Problems relating to Trade and Investment on India
14. Taxation Systems |
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Issue |
Issue details |
Requests |
Reference |
| (1) High Rates of Indirect Taxes | - Value Added Tax (VAT) 12.5%-20% (varies by state) Central State Tax (CST) 2%, servicet Tax 12% Primary education CESS 3%, import tariff, etc. Tax rates are high and their implementation is complex. - GOI levies countervailing duty (CVD) and special additional duty (SAD) in addition to the basic duty of customs. While CVD may be set off against excise duty, it impacts heavily on cash flow. |
- It is requested that GOI streamlines the taxation system and reduces the tax rates. - It is requested that GOI repeals additional duties (CVD, SAD) as soon as possible. |
- Central Excise Act, 1944 |
| (Action) - In July 2004, Education CESS was introduced and imposed on duty. Excise duty and education CESS continue. Customs duties have been reduced. In FY 2003, the custom duty cap was reduced to 23% (with certain exceptions), while the peak rate for the customs duties was reduced from 15% to 12.5%. - Concerning excise duty ("ED"), ED of 12.0% is imposed again on computers, 5% up on tobacco, up from 1,800Rs/MT to 2,500Rs/MT on products covered by Oil Industries Development Act. - General tax rate for service tax was raised from 10% to 12%. Effective service tax rate inclusive of education CESS is 12.24% in total. - On 28 February 2007, GOI released "2007/08 Federal Budget", raising educational CESS to 3% or increase by 1%, reducing central sales tax ("CST") to 3% or reduction by 1%, and reducing fuel tax to 6% or reduction by 2%. - On 26 February 2010, Finance Minister Pranab Mukherjee released the draft Federal Budget 2010/11 (Draft Budget) at House of the People (Lok Sabha). The maximum tariff rate for the majority of products remains at 10%. The basic tariff rate on crude oil is 5%, 7.5% on diesel and petrol, and 10% on other petrochemical product. Excise duty for diesel and petrol is raised to 1 Rs per litre, while the basic excise duty rate is raised to 10% with certain exceptions. (In last year, it was reduced to 8% on non-petrochemical products.). The basic excise tax rate for specified items is maintained at the lower rate of 4%. Excise tax rate for large vehicles, multi-purpose vehicles and sports-type multi-purpose vehicles is raised by 2 points from 20% to 22%. Service tax remains at 10%. The following are the details of indirect taxes in the agricultural sector: Concessionary tariff rate is 5% for establishment or expansion of the following, while service tax is exempted: --Frozen storage, chill room, freezer (including the pre-freezer for preservation, storage or transport of apiculture, horticulture, dairy, poultry, aquatic organism, marine product, and other related products), --Processing equipment for the foregoing products. Import duty of customs is exempted on freezing equipment, used for manufacturing freezing van/truck. Also exemption of excise duty applicable to certain equipment used for preservation, storage or transport of agricultural products also applies to apiculture, horticulture, dairy, poultry, aquatic organism, and marine product. The basic duty rate is reduced to 5% on certain agricultural machineries (such as rice planting machine, laser earth grader, cotton picker, harvester with binding facility, straw/feedstuff bundler, sugarcane harvester, trucks used for manufacture of harvesting and thrashing machine in truck configuration). Excise duty is exempted in full on trailers and semi-trailers for agricultural use and application. GOI has extended until 31 March 2011 the exemption period for concessionary tariff and countervailing tariff on certain machineries used in the plantation, while re-introducing the exemption of excise duty on certain machineries. GOI exempts central excise duty imposed on the initial installment of capital goods (machineries and equipment) in the profitable year for small-scale manufacturers, while permitting quarterly payments of central excise duty imposed on purchase of capital goods, in lieu of monthly payments. - Union Budget 2011-2012 has introduced new excise duty rates or changed the excide duty rates, (which have been enforced from 1 March 2011): (1) imposition of 1% duty (Without preferential measures under CENVAT Credit) on the 130-designated items, which was previously exempted, (2) duty raise from 4% to 5% on special products such as processed foods, intermediate textile products, medication drugs, medical equipment, etc. (3) imposition of 5% duty on certain computer parts, brand jewelleries, and precious metal products, (4) compulsory (previously optional) imposition of 10% duty on "brand" pret-a-porter, (5) change of duty imposition basis for Portland