaterhouseCoopers   59
     ND-SI   Non Deposit taking – Systematically Important       SLR         Statutory Liquidity Reserve/ Ratio
     NELP    New Exploration Licensing Policy                    SMS         Short Messaging Service
     NFE     Net Foreign Exchange                                SSI         Small Scale Industry
     NGT     National Green Tribunal                             STP         Straight Through Processing
     NLD     National Long Distance                              STPI        Software Technology Park of India
     NMEEE   National Mission on Enhanced Energy Efficiency      STT         Securities Transaction Tax
     NOC     No Objection Certificate                            TCS         Tax collected at source
     NPA     Non Performing Asset                                TDS         Tax deducted at source
     NPS     New Pension System                                  TFTS        Trade for Trade Settlement
     NRI     Non-Resident Indian                                 TIEA        Tax Information Exchange Agreement
     NSDL    National Securities Depository Ltd                  TOT         Transfer of Technology
     O&M     Operations and Maintenance                          TPA         Third Party Administrator
     ODI     Overseas Direct Investment                          TRAI        Telecommunications Regulatory Authority of India
     OECD    Organisation for Economic Co-operation and Develop- UAS         Universal Access Service
             ment
                                                                 UGC         University Grants Commission
     OEM     Original Equipment Manufacturer
                                                                 UIN         Unique Identification Number
     OSP     Other Service Provider
                                                                 ULIP        Unit Linked Insurance Policy
     OTC     Over the Counter
                                                                 UPA         United Progressive Alliance
     PA      Processing Area
                                                                 USD         United State Dollar
     PAN     Permanent Account Number
                                                                 UTN         Unique Transaction Number
     PAT     Perform Achieve and Trade
                                                                 Valuation   Service Tax (Determination of Value) Rules, 2006
     PF      Provident Fund                                      Rules
     PFRDA   Pension Fund Regulatory and Development Authority   VAT         Value Added Tax
     PFT     Provident Fund Trust                                VSAT        Very Small Aperture Terminal
     PGBP    Profits and Gains of Business and Profession        WDV         Written Down Value
     PIO     Person of Indian Origin                             WHT         Withholding Tax
     PLMN    Public Land Mobile Network                          WIPO        World Intellectual Property Organisation
     PNG     Petroleum and Natural Gas                           WOS         Wholly Owned Subsidiary
     PSBC    Public Service Broadcasting Council                 WPI         Wholesale Price Index
     PSTN    Public Switched Telephone Network
     PSU     Public Sector Undertaking
     QIB     Qualified Institutional Buyer
     QIP     Qualified Institutional Placement
     QR      Quantitative Restriction
     R&D     Research and Development
     RBI     Reserve Bank of India
     REGA    National Rural Employment Guarantee Act
     REMF    Real Estate Mutual Funds
     RFPs    Request for Proposals
     RIC     Resident Indian Citizen
     RoC     Registrar of Companies
     RTA     Registrar and Transfer Agent
     SEBI    Securities and Exchange Board of India
     SEZ     Special Economic Zones
     SID     Scheme Information Document
     SLB     Securities Lending and Borrowing




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