Why India’s Act East Policy can usher in a new era of Economic Growth

Why India’s Act East Policy can usher in a new era of Economic Growth

The link between a nations foreign policy and economic development is well known. With the advent of digital technologies the world has become increasingly interconnected and any change is nations foreign policy is quickly transmitted and impacts many key economic indicators like trade deficit, FDI flows and more. India’s Act East Policy has been a major focus of current government , it not only reflects the growing role of East Asia as a bloc in new economic order but is also very important for India from a trade standpoint. So the Act East policy is a reflection of internal circumstances and a rapidly fluid external environment. India has renamed its Look East policy to Act East Policy [AEP] which  is a glowing recognition that India’s economic agenda has now shifted eastwards to as high as 50% now. The core driver of this shift are nations like Japan, China, Bangladesh and the ASEAN block. ASEAN has a history of trading more with the rest of the worlds than within the region. ASEAN accounts for a combined population of 1.9 Billion which is close to 25% of global population and combined GDP is estimated to be close to US $ 4 Trillion. There are sub-regional initiatives like BBIN (Bangladesh, Bhutan, India and Nepal) within the ambit of AEP as well for example the electricity grid of Bangladesh Bangladesh, Nepal and Bhutan are now connected with India and they already have Power Purchase Agreements with India’s National Power Grid. Work has already started on 45 Km railway link between Agartala in Tripura and Akhaura in Chittagong in Bangladesh. Other than that there are major economic investments underway which have been summarized below

  1. Trilateral Highway Project

Trilateral Highway proposal aims to link India, Myanmar and Thailand and is part of an overarching multi sector economic initiative of (BIMSTEC), an international organization comprising of Bangladesh, India, Myanmar, Sri Lanka, Thailand and Bhutan. The project will boost economic relationship between India and ASEAN. This project will connect Moreh in Mainpur to Mae Sot in Thailand via Myanmar. There will be 2 border crossings, four customer checkpoints and three customs Electronic Data Interchange systems which will usher in a new era of trade prosperity of India. According to many empirical studies the states in North East Region which would be part of this corridor will witness an increase of 35% over other states through which this corridor does not pass by 2040

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  1. BCIM Economic Corridor

This economic corridor has been proposed between Bangladesh, China, India and Myanmar (BCIM) and will involve multi-modal connectivity to promote trade and investment. It would run between Kolkata (India) to Kunming (China) and pass through  Bangladesh and Myanmar. According to a study it can have a positive total trade effect spillover of 5671 Mn dollars.

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Source : Md. Tariqur Rahman and Muhammad Al Amin, “Prospects of Economic Cooperation in the Bangladesh, China, India and Myanmar Region: A Quantitative Assessment,”

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There are countless other initiatives as well which are part of the India’s act east policy towards especially through Japan which have been India’s long standing counter to China. India is one of the largest beneficiary of Japanese official development assistance loans since 2003 and   has been one of the largest recipients of Japanese official development assistance (ODA) loans and has been an official partner of choice be it investments in India’s much fabled Bullet Train project, Japanese Auto clusters in India’s Gurgaon-Manesar-Neemrana Belt, DMIC corridor among others as well.

Conclusion

India’s Act-East policy today is one of the best strategized policy by Indian government. It is being largely on economic rationale to integrate India’s economy with rapidly expanding East Asian economies. It has expanded its focus to not only ASEAN but also to far east economies like Japan and South Korea. This will also help us counter the trade deficit India have with China which is a major trade concern. Incorporation of North East Region by establishing commerce and connectivity projects also have the potential to double GDP of these states in coming five years.

About the Author

Sunil Kumar Gupta is an entrepreneur par excellence, philanthropist and a great visionary. He is the Leader of Indo European Business Forum (IEBF) and also the Founder Chairman of SARC & Associates, Chartered Accountants and SARC Foundation and Life Trustee of Rashtriya Antyodaya Sangh, a Public Charitable Trust. He has over 32 years of experience in diverse fields such as Corporate planning, Financing, Taxation, Banking, Education, Investments, Oil & Gas and in project implementations. He is a Fellow Member of the Institute of Chartered Accountants of India (ICAI), Life Member of Indian Council of Arbitration and Full Member of the Institute of Certified Public Accountants of Uganda (CPA-U).

