EPF amendments

EPF amendments to pursue India's social security pacts
New Delhi, Nov 20 (PTI) To bring into effect social security pacts signed by India with countries like France, Germany and Belgium, the government has initiated registration for "International workers" after amending the Employees Provident Fund Act.The amendment in the Act will include Indian employees who are posted to these countries and foreign nationals working in India into the ambit of the Employees' Provident Fund (EPF) scheme.The modifications to the EPF scheme were brought to effect from November 1, and so far about 30 Indian IT and Construction firms have completed necessary registration process of the International workers employed with them."The modifications to the scheme will benefit the Indian workers for availing their pension benefits right here in their country of origin. It will also allow for exportability of social security benefits accrued in these countries back to India," an EPFO official told PTI here.Since the social security pacts are on a reciprocity basis, citizens from France, Germany and Belgium would not be required to register themselves under the 'International worker' category and they can continue contributing to social security schemes in their country of origin.However, there is yet some time before the social security pacts could be actually brought to effect.Modifications to the Employees' State Insurance Act are still awaited to ensure continuity in insurance term for Indian employees covered under similar schemes in foreign countries.This figures as one of the major condition of the social security pacts with foreign nations. PTI

ICAI to oppose Valuation Professionals Bill

THE government’s move to create a separate breed of corporate valuers in the country is set to face stiff resistance from the Institute of Chartered Accountants of India (ICAI), that trains and regulates the professional conduct of chartered accountants. The Institute is expected to tell the government that financial valuation of companies is best done by chartered accountants and this job be reserved for them. The government’s attempt is to institutionalise this profession with a well laid out code of conduct. It also wants to set up a panel of independent valuers that shareholders and clients would find credible. ICAI is now studying global valuation models, where CAs or their professional equivalents play the dominant role. The study results may be used to tell the government to reserve the work of financial valuation for CAs. The ministry of corporate affairs is expected to set up an expert panel to work out the modalities of a proposed law that will regulate the business of corporate valuation by creating a pool of government-recognised valuers. Even though the proposed panel of government-recognised valuers will comprise CAs in large numbers, the institute fears that such a move may affect its professional dominance, and also affect the quality of valuation work. Corporate valuation has always been a domain strength of chartered accountants because of their in-depth skills in auditing and finance. Corporate valuation is an essential part of initial public offerings, mergers and acquisitions, strategic corporate alliances and corporate restructuring. An official with ICAI said that world over, valuation of companies is done mainly by chartered accountants or certified public accountants (CPA), which is the statutory title of qualified accountants in the USA. The government’s expert panel that will decide on the draft valuation professionals bill is also likely to have representation from the ICAI, apart from other specialised bodies. The government intends to introduce the bill in the next session of Parliament, an official with the ministry of corporate affairs who did not want to be identified said. The proposed bill will seek to create a council of valuation professionals, which will set standards for the valuers, ensure for their training and monitor their performance.

Pay Carbon Tax

Polluting power cos may pay carbon tax

29 Jul, 2008, 0205 hrs IST,Subhash Narayan, ET Bureau

NEW DELHI: The energy coordination committee headed by Prime Minister Manmohan Singh has suggested imposition of a carbon tax on polluting power stations. The proposal would club India with a select group of countries that tax carbon emissions directly and boost the renewable energy initiative. The initiative could turn Indian power stations more efficient and less polluting; it could push up power tariffs. “A proposal to levy carbon tax on polluting power stations is on the table. The move would also enable the country to begin work on containing pollution at an early stage itself. While we are sitting on huge carbon credits now, it is feared that rising pollution could change the situation soon. The new tax would provide more funds for renewable energy initiative whose share in total power mix is dismal at present,” an official source told ET . However, implementation of the proposal would depend on how fast the country progresses in having benchmarks for efficiency that would be important for levying a carbon tax. It is also felt that the carbon tax should not be additional burden on utilities. The ECC has also suggested that carbon tax should not be a standalone initiative and there was also a need for introducing a system of emission trading in order to avoid problems in the country’s negotiating position on climate change. Most countries in the European Union have a system of penalising polluting industries, forcing them to buy carbon credits from efficient industries. India proposes to add 78,577 mw of additional power generation capacity during the 11th Plan. Around 70% of this capacity would come from the thermal sector. The gross installed capacity of grid interactive renewable power in the country is estimated at 11,273 mw, 8% of the total installed generation capacity in the country.

Deductibility of political donations

Contributions that are more than what is permissible under the Companies Act cannot be deducted under Section 80GGB of the I-T Act.

In the article ‘Bringing political donations to book’ (Business Line, June 28), the author has expressed the view that “the bottom line therefore is while a company would fall foul of the company law if it breaches the 5 per cent norm, it can get away under the income-tax law and the claim of entire contribution would be allowed in computing its taxable income.” There could be another view on this.Section 293A
Section 293 of the Companies Act, operative from May 24, 1985, permits donations to political parties with certain riders. The important ones are: TO READ MORE CLICK........