cement from the previous ad valorem to 10% on certain kinds, and more than 10% ad valorem for others. - By Union Budget of India 2012, the standard excise duty rate is raised from 10% to 12%, while preferential tax rate is raised by 1%. In addition, from 1 April, service tax has been raised from the current 10% to 12%. Along with the raise in excise duty rate, countervailing duty rate collected with the customs duty upon import of goods will also increase. On the other hand, Education CESS of 3%, which has been imposed on the countervailing duty, is exempted. - Excise Duty on SUV (supports utility vehicle or sports type multi-purpose car) has been raised by 3% to 30% by the 2013 Tax Reform, released by Union Budget 2013. - By revision of union budget of 2015 wealth tax was abolished. |
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| (Improvement) - The three tax rates under the special excise duty ("SED") at 8%, 16% and 24% have been amalgamated into a single rate. Thus, the ad valorem rate of excise tax is now 32% (16% of SED + 16% of CENVAT) and the indirect tax is simplified into just two categories, namely, CENVAT and CENVAT + SED, provided however that, CENVAT of 5% applies to machine sewing thread, LPG, kerosene, and diesel engines of up to 10 HP. - In March 2002 MOF totally exempted the 27.6% excise duty on naphtha destined to the electric power generation station ("EPG"), provided however that only the EPGs already completing the conversion to LNG or having such conversion plan are eligible for the excise duty exemption. - The SED is reduced in the 2003 FY budget from 16% to 8% on air conditioner, passenger car, multi-utility vehicle, tyre, polyester fabrics, and soft drinks. - In the 2008 Budget, the base rate of SED of 16% is reduced to 14%: -- small cars, motorcycles, buses: 16%=>14%; -- hybrid cars: 24%=>14%; -- electric cars: 8%=>0% - In December 2008, commodity tax was raised to 10%. - In February 2009, commodity tax was reduced to 8%. - In the Federal Budget, submitted to the Lower House 1 by Finance Minister, on 6 July 2009, the Central VAT 2 (namely, commodity tax) maintains the centre tax rate of 8%, while the reduction rate of 4% is raised to 8% (excluding certain products, such as foods, medication products, paper, medication equipment, and certain textile machine.) The major sectors affected by the amendment include petroleum products, electronic information equipment, software, car, and medication products/machineries. - Union Budget 2011-2012 has exempted imposition of Central Excise Duty on the followings (enforced from 1 March 2011): (1) goods required for start up of (super) Large Electric Power Generation Projects (LEPGP), (2) goods required for expansion of large power generation projects (where ash disposal system and coal transport system are classified separately as integral part of LEPGP), (3) freezer for cold chain infrastructure, air-conditioner panel, and conveyor belt system, and (4) unexposed colour film for movie (400 feet and 1000 feet). - On 25 June 2014, Central Board of Excise and Customs (CBEC) extended the excise tax concessionary rates on certain machineries and equipment, auto-vehicles, etc. (from 30 June 2014 until 31 December 2014). |
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| (2) Complex Taxation System | - Indian taxation system is complex at all events. It varies by state, encompassing a vast variety of kinds and types. While many taxes are refundable or may be offset against other taxes, nevertheless, it involves complicated procedures. --Local sales tax (=VAT) makes difficult both warehouse integration and stock reduction, --Road permit procedures are complex and difficult. - The scope of taxable items varies by state on VAT and service tax. Corruption prevails among government employees in Taxation Bureaus. - Indian indirect taxes are complex and diversified in levy method and varieties of taxes, forcing enterprises into much difficulty to take proper actions in response. While the central government is empowered to collect central taxes (customs duty, excise duty, central sales tax, service tax, etc.), state governments collect state taxes (state VAT, stamp duty, state entry tax, Octroi, etc.). Deliberation and preparation are now underway to consolidate all indirect taxes into a single goods and services tax. - Tax calculation is needed for each depot to pay the state tax (as tax is levied upon each inter-depot product movement). - There are factors such as interstate tax levies that push up the operational cost, while there are cases, where a tax paid cannot be collected from the customers. - Interstate tax, levied upon each crossing of the state border. - MFS (a member firm's subsidiary) must keep on its payroll two experts on indirect taxes, to sort out the complex scheme of central and state taxes. It takes much work-time to prepare the tax formalities. |
