INSIGHT

• World………………………….at peril ???
• China……………………………is it growing or is it contracting !!!!
• Indian Economy…………where is the 7% GDP ?
 Taxation Updates
 Income Tax……………………….Advance tax due date 15.12.2015
 Service Tax……………………….additional Clean Cess-new rate 14.50%
 VAT UK……………………………….online Form 16 mandatory from 31st Dec
 Company Law………………………annual return date extended till 31.12.15
 Payment of Bonus Act…….amended
 GST……………………………………….will the rate be 18% ?
 E COMMERCE…………………….growing exponentially
 FDI……………………………………….Athithi Devo Bhava!
 HSBC…………………………………..the doors have closed
 7th Pay Commission…………..will it spur Demand ?
 Employment squeeze………..effects of automation and AI
 Disruptive technology and business……..the future

Europe has seen nothing like this for 70 years – the visible expression of a world where order is collapsing. The millions of refugees fleeing from ceaseless Middle Eastern war and the hundreds of billions of dollars fleeing emerging economies, from Brazil to China, don’t come with images of women and children on capsizing boats
Capital flight and bank fragility are profound dysfunctions in the way the global economy is now organised that will surface as real-world economic dislocation.
The IMF is profoundly concerned, warning at last week’s annual meeting in Peru of $3tn (£1.95tn) of excess credit globally and weakening global economic growth.
The heart of the economic disorder is a world financial system that has gone rogue. Global banks now make profits to a extraordinary degree from doing business with each other. As a result, banking’s power to create money out of nothing has been taken to a whole new level.
The emergence of a global banking system means central banks are much less able to monitor and control what is going on. And because few countries now limit capital flows, in part because they want access to potential credit, cash generated out of nothing can be lent in countries where the economic prospects look superficially good. This provokes floods of credit, rather like the movements of refugees.
The false boom that follows seems to justify the lending. Property prices rise. Companies and households grow overconfident about their prospects and borrow freely. Economies surge well above their trend growth rates and all seems well until something – a collapse in property or commodity prices – unravels the whole process. The money floods out as quickly as it flooded in, leaving bust banks and governments desperately picking up the incorrect assumption that all Eurozone countries were equal. pieces.
Andy Haldane, Bank of England chief economist, describes the unfolding pattern of events as a three-part crisis. Act one was in 2007-08 in Britain and the US. Buoyed for the previous decade by absurdly high inflows of globally generated credit that created false booms, they suddenly found their overconfident banks had wildly lent too much. Collateral behind new-fangled derivatives was worthless. Money flooded out, leaving Britain’s banking system bust, to be bailed out by more than £1tn of liquidity and special injections of public capital.
Act two was in Europe in 2011-12, when it became obvious that the lending had been made on the Again, money flooded out and Europe only just held the line with extraordinary printing of money by the European Central Bank and tough belt-tightening measures in over borrowed countries such as Portugal, Greece and Ireland. It might have been unfair, but it worked.
Now Act three is beginning, but in countries much less able to devise measures to stop financial contagion and whose banks are more precarious. For global finance next flooded the so-called emerging market economies (EMEs), countries such as Turkey, Brazil, Malaysia, China, all riding high on sky-high commodity prices as the China boom, itself fuelled by wild lending, seemed never-ending.
China manufactured more cement from 2010-13 than the US had produced over the entire 20th century. It could not last and so it is proving.
China’s banks are, in effect, bust: few of the vast loans they have made can ever be repaid, so they cannot now lend at the rate needed to sustain China’s once super-high but illusory growth rates. China’s real growth is now below that of the Mao years: the economic crisis will spawn a crisis of legitimacy for the deeply corrupt communist party. Commodity prices have crashed.
Money is flooding out of the EMEs, leaving over borrowed companies, indebted households and stricken banks, but EMEs do not have institutions such as the Federal Reserve or European Central Bank to knock up rescue packages. Yet these nations now account for more than half of global GDP. Small wonder the IMF is worried.
The world needs inventive responses. It needs a bigger, reinvigorated IMF whose constitution should reflect the global balance of economic power and that can rescue the EMEs. It needs proper surveillance of global finance. It needs western governments to launch massive economic stimuli, centred on infrastructure spending. It needs new smart monetary policies that allow negative interest rates.
There is even less to reorder the global economy. We may muddle through, but don’t bet on it.

EQUITIES
A recovery in the economy marked by earnings revival and beginning of the investment cycle will be the biggest trigger for the domestic equity market, which has been range bound over the past few months waiting for fresh triggers to move up.