How REIT will be a game changer for Indian Real Estate Industry

How REIT will be a game changer for Indian Real Estate Industry

The concept of REIT which is an acronym for Real Estate Investment Trust has been there for nearly 60 years now REITs. REITs as an investment asset class came into being when President Eisenhower of the USA enacted a law in 1960 that enabled all investors to invest in diversified large-scale portfolios of real estate that produce income in form of rent and lease. The first REIT was launched in 1961 by American Realty Trust 1961. In 2018, globally REITs had over 2 trillion US Dollars worth of assets under management. In the budget of 2014, Finance Minister Arun Jaitley introduced a law for setting up REITs and in August 2014 India approved the creation of Real Estate investment trusts. Last month, Blackstone Group LP – Sponsored, Embassy Office Parks raised Rs 4750 cr through India’s first REIT IPO. The IPO was over-subscribed 2.58 times. Investors in this REIT IPO were allotted units at a price of Rs 300. On its listing day, the REIT IPO received a thumbs up from the market when it touched a daily high of Rs 325 and closed at Rs 314, thus enabling IPO investors to earn a sizeable gain of 4.7% on the issue price. With it India became another market having REIT offerings for individual investors.

  • Reduced Risk, Stable Returns, and Diversification for Investors in Real Estate  (REIT)

A new fund-raising avenue for the cash-strapped real estate sector in the country. Firstly it gives investors an investible corpus of only a few lacs to invest instead of conventional Real Estate where you were set back by a huge amount. Secondly, it also gives investors exposure to a pool of real estate thus giving them much-needed diversification across properties and geographies. This reduces risk as end users are holders of units of securitized real estate pools.  According to the guidelines, REITs will have to invest in a minimum of two projects with 60% asset value in a single project. REIT will showcase the full valuation on a yearly basis and will also update it on a half-yearly basis. Thirdly it is managed by a professional investment team so investment risk is further reduced. Last but not least is a friendly taxation structure. if a REIT unit will be by the investor for a period of more than 3 years then the long-term capital gain will be applicable. If the periodic income is through dividends then it is tax-free and if the pay-out is in the form of interest then tax will be applicable as per the tax slab of the unit holder. For Indians, Real Estate has always been a preferred investment class as according to an RBI study about 56 percent of Indian household savings have been concentrated in Real Estate but Indians have long invested largely in Residential Real Estate which has lower rentals. Retail investors have stayed away from commercial real estate because of the higher ticket size of investment and the complexity associated with commercial property ownership. Colliers Research shows that the Indian market is rife with great opportunities in terms of rental yields as evident from the infographic shown below.

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The launch of the first REIT will certainly be a game changer for Real Estate as it has the potential to revive the commercial real estate segment by introducing Retail investors to contribute sizeable inflows across this segment.

  • Needed Liquidity Boost for  Real Estate Industry (REIT)

The greatest benefit for the Real Estate industry as a whole will be that of fast and easy liquidation of investments in the real estate market, unlike the traditional way of disposing of real estate which is very opaque and fraught with risks of fraud, cheating, and legal disputes emanating from property records. The assets under REIT corpus are rent-bearing assets where an established name has gone through due diligence from multiple bodies including SEBI, so property records will be transparent and it will boost Real Estate industry sentiment. India’s real estate has endured a lot in recent years. Despite the high credit growth environment and factors like Demonetisation, Global Recession, and rapidly evolving GST structure, Real estate has held forth as a preferred asset class for Indians. This is a much-welcomed move and will give the real estate industry a much-needed boost. Given the prevalent situation of funding crunch, the launch of the first REIT offering in India is very well-timed for real estate developers who want to unlock much-needed capital to fund further projects or to pare down their debt. It will also greatly reduce a great deal of pressure on the NPA-saddled banking industry. It will ensure more liquidity for Banks to lend to end users and customers instead of relying on a much riskier way of lending through Loan Against Property (LAP) and Lease Renting Discounting (LRD).