- It is requested that GOI unifies the taxation system into a simpler form as soon as possible. - It is requested that GOI introduces the GST system as soon as possible (so that it is implemented from the fiscal year 2016.) - It is requested that GOI introduces Central Sales Tax (CST). - It is requested that GOI introduces a rule that allows a simple setoff between receipt and payment. - It is requested that GOI takes step to improve the waning competitive strength. - It is requested that GOI takes step to expedite implementation of The goods and services tax law. |
- Union Budget - Indian Income Tax Act -- Income Tax Act, 1961 -- Income Tax Rules, 1962 - The Central Sales Tax Act, etc. |
| (Action) - According to the Examination Report of WTO TPRB completed in June 2002, the complexity in the taxation structure in India is gradually lessened for consolidation into the standard rate of 16%, and finally transferred to the single VAT. The Report points out: "However, these attempts have met with limited success, especially with respect to conversion of State taxes to VAT." - According to the 2003 FY budget, VAT will be introduced from 1 April 2003 while the state sales tax will be repealed. With the introduction of VAT, the central sales tax ("CST"), being the inter-state sales tax, is reduced from 4% to 2% from the 2003 FY and will be finally repealed in stages. - It is the policy of GOI to harmonise all sales taxes such as SED, service tax and VAT to a single general service tax by April 2010. - Indian Minister of Finance proposed in the 2009-2010 Budget the abolishment of fringe benefit tax (FBT) and commodity transaction tax (CTT). - On 25 January 2010, GOI released its implementing plan to solicit public opinions for the first discussion paper (FDP) on goods & service tax (GST) prepared by the Empowered Committee of State Finance Ministers (ECSFM). GOI also solicits public opinions on the Revenue Bureau's recommendation included in the FDP. ECSFM is now working on the progressive schedule toward introduction of GST. Introduction of GST will repeal and replace cascaded taxation system (cumulative tax imposition in multiple layers), since it enables a single comprehensive collection of taxes on goods and services, while improving the existing value added tax (VAT) system. GST is due for enforcement from 1 April 2011. - On 19 February 2010, GOI promulgated (amended) rules "Notification No. 04/2010-Central Excise (N.T.)" ("The New Rule" enforced from 1 April 2010). The New Rule amends the provisions of the Central Excise Rules, 2002 (Old Rules) that sets forth the payment method of excise duty and the method of filing the tax report. - On 26 February 2010, Finance Minister Pranab Mukherjee submitted the 2010/11 Union Budget (UB) in Lok Sabha. The UB extends the preferential treatment on export in certain sectors, and proposes installment of Financial Stability and Development Council, consigned with the responsibility to monitor economy and to secure financial stability. The UB raises the basic tax rate of excise duty from 8% to 10% (with certain exceptions). The maximum rate of duty for customs remains unchanged. It also proposes a number of preferential treatments that affect agriculture, environment, medication and infrastructure sectors. It also incorporates Direct Tax Code (DTC) for enforcement from 1 April 2011. Enforcement of goods & service tax (GST) is also targeted for enforcement from 1 April 2011. (Work is now in progress with the view to perfect its mechanism.) - Effective total customs duty payable upon import is raised from the current 26.85% to 28.85% when the basic duty is 10%, and the tax rates for service tax and excise duty is raised from 10% to 12%, while education CESS is exempted. - In July 2014, in Ministry of Finance Speech on 2014 Budget, the Modi Administration disclosed its policy to overhaul the legislation toward the GST introduction that requires amendment of the Indian Constitution that allows each state the right of tax collection. Some states, however, raise their voices opposing the GST introduction while the two-third or more of "PRO" voting is necessary for the constitutional amendment. In light of the "twisted" houses of the Diet controlled by opposing parties, some take the view that the GST introduction within 2016 is difficult. |
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| (Improvement) - On 1 July 2012, as regards service tax, the full shift to the Negative List Scheme for the 17-service categories is completed. |