While Asia's third largest economy is recovering slowly, analysts say it has the potential to touch double-digit growth in a few years. When that materializes, India's GDP would grow to $5 trillion-$6 trillion in 5 to 10 years from $2 trillion now.

ASIAN & WORLD ECONOMY
The market is likely to witness high volatility during the rest of this year and early part of 2016 due to slow earnings revival, a mismatch between expectations and delivery from the government and global factors like slowing China and the impending US Fed rate hike.

But it would also present a golden opportunity to accumulate quality stocks. The year 2016 has a lot to offer, which could well lay the foundation for a big bull run.

Asian stocks edge lower amid strengthening prospects for higher US interest rates as soon as December and the latest signal of China's weakening economy.

The impending US Fed rate hike, possible currency devaluation by China, shale oil crisis, Russian aggression and the Middle East conflict are the global factors of contention. At the time of writing this report, the European stocks reversed initial gains, trading on a somber note.

The low Oil prices have forced large Oil companies with reserve oil fields to write off more than 50% of their Inventory, due to a change in Accounting .In adopting “fair valuation” of Inventory, the Companies had to recognize the write off since on account of the low Oil prices, the drilling of the reserves of Oil would no longer be viable

The shadow of World terrorism threatens to derail the world economy as larger budgets are being sanctioned for Defense and arms production
The Syrian crisis is enveloping the major economies and may have a devastating effect on growth, world money markets and share market values

CHINA

China said that it had broken the nation’s biggest “underground bank “which handled US $ 64 Billion of illegal foreign exchange transactions .China had been trying to control capital outflows which were sending real estate prices soaring from Vancouver to Sydney
The method used was to either break down the large sums to smaller transfers using the foreign exchange quotas of a range of individuals OR by setting up several companies and transferring yuan to non-resident accounts, used by Companies to transfer money abroad
More than 370 people have been arrested or face lawsuits or other punishments.

China’s stocks tumbled with the Shanghai Composite Index falling by 5.5% as some of the largest brokerages disclosed regulatory probes.

Industrial profits fell by 4.6% and two more companies (fertilizer and pig iron)were struggling to repay bonds.

India CPI inched up to 5% while IIP growth slowed down to 3.6%
India CPI inched up to 5% driven by higher food inflation India’s Consumer Price Inflation (CPI) for October 2015 rose to 5% vs 4.41% in September 2015. Inflation in Rural and Urban India has come in at 5.54% and 4.28% in October 2015.
IIP growth slowed down to 3.6% amid slower growth in manufacturing India’s Index of Industrial Production (IIP) growth for September 2015

FDI
As per the note released by the Department of Industrial Policy and Promotion (DIPP), the Government has eased the FDI policy for as many as 15 sectors that chiefly include, Defense, Broadcasting, Civil aviation, Single Brand Retail, Private Sector Banking, Construction and Development, and Agriculture and Animal Husbandry to name a few.
As per DIPP, the Crux of these reforms is to further ease, rationalize, and simplify the process of foreign investments in the country and to put more and more FDI proposals on automatic route instead of Government route where time and energy of the investors is wasted.
Reforms in the FDI policy are also expected to revive the Capex cycle, foster investments, and generate employment.Govt. plans to put 98% sectors for FDI under automatic route.
Govt. reviews FDI policy on various sectors; defines term 'manufacture'

7th PAY COMMISSION
The impact will be 0.65% of GDP or Rs 1.02 lac crores in FY 2016.2017.In the best case scenario it should fund revenue and extra spend boosting consumption, clearing excess capacity and encouraging private investment. If the Central Govt.is not able to step up capital spending, it would revive inflationary pressures, create higher Budget deficits and India’s rating could be impacted

NRI Deposits
A weak rupee and US rate spread rush pushed April to September deposits by US $ 10 Billion and as of 30th September, 2015 NRI deposits in Indian Banks totalled US$121.8 Billion

BANKING
HSBC India has decided to shut down private banking. This follows the sacking of employees for their questionable dealings with real estate brokers catering to the Banks ultra-rich clients.

IDBI may kick startstrategic sale of public sector entities and the Govt. is in talks to sell a 15% stake to the IFC, International Finance Corporation, a World Bank arm.

SEBI
Investors may get to exit companies if promoters fail to use money raised through IPO for the stated purpose.

CONSUMER VIEWERSHIP
The rural and semi urban viewer has accounted for half of the viewership of the ongoing football Indian Super League.46% of the 173 million viewership has been from the rural and semi urban towns, proving that cricket is more popular in Urban India.