About the Author

Sunil Kumar Gupta is an entrepreneur par excellence, philanthropist, and a great visionary. He is the Leader of Indo European Business Forum (IEBF) and also the Founder Chairman of SARC & Associates, Chartered Accountants, and SARC Foundation, and Life Trustee of Rashtriya Antyodaya Sangh, a Public Charitable Trust. He has over 32 years of experience in diverse fields such as Corporate planning, Financing, Taxation, Banking, Education, Investments, Oil & Gas, and project implementations. He is a Fellow Member of the Institute of Chartered Accountants of India (ICAI), a Life Member of the Indian Council of Arbitration, and a Full Member of the Institute of Certified Public Accountants of Uganda (CPA-U).

Remove flaws to make GST a gamechanger

Remove flaws to make GST a gamechanger

The Goods and Service Tax (GST) was successfully implemented across the nation on July 1, 2017 with a lot of fanfare. It is a buzz word in India these days spanning across trade circles, financial pundits, and investment gurus. GST is the biggest tax reform in India’s 70-year history as an independent nation. It has replaced a complex net of existing taxes, bringing uniform tax rates and rules and simplifying compliance for businesses. It is a single, unified tax which justifies the adage ‘One Nation-One Tax’ and will have a very positive impact on Indian economy.

Impact of GST on Indian Economy

GST will bring about a uniformity in process and centralised registration that will make starting a business and expanding in different states across the India much simpler.

GST will ensure that interstate movement becomes cheaper and is less time consuming, by eliminating small border taxes and resolving check post issues.

GST also introduces an optional scheme called the composition scheme, which empowers small businesses with turnover between Rs. 20 lakh to Rs. 75 lakh to pay lower taxes.

In the near future, GST will enable financial inclusion in the economy.

Broader Tax Base and decrease in “Black” transactions.

Improved compliance and revenue collections

Automation of compliance procedures to reduce errors and increase efficiency.

GST will reduce tax evasion.

Cascading effect of tax on tax will be eliminated.

It will harmonise Central and State tax administrations

Make in India will get a huge boost as both tax and logistics cost will fall and lead to higher investments for the manufacturing industry.

Salient Features of GST

Destination-Based Consump-tion Tax: GST is a destination-based tax. This implies that all SGST collected will ordinarily accrue to the State where the consumer of the goods or services sold resides.

Dual GST: A dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to be levied by the States would be called the State GST (SGST).

Computation of GST on the basis of invoice credit method: The liability under the GST will be invoice credit method, i.e. cenvat credit will be allowed on the basis of invoice issued by the suppliers.

Payment of GST: The CGST and SGST are to be paid to the accounts of the central and states, respectively.

Input Tax Credit: Input Tax Credit available on taxes paid on all procurements (except few specified items).

Technology based Assistance: GSTN and GST Suvidha Providers (GSPs) to provide technology based assistance.

The government is trying very hard to implement GST successfully for the benefit of the common man but there are certain oversights, loopholes, or shortcomings in entire gamut of GST implementation that become a hurdle in sectoral growth, synergised policy making and financial transparency, which the Modi government has been encouraging ever since it has come to power.

Even though simplified, GST still has certain complexities entwined in it. GST has an anti-profiteering provision empowering the Central Government to constitute, or appoint, an authority to monitor prices businesses charge for goods and services in the lead up to, and following the introduction of, the GST. This provision prevents entities from making excessive profits due to the GST.

But, there are no clear methods of assessing the GST benefits for purposes of passing it to the consumers. A GST anti-profiteering authority is also yet to be formed.

While, the reason behind such anti-profiteering measures is to protect the masses, the government should ensure that the entities will pass the tax savings from the seamless input credit to its consumers. For the successful implementation of GST and to attain its objective, the rules and methodology of anti-profiteering provisions need to be clearly stated.

In India, various developmental authorities/governmental authorities have been entrusted the function of urban planning. Urban planning is one of the functions enlisted in Article 243W and Schedule XII of the Constitution of India.

These authorities while discharging the function of urban planning, lease out the land for a period of 90 years or more for various planned uses like industrial, institutional, residential, commercial and mixed use.

The leasing of land for such a substantial period of time is akin to sale as per the provisions of Transfer of Immovable Property Act. As such the payment made for acquisition of land popularly termed as Land Premium, Salami, Cost of Land, is treated as capital payment which is subject to levies such as stamp duty, etc., on transfer.

