Top 5 Budget Expectations ; e-Commerce & Other Businesses

1. Implementation of Goods & Services Tax and Tax Benefits

With states currently having different tax rates for different categories, it becomes difficult for e-commerce players to do business in India. It is not unheard of among e-commerce players, that they get Income Tax notices from state municipalities for non-compliance, especially for Cash on Delivery shipments. Hence, quick implementation of GST is a much needed improvement.

IT services companies like TCS and Infosys were able to generate huge employment at their time because of the tax holiday which they enjoyed. Now, it is e-commerce which will be the key employment generator for the next 10 years. Re-investment of profits into businesses will enable that and hence, this sector is one of the front runners in deserving a tax holiday.

2. Allowing Foreign Direct Investment in B2C

Small e-commerce players in B2C space face difficulty in raising funds at the initial stages as the depth of angel and VC investors is not like the foreign markets. The first institutional round generally comes from HNIs and there is no clarity on foreign HNIs investing in Indian startups. Getting risk capital from Indian banks is out of the question. For debt, startups have to wait for 3 years to be eligible in the current environment. Hence, many B2C e-commerce players face the challenge of scaling up with lack of intelligent capital backing them. The government can easily allow FDI with a maximum capital limit so that only early stage startups can benefit. Having more number of e-commerce players will lead to more choice for retail customers.

3. Investment in Infrastructural backbone
No courier company in India covers even 25% of the total pin codes in India. Coupled with the fact that there is an acute shortage of warehousing space, except in Tier 1 cities, it pushes up delivery costs of the packages shipped to customers drastically. Government needs to come out with a clear policy, coupled with a single window clearance, to create warehousing and logistical infrastructure. This will attract private players, both domestic and foreign, to invest in this sector, where investment is much needed.

In addition to this, faster implementation of broadband rollout and dedicated terminals for railways and air shipments, will also give a fillip to the e-commerce sector.

4. More investment required in skilling youth

Currently most of the e-commerce players, specially the smaller ones, train their workforce themselves as there is a shortage of skilled manpower. This leads to a gestation period before the new employees become productive. 'Skill India' should be implemented at a quick pace to ensure that this bottleneck is removed at the earliest. E-commerce players will be more than happy to partner with the government to train youth in the different skills required to work in this emerging industry.

5. Entrepreneurship support for Tech ecosystem

The government should encourage more tech startups to come into their own. Setting up a National Tech Entrepreneurship program and providing funds, incubation and mentorship to such startups, especially in colleges of India will ensure that innovation happens, here in India. Benefits of such a program for e-commerce players will be huge as they are always in need of new technology ideas to improve their systems and ensure better service, both to their vendors and customers.

Positive movement on the above five will provide a huge fillip to the sector and create growth opportunities for small and medium e-commerce players and greatly benefit consumers.


Economic Times, 18th February, 2015
(The author is the co-Founder of Shopatplaces, a private label e-retail venture, where he leads the Business Development and Finance divisions. He has worked with firms like JP Morgan and Casa Capital. He is an MBA graduate from FMS Delhi, and an Electronics engineer from Jamia, Delhi)

Is social responsibility of Capitalism a recent phenomenon?

Geoffrey Jones of HBS writes this really interesting paper.
He says  corporate responsibility has been associated with capitalism for a long time. It isn’t a recent development. However, the reasons why certain companies engaged in csr were for different reasons:

• Four factors have driven beliefs that corporations have responsibilities beyond making money for their owners. These factors are spirituality; self-interest; fears of government intervention; and the belief that governments were incapable of addressing major social issues.
• Many of the most forceful exponents of responsibility had strong religious or spiritual values. They did not accept the arguments of Adam Smith, Ted Levitt, and Milton Friedman that they should set aside these values in the sphere of business, and simply take on trust that self-interest and profit maximization would automatically deliver public good.
• Self-interest also mattered. In the United States, where corporate philanthropy acquired a unique importance, rich business leaders can be regarded as making investments in shaping the future. Less grandiosely, corporate social responsibility and philanthropy could be interpreted as reflecting the desire of business leaders to secure legitimacy for themselves and their firms. In the United States in particular wanting to pre-empt government intervention was important also.
• While most research has focused on developed countries, historically the non-Western world has produced many pioneers of corporate responsibility. These include Shibusawa Eiichi in late nineteenth and early twentieth century Japan, Jamnalal Bajaj in interwar India, Ibrahim Abouleish in postwar Egypt, and multiple Latin American companies today.
• Historically and today, there has never been a consensus on what responsibility means, and although the language of corporate responsibility has now diffused globally, there remain wide variations in the relationship between rhetoric and practice. A key challenge now is disentangling the now near-universal rhetoric of corporate responsibility with what is actually happening.

He draws examples from corprates across the world which makes this a really interesting read.
Business history esp of the kind Prof Jones writes is really exciting. Though, one does not really agree with his interpretation of what Smith said on businesses. Econs have pointed that Smith was as much concerned about moral issues than just economics ones.  I so wish if Prof. Friedman had clarified his statement that only purpose for business is to make profits. It has been widely misinterpreted and stretched. It has led people to defend anything under the sun and has led fancy things like CSR becoming a style statement..
The passage on India and particularly how Bajaj and Tatas has social responsibility so early on is an interesting read. Wish we had more business historians in India as well..

(Blog Entry Adopted from Mostly Economics)

Income Tax Rates in India

The following INCOME TAX RATES ARE applicable for the Financial Year ending March 31, 2015 (Financial Year 2014-15)-Assessment Year 2015-16):

Every year the income tax rates are changed and it is important to get the latest income tax rates. We give below the Income Tax Rates and Slabs applicable for the FY 2014-15 or AY 2015-16.  

Income Range	General (non-senior citizens) Category	Women (Below 60 years of age) (This category is abolished from this year and is thus is same as that of  General Category	Senior Citizens (Men and Women above 60 years of age), but below 80 years	Very Senior Citizens (Men and Women above 80 years of age)
Upto Rs. 2,50,000	Nil	Nil	Nil	Nil
Rs. 2,50,001 to Rs. 3,00,000	10% *	10% *	Nil	Nil
Rs. 3,00,001 to Rs. 5,00,000	10% *	10% *	10% *	Nil
Rs. 5,00,001 to Rs. 10,00,000	20%	20%	20%	20%
Above Rs. 10,00,000	30% **	30% **	30% **	30%**

* A tax rebate of Rs 2,000 from tax calculated will be available for people having an annual income upto Rs 5 lakh.   However, this benefit of Rs2,000 tax credit will not be available if you cross the income range of Rs 5 lakh.  Thus we can say that tax payable in 10% slab will be maximum Rs23,000 (taking into account Rs 2000 tax credit), but for people who fall in income range of Rs5 lakh and above, the tax will be Rs25,000 + 20% tax on income above Rs 5 lakh;

The education cess to continue at 3 percent.

The Corporate Tax Rate in India stands at 34 percent. Corporate Tax Rate in India averaged 33.61 percent from 2006 until 2014, reaching an all time high of 34 percent in 2014 and a record low of 32.44 percent in 2011. Corporate Tax Rate in India is reported by the Ministry of Finance, Government of India.

     

In India, the Corporate Income tax rate is a tax collected from companies. Its amount is based on the net income companies obtain while exercising their business activity, normally during one business year. The benchmark we use refers to the highest rate for Corporate Income. Revenues from the Corporate Tax Rate are an important source of income for the government of India. This page provides - India Corporate Tax Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news. Content for - India Corporate Tax Rate - was last refreshed on Thursday, February 12, 2015.