HOTELS
The demand for hotel rooms has been the highest in the last 5 years, with occupancy increasing by 15% and revenue per available room increasing by 13.6%.The increase is driven by business related travel. Foreign tourist arrivals have grown by 1.8%.
SOLAR POWER
The industry has seen power tariffs fall from Rs 10.95 per unit in 2010 to Rs 4.63 per unit in 2015.The Industry is at risk as transmission lines take up to 24 to 36 months to connect to the grid and costs could escalate due to currency fluctuations. Transmission networks are not expanding fast enough to absorb the capacity of solar power being built up.
WORKFORCE
Nearly 13 million Indians are expected to join the workforce every year. This trend will continue up to 2030. Given this, the government needs to create an environment in which jobs are created, in order to accommodate this workforce at a fast speed. With automation and robots taking over manufacturing the number of new jobs being created will come down. And this will mean trouble for the Make in India programme given that ultimately it's a job creation programme.

A businessman is a capitalist and he works for 'more' profit .Further, given India's surfeit of labour laws which make the business environment even more challenging, automation may be the best way out for any businessman.
Other manufacturers of engineering goods endorse the view that shop-floor employment in the engineering goods sector is unlikely to grow rapidly because of steadily increasing automation as well as gains in productivity." Godrej "recalls a time early on when the majority of his company's employees worked in the factory." Now, the number of employees working outside the factory is four to five time the number .In this scenario, it is important that the government realizes that the success of Make in India, should not depend on the number of manufacturing jobs it ends up creating. Even if it does not create manufacturing jobs, it will create jobs in services.

Domestic demand has been dull. Export opportunities are uninspiring. Labor issues have remained problematic. Tax laws are unhelpful. Land acquisition is a major worry.
The data is clearly bad on this front as well. As today's chart shows, bank credit growth has reached a new low recently. This is partly because large firms have been raising funds via commercial paper.
Falling credit growth to hurt manufacturing?

The problem lies in the NPA menace. Banks are reluctant to lend, as they are worried about credit quality. A healthy banking system is a prerequisite for economic growth. If credit growth continues to slow down, it could be a leading indicator of a more general deceleration of the Indian economy in the coming quarters.

CBEC Clarifications on Swachh Bharat Cess Swachh Bharat Cess has come into effect from 15th November 2015, at the rate of 0.5% on all services, which are presently liable to service tax.
Reverse charge mechanism applicable on Swachh Bharat Cess.
Indian industry hasn't taken too kindly to the recent imposition of a cess to help fund the Swachh Bharat initiative, with Heavy pendency of service tax refund / rebate claims of exporters with service tax department raises a serious question on government’s promise of ease of doing business in India.
Where on one side Indian Industry is facing huge demands in Income Tax by Transfer Pricing adjustments, on other side delay in indirect taxes refunds is a hit of double edge sword. Not only it affects the liquidity of the exporters, but their productivity and morale also goes down.
Aggregators such as Foodpanda, Oyo Rooms and Airbnb have been asked whether they are paying service tax. "Letters were sent to ascertain if these entities are registered with the department and paying due tax," said a department official. This seems to be part of a 'friendlier' approach to alert service providers of their potential liability, in line with the Centre's desire for a non-adversarial tax regime that's more welcoming to investors.

-CBDT is mulling ways to simplify the Income tax return filing form
-Constitution of Local Committees to deal with Taxpayers Grievances from High-Pitched Scrutiny Assessment
Board has consistently been advising the field authorities to be fair, objective and rational while framing scrutiny assessment orders.
In view of the above, a need has been felt to lay down an institutional mechanism to quickly resolve the taxpayers' grievances arising on account of high-pitched and unreasonable additions made by the Assessing Officers.