IN the service tax era, there was no tax on such transactions as it was taken as similar to sale of land. But, while framing the GST provisions, it has not been considered that these transactions have been brought under the GST net. However, exemption has been provided for the Lease Premium/ Salami/cost of land received by the developmental authorities/governmental authorities for allotment of land for industrial purposes.

There is no logic why land being allotted for purposes other than industrial purposes has been kept out of exemption list, while in current scenario, almost all lands being allotted by development / governmental Authorities are on a lease of 90 years or more

Land has always been kept out of the meaning of goods and service, but by taxing the Lease Premium/ Salami/cost of land, the basic concept of levy of GST has been missed.

Under the GST, where Central and State-level taxes have been merged and a provision has been put that any manufacturer with a turnover of Rs. 20 lakh (Others)/10 lakh (Special Category States) or more has to comply with GST norms related to excise duty, which earlier were exempt up to turnover less than Rs. 1.5 crore will serve as a dampener for many MSMEs. For an MSME, a lot of self-effort is utilised is staying in business by running business in a most cost effective way. Now, they will have to spend resources – time, money, and manpower – on fulfilling the GST obligations.

This can have negative impact on compliance for GST.

GST implementation has a high compliance cost to MSMEs. The single window tax regime intended to simplify processes under GST is facing many challenges in its interpretation and implementation. To reduce the GST compliance burden on MSMEs, the Government has to provide all GST compliance utilities on the GST portal. So that MSMEs can accomplish all the compliances without any hassle and any professional support.

In conclusion, I would like to state that GST is a welcome change for the Indian economy. It is bound to reap fruits of profit for India in the long term. However, while drafting the GST bill and categorising the items, there have been multiple oversights which will have adverse to negative impact on the common man of India, certain sectors and the economy at large. The government and the GST Council have not closed their doors for suggestions or observations. They have promised the country to revisit the rules and rates periodically till all the dust settles down. We need to be patient and let the financial experts do their work, however, if we need to share anything then we should be duty bound to bring it to their notice. I am very sure that with time GST will become the strongest backbone of the economy and will help Indian economy to walk miles into bliss.

The writer is an author, economist and philanthropist. He can be contacted at www.sunilkummargupta.com

Top Accounting Technology trends you need to know

Top Accounting Technology trends you need to know

Technology has really shaped up the mindset of professionals from all walks of life and its utilization has given a holistic understanding in order to pester the needs of working professionals. Now this revolutionary change applies to people in accounting industry as well.

We are in an era where without the use of technology, we can easily be ostracized and this cobwebbed situation especially in our working atmosphere can pull us out of business. Even if you’re an aspiring accountant or you’ve been a CPA for decades, you may not think much of your preferred accounting system. If you are dedicated in the field of accounting or currently pursuing a bachelor’s degree in accounting, then it is important that you must be up to date on the kind of technology being used in your professional workspace.

Let’s take a look at some of the most important accounting technologies that can help accountants to approach their workspace through an effective and efficient lens:

Cloud Computing

Cloud computing plays pivotal role as one of the efficient technologies within the accounting sector. According to Forbes, worldwide spending on cloud services will grow radically.

This paradigm shift for professionals following traditional accounting pattern has given them a technology that is used for storage and accessibility of data online rather than on your hard drive.

Blockchain Technology

Blockchain technology is the distribution and decentralization of database technology. It can protect encrypted data and sustain an expanding list of transaction between all parties of those transaction.

This accounting technology will assist many financial advisors in Delhi to bring a qualitative change in the financial industry.

Automated accounting

This type of technology eases human effort and does most of the job for you. Automated is an efficient tech that will make virtual controllers of automated accounting high in demand.

This lucrative technology will be able to redefine the role of an accountant and bring quantifiable results for the same.

Optical Character Recognition

Optical Character recognition is a new technology in the market that electrically converts images and handwritten texts or printed text into machine encoded text.

OCR is finding an elbow room in automated, cloud based applications. These technological trends create a powerhouse for business experts within the accounting software

All About GSTR-1

GSTR-1: Every supplier needs to file a monthly or quarterly return. This return is called GSTR-1. All the details regarding the outward supplies are contained in GSTR-1. Hence, this return becomes the basis upon which the whole compliance structure in GST would be primarily based.