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| (3) Meaningless Obligations upon Non-Resident to File Tax Return | - Indian Tax liability results from transfer of shares in Japan of the shares in an Indian company (direct transfer). Indian tax liability also results from transfer of shares in Japan of the company holding shares in an Indian company (indirect transfer). | - It is requested that GOJ and GOI insert a provision in Japan/India Tax Treaty so that tax levy on transfer profit is payable only in Japan from transfer of shares between Japanese companies. (The Tax Treaty between India and Singapore already includes this provision.) | - Japan/India Tax Treaty - The Income Tax Act (India) |
| (4) Refund of the Full Amount of TDS on Sales Disallowed under Singapore/ India Tax Treaty | - Withholding tax of 10-20% over the sales amount is payable when providing services for design or employment from Singapore to India. While withholding tax is refundable under the Tax Treaty between Singapore and India, it is refunded only in part, impacting profitability of operation in Singapore. | - Singapore/India Tax Treaty |
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| (5) Nebulous Treatment of PE for Employees on Long-term Business Trip | - Treatment is nebulous for employees on a long-term business trip to India in the context of PE. Uncertainty in the 183-days rule, both in concept and counting method, whether the supervision and instructions given in execution of obligations as parent company may expose our member firm to the PE risk. All these uncertainties frustrate enterprises' operation with subsidiaries incorporated in India. | - It is requested that GOI clarifies the application method of 183-days rule concerning employees on a long-term business trip to India (the calculation method for the days of stay in India). | - Transfer Price Taxation System (Corporate Income Tax Act) |
| (Action) - In May 2014, The Delhi high court handed down the decision on Centrica India (CI) case, holding, "CI is Permanent Establishment (PE) under the PE provisions of the U.K.-India tax treaty." The court decided that this staff worked for Centrica practically (not CI) because his salary had been paid by Centrica since sent to CI which has no right of dismissal. Therefor this case was applied to the provision of PE on tax treatment between UK and India. - In "Morgan Stanley India (MSAS) v. department of international taxation", Indian supreme court ruled: "The outsourcing of services such as back-office operations to a captive service provider for a short-term stay will not per se create a Permanent Establishment (PE) of the parent (MSAS) in India." Despite the affirmative PE ruling, it did not result in any tax levy. However, in the case of Morgan Stanley & Co. U.S. (MSCo), pursuant to the court ruling that MSCo's despatch of its employee to MSAS meant his/her inclusion in the MSAS payroll, and the resulting generation of adequate income in India meant attachment to PE of No additional income, hence no tax was levied. |
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| (6) Excessive Examination of TPTS | - In the context of the transfer price examination by and among related companies, a member firm's main business operation is materially burdened with the GOI's request for provision of a vast amount of cost data and information, requiring a huge amount of work-time, materially disrupting the member firm's main business. There is a risk of additional tax levy, depending upon the examiners' judgements in concern, with a possibility of court proceedings in the end. Moreover, as a part of this issue, 1% security bond is payable in a CIF supply contract between member firm and MFS (which is refundable upon completion of the project under the undefined procedural details). |
- The CIF supply contract involving the member firm, MFS acts only as a trading firm, adding the minimum margin on the CIF price under high sea sale procedures to an Indian Importer (I-Imp), MFS's customer, at a price determined by international competitive bidding. It is requested that GOI excludes this kind of inter-company transactions from the scope of its TPTS investigations, - It is requested that GOI resolves the variances in views among Ministries and agencies and by and among individual government investigators. |
- Transfer Price Taxation System - Customs Act, 1962 |
| (7) Unjustified Correction and Additional Tax Imposition on Trade Firm Activities under the Transfer Price Taxation System | - In the course of carrying out the Transfer Pricing Investigation (TPI) on the locally incorporated subsidiary of each trade firm, GOI has imposed huge amounts of additional tax on each firm based on the arbitrary contention that the commission earned on the triangular trade, which is the main business of the investigated firm, should not be less than the profit rate gained in the normal sales and purchase transactions. The outcome of TPI materially blocks Trade Firms entry into and business expansion in India. While trade firms are bogged down in seeking the solution of the problems, they incur huge cost on account of consultants' fees, etc. | - It is requested that GOI: -- corrects their grasp and understanding of the business activities in detail and in full perspective, and -- assures full transparency and rationality in carrying out their TPI. |