Checks on inter-co loans

In a bid to check fund manipulation by companies, the government may introduce greater safeguard provisions to govern inter-corporate loans. The proposed changes, likely to be introduced as part of the new company law amendments, would require companies to be more transparent in their efforts to avail such finance options. While the government’s efforts would not be directed to cap companies’ rights to raise funds through the route, the ministry of corporate affairs wants them to be totally transparent about loans and reasons for any deviation from standard procedure. Officials say the government was not in favour of curbing the rights of companies for easier access to financing. The proposed steps would ensure that corporates are made to follow greater standards of compliance before availing such loans. To check fund manipulation, it is proposed that the capacity of the corporate houses to invest or lend surplus funds should be established transparently. It is believed that detailed disclosures in the annual report of the lending company on the end-use of the loans and advances by the recipient entity for the intended purpose will usher greater transparency to such operations. While the new provisions are unlikely to put in place regulatory hurdles for corporates to comply before reaching such an arrangement, the idea is to ensure that companies do not misuse their rights. The rights of corporates to enter into inter-corporate loans are covered under Section 372A of the company law. The proposed regulatory changes are in consonance with the J J Irani committee’s recommendations stating that provisions of the company law on such loans should be strengthened to prevent misuse of the exemptions by corporates. Officials, however, say the proposed legislative changes would not affect the interests of the corporates. The expert committee had also recommended that regulatory changes should not reintroduce a regime of government approvals. It is believed that India Inc should not be placed at a disadvantage compared to the companies incorporated in other jurisdictions in any international competitive bidding for acquisition

MICRO ,SMALL AND MEDIUM ACT 2006

MICRO ,SMALL AND MEDIUM ENTERPRISE DEVELOPMENT ACT 2006
The micro, small and medium enterprises sector comprises 50% of India's total manufactured exports,45% of India's industrial employment, and 95% of all industrial units in the country. Despite its importance, the MSME sector has long faced extreme obstacles in accessing finance and markets. Therefore in order to facilitate promotion and development and enhancing the
competitiveness of the MSME sector the Micro, Small and Medium Enterprises Development Act 2006 was enacted which became operational from Oct 2006.The salient features of this Act are as follows:
1. Definition of MSMEs: It defines 'Enterprise' instead of 'Industry' to give due recognition to the service sector. The Category of an enterprise is dependent on the level of investment in Plant and Machinery/Equipment. (Sec.7)
Manufacturing Service Sector
Sector Investment in
Enterprise Investment in Equipment
Category P&M

Micro Upto 25 lacs Upto 10 lacs

Small More than 25 lacs More than 10 lacs
but less than but less than
5 crores 2 crores

Medium More than 5 crores More than 2 crores
but less than but less than
10 crores 5 crores
2. National Board for Micro, Small and Medium
Enterprises: A National Board has been constituted with its head office at Delhi for overseeing and regulating the development of MSMEs.

3. Filing of Memorandum: The earlier timeconsuming
registration process has been replaced by a simpler system of filing of memoranda by the enterprises. The enterprises just need to file a memorandum with the District Industry Centers (DICs) as follows: (Sec.8)
Type of enterprise Mfg/ Service Mandatory/optional
Micro and Small Both Mfg. and service Optional
Medium Service Optional
Medium Mfg. Mandatory

4. Credit facilities: The policies and practices for extending credit to MSME shall be progressive as per the guidelines issued by RBI. This will ensure timely and smooth flow of credit to such enterprises, minimize the incidence of sickness and enhance the competitiveness of such enterprises. (Sec.10)
5. Procurement Preference Policy: For facilitating promotion and development of micro and small enterprises the govt. will notify preference policy in respect of procurement of goods and services produced and provided by micro and small enterprises, by its Ministries, departments or its allied institutions and PSU.
6. Mechanism to check delayed payment: a. Where any micro or small enterprise (not the medium enterprise) supplies goods or services to any buyer, the buyer is required to make payment to the supplier on or before the agreed date between buyer and supplier. But in any case the credit period for payment agreed between the supplier and buyer shall not
exceed forty five days.(Sec.15)
b. If the buyer does not make payment as per the agreed terms of payment (maximum 45 days) he shall be liable to pay to the supplier compound interest with monthly rests at three times the bank rate notified by RBI. (Sec.16)
c. For recovery of the above amount due with interest, any party to dispute may make a reference to the Micro and Small Enterprises Facilitation Council who hall act as Arbitrator or Conciliator under Arbitration and Conciliation Act 1996.
d. The amount of interest payable or paid by any buyer in accordance with the provisions of this Act shall not be allowed as a deductible expenditure under the Income Tax Act 1961. (Sec.23)
7. Disclosure in audited accounts

a. Where any buyer is required to get his annual accounts audited under any law, such buyer is
required to furnish following additional information in annual statement of accounts:
i. Principal amount and interest due thereon remaining unpaid to any such supplier;
ii. The amount of interest paid by the buyer in terms of section 16, alongwith the amounts of
the payment made to supplier beyond the agreed day;
iii. The amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the agreed day during the year) but without adding interest specified
under the Act;
iv. The amount of interest accrued and remaining unpaid at the end of each accounting year;
v. The amount of further interest remaining due and payable even in succeeding years, until such date when the interest dues as above are actually paid to the small enterprise. (Sec.22)
b. The corresponding amendment to the Schedule VI of the Companies Act 1956 in line with e above has been made w.e.f. 29th Nov 2007 vide Notification no. G.S.R. 719(E) dated 16.11.07. The earlier requirement of giving names of SSIs to whom company owes any
sum together with interest outstanding for more than 30 days has been dispensed with
8. Penal provisions: Contravention of section 8 (filing of memoranda) or 26 (furnishing of information on requisition) would entail a fine upto Rs.1000 on first conviction and a fine of Rs.1000 to 10000 for any second or subsequent conviction. Where a buyer contravenes
provisions of section 22 he shall be punishable with a minimum fine of Rs.10000. (Sec.27)
9. Repeals: The Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act 1993 is repealed on enactment of this Act. (Sec.32)

Liquidation to soon get transparent

The way assets of sick companies are auctioned in India is likely to undergo a major change. In a bid to usher in transparency in the process of corporate liquidation, the government will soon give wide publicity to details of distressed assets that are put on the block. These are assets of companies which the official liquidators attached to various high courts auction, the proceeds of which are given to various stake holders in the company as per the sequence of priority.

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