Due Date for filing GSTR-1

Quarterly returns are required to be filed by taxpayers whose turnover is up to Rs. 1.5 crores.

Period (Quarterly) Due dates
July – Sept 2017 Jan 10, 2018
Oct-Dec, 2017 Feb 15, 2018
Jan – Mar 2018 April 30, 2018
April – June 2018 July 31, 2018

Monthly returns are required to be filed by taxpayers whose turnover is above Rs. 1.5 crores.

Period (monthly) Due dates
July – Nov 2017 Jan 10, 2018
Dec 2017 Feb 10, 2018
Jan 2018 March 10, 2018
Feb 2018 April 10, 2018
March 2018 May 10, 2018
April 2018 May 31, 2018
May 2018 and onwards 10th of  Next Month

GSTR-1 Should Be Filed By?

Every registered person needs to file GSTR-1 irrespective of the fact that there are any transactions in the reporting period or not.

The below-mentioned Taxpayers are exempt from the filing of GSTR-1:

  • Dealers opting Composition Scheme
  • Input Service Distributors
  • Suppliers of online information and database access or retrieval services (OIDAR), who need to pay taxes by themselves
  • Taxpayers liable to collect TCS
  • Taxpayer liable to deduct TDS
  • Non-resident taxable person

Can GSTR-1 Be Revised?

Once you file GSTR-1, it cannot be revised. However, in case of any changes, the same can be provided for in the next return by giving the details of revised Invoices, Debit Notes, or Credit Notes.

About the Author

Sunil Kumar Gupta is the Founder Chairman of SARC Associates and a Fellow Member of the Institute of Chartered Accountants of India (ICAI). He holds a Post Qualification Diploma in Information Systems Audit (DISA) and is a certified Forensic Auditor holding “Forensic Accounting & Fraud Detection” (FAFD) certificate and a certificate in “Anti-Money Laundering Laws”, issued by ICAI.

He is also the Life Member of the Indian Council of Arbitration (ICA) and on the Panel of Arbitrators maintained by ICA & ICAI and a Member of the Institute of Certified Public Accountants of Uganda (CPA-U).

He is the Co-founder of the multinational business forum Indo European Business Forum (IEBF) and possesses experience of over 35 years in the fields of Corporate Financing, Taxation, Banking, Education, Investment, Development, and Project implementation. He has also been a part of numerous international delegations and has participated in a number of international conferences.

Due to his business acumen, and analytical & policy-making skills, Mr. Gupta has been a part of several international delegations. He accompanied the Former Hon’ble President of India Mrs. Pratibha Devi Singh Patil in the business delegation to Seychelles and South Africa, to discuss bilateral issues between the two nations. He was also a part of the 21-member delegation from the Institute of Chartered Accountants of India to Vienna, Austria in 2011.

Mr. Gupta has served the nation in several dignified posts Expert Member of the Northern Railways Audit Advisory Board (C&AG), a Life Trustee of Rashtriya Antyodaya Sangh (Public Charitable Trust), a Life Member of Delhi & District Cricket Association (DDCA), National Sports Club of India (NSCI) and Noida Golf Club.

Consultant To Various Government Authorities:  

Mr. Gupta is associated with various Government Authorities, as a Consultant for Income Tax and GST matters, like Northern Railways (NR), Delhi Development Authority, DGH (Ministry of Petroleum and Natural Gas, Govt. of India), New Okhla Industrial Development Authority (NOIDA), Greater Noida Industrial Development Authority (GNIDA), Yamuna Expressway Industrial Development Authority (YEIDA).

Mr. Gupta acknowledges the concept of entrepreneurship as the strongest pillar of an empowered economy. He appeared in two highly recognized and much appreciated business shows, namely, ‘Business Inside’ on DD National (Doordarshan) and ‘Big Business Ideas’ on Zee Business in the year 2017. The shows were centered on educating the youth about the schemes/initiatives of the government as a step towards nation building with focus on the MSME sector, Make in India, Skill India, Start-Up India, Stand-Up India, Mudra Yojana along with Credit Guarantee Fund and many more. The shows garnered more than eight crore viewership during the 104 weeks of telecast and were among the highest TRP rated shows.