- Section 92C/92CA Income Tax Act,1961 - Income Tax Act Section 92-94 |
| (Action) - In October 2014, Delhi Income Tax Appellate Tribunal (ITAT) handed down its decision upholding the complaint concerning the tax levy, lodged by a subsidiary in India of a member firm (MFS), a Japanese general trading company (or "sogo-shosha" in Japanese). GOI levied income tax on MFS, by equating the functions of MFS to traders engaged in purchase and sales of goods, and concluding MFS must be gaining high profits. ITAT handed down its decision in recognition of the business model of a Japanese "sogo-shosha" that earns commission in consideration for its functions for: provision of services such as matchmaking between venders and purchasers, finance, distribution, logistics, etc., quashing the additional assessment of GOI (deputy commissioner of income tax circle 6(1), New Delhi). |
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| (8) Nebulous, Arbitrary Implementation of Transfer Price Taxation System (TPTS) | - GOI's investigation requires vast amount of person-hours, while its decision is least convincing. (GOI assumes the position of totally denying the vast amount of the fund outflow from Japan to India in the context of TPTS.) | - It is requested that GOI upgrades (to the international level) the quality of the investigation officers. | - Income Tax Act, Section 144C |
| (Action) - GOI has not yet introduced "advance pricing agreement (APA)". Therefore, it is not possible to predict the tax amount under transfer pricing taxation system. In addition, none of the petitions filed under "mutual agreement procedure (MAP)" between the Taxation Authorities of Japan and India has reached agreement to this date. MAP is aimed at securing predictability under Transfer Pricing Taxation System and avoiding the risk of double taxation. (Reference: National Tax Agency "The Status of Advance Confirmation requiring Mutual Consultation for 2009") (http://www.nta.go.jp/kohyo/press/press/2010/sogo_kyogi/pdf/01.pdf) - 2012 Union Budget Amendment of Taxation System includes introduction of the followings related to transfer price taxation system: (1) Extension of warranty, business reorganisation, organisational restructuring, rights and obligations generated by ordinary business assumption, intangible assets such as marketing assets, human assets, etc. arising from normal course of business as external related party transactions are subject to and within the scope of transfer price taxation system, (2) The new introduction of the definition of specified domestic transactions, being transactions subject to transfer price taxation system, (3) The difference of plus or minus 3% is expressly stated on transaction prices between with the independent enterprises and transactions with overseas' related enterprises, and (4) Introduction of advance pricing agreement (APA) system. - Introduction of general anti-avoidance rules (GAAR) that empower the Taxation Authority to disapprove "impermissible avoidance arrangement" due for enforcement from April 2012 was postponed to April 2013, and further extended to April 2015. |
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| (9) Unjustified Determination of PE and PE Tax Levy | - Out of the blue, Indian taxation authority determined that member firm's local subsidiary (MFS) is a permanent establishment of member firm, alleging that MFS does not assume any risks but functions merely as an intermediary of the Member Firm. | - It is requested that GOI: -- refrains from determining member firm in Japan, etc. as Permanent Establishment (PE), and levying PE tax on member firm, -- discontinues futile litigation, etc. on the similar grounds, or refrains from invocation of non-fruits bearing additional tax levy, and --makes it clear by revision of tax law, or issuance of notification that external payment of consideration for offshore purchase transactions is neither subject to withholding tax levy nor to tax collection, on the ground of violating the duty for withholding tax collection. |
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| (10) Special Taxation System on Dividends | - The high rate (of more than 16%) on dividend tax makes it difficult to circulate funds among the cross border group companies. | - It is requested that GOI takes step to repeal the dividend tax or review the tax rate. | - Income Tax Act - Royal Bank of India |