IMPORTANT JUDGEMENTS
RBI NPA guidelines overrides Income Tax Act & binding on income tax authorities………………….Income reversed on account becoming NPA cannot be recognized as Income and Taxed………………….DCIT vs The Vaish Cooperative Adarsh Bank Ltd.(ITAT Delhi), I.T.A. No.3310/Del/2012, Date of pronouncement: 16.10.2015
Retro amendment in sec. 115JA can't be deemed as reasons to believe that income has escaped assessment………….HIGH COURT OF BOMBAY/Godrej Industries Ltd. Vs B.S. Singh, Deputy Commissioner of Income-tax, Range 10(2)*
ITO vs. LGW Limited (ITAT Kolkata)…………..S. 50C should not be invoked if difference between stamp value and declared consideration is nominal, S. 14A/ Rule 8D does not apply to share application money, Pure foreign exchange hedging transactions cannot be treated as speculative transactions
Harish Textile Engrs. Ltd vs. DCIT (Bombay High Court)………………S. 292C: The presumption that documents found during search correctly reflect the facts is a ‘discretionary presumption’ & not a ‘compulsory presumption’. The presumption does not apply if the documents are inchoate
CIT vs. Bruhat Bangalore MahanagarPalike (Karnataka High Court)………………S. 194LA: TDS provisions apply only when payment is made by cash, chequesetc and not to a case of exchange such as of land for Certificate of Development Rights (CDR/ TDR)
Hero Cycles (P) Ltd vs. CIT (Supreme Court)……………..S. 36(1)(iii): Law on when interest expenditure on loans diverted to sister concerns and directors can be allowed as business expenditure explained.Once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman
DCM Ltd vs. DCIT (ITAT Delhi)……..S. 14A/ Rule 8D: The AO must give reasons before rejecting the assessee's claim. He must establish nexus between the expenditure & the exempt income. The disallowance cannot exceed the exempt income.The AO has neither recorded his satisfaction nor given reasons as to how the claim of expenditure in relation to tax free income has not been correctly made by the assessee as envisaged under section 14A(2). The AO has mechanically invoked Rule 8D.

ITAT power curtailed……………………The Punjab & Haryana High Court has said that ITAT does not have the power to stay Tax prosecution, in a case involving Jindal Power & Steel

Prospects brighten for key tax reform; Arvind Subramanian panel may suggest 18% GST rate…..A key panel on goods and services tax is likely to recommend a revenue-neutral rate of about 18 per cent and may do away with additional 1% on Inter State sales
GST RETURNS
The salient features proposed in relation to GST Return are as follows:
1. There will be common E-Return for CGST, SGST, IGST and Additional Tax.
2. Every registered person is required to file a return
3. Periodicity of Filing returns:Different periodicity for filing of return for different categories of taxpayers, after payment of tax due. .
4. Monthly Returns –Major Components of GSTR 1 Final invoice-level supply information
4.2 Major Components of GSTR 2 –Final invoice-level inward supply information pertaining to the tax period for goods and services separately
4.3 Major Components of GSTR 3 –Turnover Details including..
4.4 Major Components of GSTR 6 –Final invoice-level inward supply information will be auto populated
4.5 Major Components of GSTR 7-Details of GSTIN of the Supplier along with the invoices against which the Tax has been deducted.
5. Annual Return - Major Components of GSTR 8 –It will be filed by all normal/regular taxpayers. It would provide a reconciliation of the returns with the audited financial statements of the taxpayer.
6. Invoice Level information to be captured in the return has been specified.
7. Revision of Returns -There would be no revision of returns. All unreported invoices of previous tax period would be reflected in the return
8. Non-Filers and Late Filers -In case of failure by the taxpayer to submit periodic returns, a defaulter list will be generated by the IT system
9. Acknowledgment of Return –On submission of return, an Acknowledgement Number will be generated..
10. Processing of Return –Once a return is acknowledged, forward that GST Return to tax authorities.

11.The ITC claim will be confirmed to purchasing taxpayer in case of matched invoices after 20th of the month succeeding the month of the tax period
To sum up, the mechanism of return filing is integrated real time from the point of view of supplier and receiver. The whole process is technology driven which presupposes setting up of flawless IT infrastructure which seems a big challenge.

Delhi government tells ecommerce companies to file returns by month end

The Delhi government has given time till November end for ecommerce companies to start filing mandatory quarterly returns, providing specific information on sellers from the national capital on their platform."Attention! All ecommerce web portals," a half-page ad issued by Delhi government's department of trade and taxes on Monday said. "It is compulsory to enroll with the department by filing form EC-1 online." In a bid to check tax evasion by Delhi-based sellers on online platforms,

Government to set up new agency to probe corporate accounting frauds. The government will soon set up a specialized agency to investigate large corporate accounting frauds. It is keen to establish a robust mechanism for faster inquiries into scams such as the one at Satyam Computer Services, which overstated earnings for several years under a previous management. The proposed agency is likely to examine accounting frauds of certain classes of listed companies or those of Rs 500 crore and more.