India Taxes		Last	Previous	Highest	Lowest	Unit
Corporate Tax Rate		34.00	33.99	38.95	32.44	percent	[+]
Personal Income Tax Rate		33.99	33.99	33.99	30.00	percent	[+]
Sales Tax Rate		12.36	12.36	12.50	12.36	percent	[+]
Social Security Rate		24.00	24.00	24.00	24.00	percent	[+]
Social Security Rate For Companies		12.00	12.00	12.00	12.00	percent	[+]
Social Security Rate For Employees		12.00	12.00	12.00	12.00	percent	[+]

		Corporate Tax Rate	Reference	Previous	Highest	Lowest	Unit
Australia		30.00	Jan/14	30.00	49.00	30.00	percent	[+]
Brazil		34.00	Jan/14	34.00	37.00	25.00	percent	[+]
Canada		26.00	Jan/14	26.10	50.90	26.00	percent	[+]
China		25.00	Jan/14	25.00	33.00	25.00	percent	[+]
France		33.30	Jan/14	33.30	50.00	33.30	percent	[+]
Germany		29.60	Jan/14	29.60	56.80	29.40	percent	[+]
India		34.00	Jan/14	33.99	38.95	32.44	percent	[+]
Indonesia		25.00	Jan/14	25.00	39.00	25.00	percent	[+]
Italy		31.40	Jan/14	31.40	53.20	31.40	percent	[+]
Japan		33.11	Apr/15	35.62	52.40	33.11	percent	[+]
Mexico		30.00	Jan/14	30.00	42.00	28.00	percent	[+]
Netherlands		25.00	Jan/14	25.00	48.00	25.00	percent	[+]
Russia		20.00	Jan/14	20.00	43.00	20.00	percent	[+]
South Korea		24.20	Jan/14	24.20	30.80	22.00	percent	[+]
Spain		30.00	Jan/14	30.00	35.00	30.00	percent	[+]

What is 'Wealth' for the Average Citizen in India ? Demystifying wealth tax: 10 things to know