World Bank: India becomes the world’s 6th largest economy

World Bank: India becomes the world’s 6th largest economy

The world’s largest democracy, India is on the road to gaining economic muscle power. A federal republic with 29 states and 7 union territories, India is a fast-growing diverse economy. According to the updated figures released by the World Bank for the year 2017, India is the sixth-largest economy in the world. This is a milestone for the Indian economy more so because it has successfully surpassed France, which now holds the seventh position. The US is the world’s highest-ranked economy followed by China, Japan, and Germany.

About a decade ago the GDP of India was half of the GDP of France. However, the size of the Indian economy has nearly doubled since then and is expected to power ahead as a key economic engine. The Gross Domestic Product of India increased by an average of 8.3% which is an increase of 116.3% from 1.201 trillion dollars in 2007 to 2.597 trillion dollars in 2017. On the other hand, the Gross Domestic Product of France has reduced by 0.01% that is from 2.657 trillion dollars in 2007 to 2.583 trillion dollars in 2017.  According to the International Monetary Fund, India is projected to generate a growth of 7.4 % this year and 7.8% in 2019, boosted by household spending and tax reform.

India ranks 123rd in terms of its per capita income at Purchasing Power Parity, amounting to 7060 dollars, while France is ranked 25th with a per capita income of 43,720 dollars. The Purchasing Power Parity is the true value of a country’s currency vis-à-vis the dollar. It depicts the true picture of the relative performance of different countries. India has a much lower Purchasing Power Parity as compared to France owing to the difference in the size of its population. The population of India stands at 1.34 billion while that of France is 67 million. This shows that India should have grown at a much faster pace and at a greater scale to level some of the inequality in the levels of per capita income.

The Indian economy had a strong rebound after slowing down as a result of demonetization. The rural and informal sectors of the economy suffered disproportionately because of the cash crunch as a majority of their work is based on liquid cash. Even today nearly 80% of our population is dependent on the informal sector. Shortage of cash led to meant severe losses in their employment and earnings. However, the economy started to revive and has had a strong rebound since July 2017 but also suffered a huge loss of 1.5% of its GDP growth rate. The manufacturing sector which contributed 17.4% to GDP in the year 2012 increased its share to 18.1% in the year 2018. Significant improvements have also been observed in the service sector whose contribution to GDP increased from 18.9% in the year 2012 to 21.7% in 2018.

Union Minister Arun Jaitley said that if firm growth continues, India will soon reach the fifth position in world rankings. The announcement also proved good for the markets as benchmark indexes Sensex and the Nifty jumped 0.8 percent and 0.7 percent respectively, while the rupee surged by 20 paise to end at a one-week high of 68.57 per dollar.

India might have surpassed France in terms of its GDP rankings but is way behind it in terms of its per capita income. There is still a long way to go before it establishes itself as a global superpower. Even as it is gaining economic power, India has to utilize its full potential to strengthen its weaker sectors.

About the Author

Sunil Kumar Gupta is the Founder Chairman of SARC Associates and a Fellow Member of the Institute of Chartered Accountants of India (ICAI). He holds a Post Qualification Diploma in Information Systems Audit (DISA) and is a certified Forensic Auditor holding “Forensic Accounting & Fraud Detection” (FAFD) certificate and a certificate in “Anti-Money Laundering Laws”, issued by ICAI.

He is also the Life Member of the Indian Council of Arbitration (ICA) and on the Panel of Arbitrators maintained by ICA & ICAI and a Member of the Institute of Certified Public Accountants of Uganda (CPA-U).

He is the Co-founder of the multinational business forum Indo European Business Forum (IEBF) and possesses experience of over 35 years in the fields of Corporate Financing, Taxation, Banking, Education, Investment, Development, and Project implementation. He has also been a part of numerous international delegations and has participated in a number of international conferences.

Due to his business acumen, and analytical & policy-making skills, Mr. Gupta has been a part of several international delegations. He accompanied the Former Hon’ble President of India Mrs. Pratibha Devi Singh Patil in the business delegation to Seychelles and South Africa, to discuss bilateral issues between the two nations. He was also a part of the 21-member delegation from the Institute of Chartered Accountants of India to Vienna, Austria in 2011.