SCAM
SGFX Financials , a Company incorporated in December 2010, had its share value shoot uptoRs. 7 Lac Crores ,( more than twice the market capitalisation of Reliance Industries)between January and June 2011.The Co. was dissolved in November 2012.The Company was run by a couple named Sarvesh Narendra Gade and Shahanaz Ashraf Bharde and offered investment earnings through forex trading. The Company folded overnight. Mr Sharad Pawar filed a complaint with Economic Offences Wing, as his name surfaced as a Director in SGFX Financials

Government to hike minimum wages to boost economy: Shankar Aggarwal, Labour Secretary

The government is working on a law that will seek to raise minimum wages ( by as much as 25%) in both formal and informal sectors as well as ensure that the higher wages are paid to workers. "We will increase the wages under Minimum Wage Act, so that workers have decent wages aligned with inflation and have some money to buy goods and services," Labour Secretary Shankar Aggarwal said at a CII event here.

Disruptive technologies: Advances that will transform life, business, and the global economy
The relentless parade of new technologies is unfolding on many fronts. Almost every advance is billed as a breakthrough, and the list of “next big things” grows ever longer. Not every emerging technology will alter the business or social landscape—but some truly do have the potential to disrupt the status quo, alter the way people live and work, and rearrange value pools. It is therefore critical that business and policy leaders understand which technologies will matter to them and prepare accordingly.
Disruptive technologies: Advances that will transform life, business, and the global economy, a report from the McKinsey Global Institute, cuts through the noise and identifies 12 technologies that could drive truly massive economic transformations and disruptions in the coming years.

It is estimated that, together, applications of the 12 technologies discussed in the report could have a potential economic impact between $14 trillion and $33 trillion a year in 2025.Due to key potential applications and the value they could create in a number of ways, including the consumer surplus that arises from better products, lower prices, a cleaner environment, and better health.
Examples of the 12 disruptive technologies include:
Advanced robotics—that is, increasingly capable robots or robotic tools, with enhanced “senses,” dexterity, and intelligence—can take on tasks once thought too delicate or uneconomical to automate as well as robotic prosthetics and “exoskeletons” that restore functions of amputees and the elderly

Next-generation genomics marries the science used for imaging nucleotide base pairs (the units that make up DNA) with rapidly advancing computational and analytic capabilities. Next-generation genomics will offer similar advances in our understanding of plants and animals, potentially creating opportunities to improve the performance of agriculture and to create high-value substances—for instance, ethanol and biodiesel—from ordinary organisms, such as E. coli bacteria.

Energy-storage devices or physical systems store energy for later use. These technologies, such as lithium-ion batteries and fuel cells, already power electric and hybrid vehicles, along with billions of portable consumer electronics. Over the coming decade, advancing energy-storage technology could make electric vehicles cost competitive, bring electricity to remote areas of developing countries, and improve the efficiency of the utility grid.

The potential benefits of the technologies discussed in the report are tremendous—but so are the challenges of preparing for their impact..
• Business leaders should keep their organizational strategies updated in the face of continually evolving technologies, ensure that their organizations continue to look ahead, and use technologies to improve internal performance.
• Disruptive technologies can change the game for businesses, creating entirely new products and services, as well as shifting pools of value between producers or from producers to consumers.
• Organizations will often need to use business-model innovations to capture some of that value.
• Leaders need to plan for a range of scenarios, abandoning assumptions about where competition and risk could come from, and not be afraid to look beyond long-established models.
• Organizations will also need to keep their employees’ skills up-to-date and balance the potential benefits of emerging technologies with the risks they sometimes pose.
• Policy makers can use advanced technology to address their own operational challenges (for example, by deploying the Internet of Things to improve infrastructure management).
• The nature of work will continue to change, and that will require strong education and retraining programs.
• To address challenges that the new technologies themselves will bring, policy makers can use some of those very technologies—for example, by creating new educational and training systems with the mobile
• Internet, which can also help address an ever-increasing productivity imperative to deliver public services more efficiently and effectively.
• To develop a more nuanced and useful view of technology’s impact, governments may also want to consider new metrics that capture more than GDP effects.

Keep your thoughts positive, because your thoughts become your words.
Keep your words positive, because your words become your behavior
Keep your behavior positive, as your behavior becomes your habit
Keep your habits positive, because your habits become your values
Keep your values positive, because your values become your destiny……….
Mahatma Gandhi

THE CONTENTS OF THE NEWSLETTER ARE COMPILATIONS OF NEWS AND OPINIONS AS EXPRESSED IN VARIOUS JOURNALS, NEWSPAPERS AND ARTICLES AND THE ACCURACY OF THE CONTENT IS NOT THE RESPONSIBILITY OF THIS DOCUMENT