Demystifying wealth tax: 10 things to know

SUBHASH LAKHOTIA
Tax & Investment Consultant
Tax Guru : CNBC Awaaz
You might be surprised about listening to the terminology of wealth-tax. Most of us by now are fully conversant with the theme of income-tax and really we understand that if we make money, then we are required to start parting with a portion of the money by way of income-tax payment.  But surely payment of wealth-tax might be a new discovery for you and perhaps you may not be interested to understand too much about the Wealth-tax law because when we talk of wealth-tax, it implies some payment of tax on our wealth.
However, do not worry but please try to understand the meaning of wealth-tax, the exemption limit of wealth-tax and the items on which wealth-tax is payable.  In the initial stage please do remember that wealth-tax is a separate tax other than income-tax and also other than service tax and the same is payable by individuals, Hindu Undivided Families and the Corporate Sector.  Other than these categories of tax payers wealth-tax is not payable by other categories of tax payers in India.  In income-tax we are aware that the basic income-tax exemption limit for individuals is Rs. 2 lakhs which means that if you have income up to Rs. 2 lakhs, you are not liable to make payment of income-tax,  Similarly, in the Wealth-tax Law the basic exemption limit is Rs. 30 lakhs.  This means that there is no liability to payment of wealth-tax if you have got a taxable wealth up to Rs 30 lakhs.  With the growing savings and accumulation of great wealth in your name or in the name of your client you might be worried that in most cases your wealth will be exceeding Rs. 30 lakhs and that if you are called upon to make payment of wealth-tax, you may not feel too very happy but please do remember that a large number of assets owned by you fall outside the purview of wealth-tax and thus, with happy note you can now come to a conclusion that wealth-tax is not payable on the entire wealth you are having in your name but the wealth-tax is payable only on selected assets belonging to you. The list of the assets in respect of which wealth-tax is payable are enumerated in section 2(ea) of the Wealth-tax Act, 1957.  For ready reference we print hereunder the specified assets which alone are liable to wealth-tax as mentioned in the said Wealth-tax Act and here is the list :-
(a) Any guest house; residential house; commercial property; and/or farm house situated within 25 kilometres from the local limits of any municipality or a cantonment board; but excluding;
(1) A house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment; (A) having gross annual salary of less than Rs. 10,00,000; (B)    having gross annual salary of less than Rs. 5,00,000 [upto assessment year 2012-13],
(2) Any residential house forming part of stock-in-trade,
(3) Any house for commercial purposes (i.e., commercial property) which forms part of stock-in-trade,
(4) Any house which is occupied by the assessee for the purposes of any business or profession carried on by him,
(5) Any residential property that has been let-out for a minimum period of 300 days in the previous year, and
(6) Any property in the nature of commercial establishments or complexes;
(b) Motor cars, other than those used in assessee’s hiring business or used as stock-in-trade;
(c) Jewellery, bullion, and furniture, utensils or any other article made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, other than those used as stock-in-trade by the assessee;
(d) Yachts, boats and aircrafts, other than those used by the assessee for commercial purposes;
(e) Urban land, being land situated in any area, within the jurisdiction of a municipality or a cantonment board which has a population of not less than 10,000; or within 8 kilometres from the local limits of such municipality or a cantonment board, as the Central Government may notify.
However, urban land shall not include:
(1) Land on which construction of a building is not permissible under any law or the land on which building is constructed with the approval of the appropriate authority,
(2) Any unused land held by the assessee for industrial purposes for a period of two years from the date of its acquisition by him, and
(3) Any land held by the assessee as stock-in-trade for a period of ten years from the date of its acquisition by him;
(f) Cash in hand, in excess of Rs. 50,000 of individuals and Hindu undivided families and in the case of other persons any amount not recorded in the books of account.
 Thus, from the above mentioned list you can come to the conclusion that not all your assets come within the mischief of tax liability under the Wealth-tax Act.  It is only the selected assets which come within the purview of Wealth-tax Law.  To make it simple please do understand that generally speaking your residential properties, motor cars, jewellery are some of the most important items on which wealth-tax is payable.  However, when it comes to real estate, please do remember that one house property in any case is fully exempt from wealth-tax.  Moreover, if you are having more than one house property but these properties are in the form of commercial properties, then again there is no liability to wealth-tax irrespective of the number of properties you own.  If your love is towards making investment in residential properties and that you have got more than one residential property in your name, then if you have given these residential properties on rent for a minimum period of 300 days in a year, then also there is no liability to wealth-tax in respect of such properties. 
We have discussed in the above paragraphs certain important assets which alone are liable to wealth-tax but all your other movable assets like bank balances, Fixed Deposits, shares of companies, debentures of companies, bonds of companies, loans to friends, relatives, loans to any party, Mutual Funds etc., etc., are not at all liable to wealth-tax.  Thus, for most of the individual tax payers this exemption will prove so very handy as they will not be required to make payment of wealth-tax because of innumerable wealth-tax exemptions.  Also do remember that there is no wealth-tax liability on the insurance policies owned by you.
For all those persons who are liable to make payment of wealth-tax, they have to compulsorily file yearly Wealth-tax Return. However, it may be noted that the Wealth-tax Return is to filed only when the net taxable wealth is in excess of Rs. 30 lakhs.  For example if a person is having jewellery worth Rs. 10 lakhs, shares worth Rs. 50 lakhs, bank Fixed Deposit of Rs. 30 lakhs and a very big house, even then he is not liable to payment of wealth-tax because the entire quantum of shares and FDR as also one house are completely exempt from wealth-tax and thus, his taxable net wealth-tax happens to be only Rs. 10 lakhs for which there is no liability to wealth-tax.
Hence, it may be remembered that all those persons who have got wealth exceeding the exemption limit have to file Wealth-tax Return every year after the close of the financial year.  The last date of filing Wealth-tax Return is exactly like the Income-tax Return.  There is a separate Wealth tax Return form required to be filled up for filing Wealth-tax Return.  The tax payer is required to make payment of Self Assessment Wealth-tax before filing the Wealth-tax Return.  However, the happy news is that no Advance Tax is liable to be paid with reference to your liability to Wealth-tax.  The payment of Wealth-tax is at the rate of 1 per cent of the taxable wealth.  Once you understand your obligations to pay and file the Wealth-tax Return, then you have no other hassles and problems in dealing with the matters relating to Wealth-tax.
The author is Tax and Investment Consultant at New Delhi for the last over 40 years.
E-Mail : slakhotia@satyam.net.in