| (Action) - GOI levies DDT (dividend distribution tax) upon the Indian subsidiary that pays dividends to its overseas parent. - In the context of the 2012 Union Budget Amendment of the Taxation System, where an Indian subsidiary enterprise pays dividends to its overseas parent enterprise from the dividend received from its Indian sub-subsidiary enterprise, dividend distribution tax (DDT) is levied only upon the dividend paid by Indian sub-subsidiary to Indian subsidiary, while no dividend distribution tax (DDT) liability arises upon payment of dividend from Indian subsidiary to its overseas' parent enterprise. - Effective 1 April 2013, dividend distribution tax imposed on enterprises paying dividends has been raised to the effective tax rate of 16.995% (15 % + surcharge 10% + education CESS 3%). - Beginning June 2013, GOI has tightened its tax levy by introduction of the new (buy back) Levy, against the conduct of buying back own shares with the express purpose of avoiding dividend distribution tax. The effective tax rate is 22.66% (base tax rate 20% + surcharge 10% + education CESS 3%). |
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| (11) Disallowed Offset of VAT and Sales Tax | - Offset is prohibited between VAT (in-state-commerce 12.5%) and sales tax (interstate commerce 2%) | - It is requested that GOI expedites early introduction of the goods and sales tax. | |
| (12) Judgment Base of the CVD Excise Tax Base is nebulous | - CVD excise, corresponds to excise duty imposed on the domestic products, is imposed upon import of goods. CIF price forms the basis of taxable price in some cases, however, in other cases, maximum retail price (MRP) replaces CIF price. Moreover, what forms the basis of such distinction is ambiguous. The authority determines the abatement rate to fix the taxable price based on MRP. However, the process to determine the abatement rate is nebulous. Moreover, importers must attach MRP self-sticking label on the parcel (package) of each product upon import. Its requirement means additional person-hours and increased cost of production. |
- It is requested that GOI: -- repeals the MRP system and MRP self-sticker labeling requirement, and -- unifies the use of CIF price as the calculation base of the taxable price for CVD Excise Tax. |
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| (13) Inequality in Tax Levy between Commodity Transaction and Service | - There have been cases where GOI levies both excise tax (12.36%) and VAT, individually. On the other hand, for services rendered, GOI levies only service tax (12.36%) without VAT levy. It makes inequality in tax levy, where service is provided. | - It forces extremely heavy burden upon manufacturers. | |
| (14) Delayed Introduction of GST | - Indian indirect tax regime is extremely complex: state VAT, excise tax, service tax, central sales tax (CST) levied on inter-state transactions. Modi administration, inaugurated in May last year, in its policy statement publicly committed introduction of GST. The fulfillment of this commitment during this year is eagerly awaited. | - It is requested that GOI introduces GST as soon as possible. | - GST Bill |
| (Action) - In December 2015, at the closure of the winter session of Indian parliament, the constitution bill (GST Bill) did not get through, due to the frequent interruptions of the deliberation by the oppositions that hindered the Modi administration's targeted introduction of the GST bill from April 2016. In the subsequent budgetary diet closed on 13 May, 2016, no further development took place, as the GST bill got postponed. While the administration targets the passing of the bill at the monsoon parliament in July, and even if the GST bill gets through, it is subject to further approval by more than 15-states congresses out of the 29 in total. |
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| (15) Withholding Tax on Royalties and Fees for Technical Service | - "Withholding tax levy on royalties and fees for technical service" under the GOJ/GOI Japan/India tax treaty is an economic factor that impedes consignment of offshore business development in India. | - It is requested that GOI and GOJ amends the tax treaty as soon as possible. | - Japan/India Tax Treaty |
| (Action) - Union budget, released by the end of February 2016, proposes introduction, from 1 April 2017, of "patent box tax regime" that applies 10% tax rate on gross basis (surcharge and education CESS). |
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| (16) Permanent Account Number (PAN) Acquisition Requirement under Japan-India Tax Treaty | - Acquisition of PAN is pre-requisite to enjoy the benefit of the lower withholding tax rate of 10% (if without PAN, 20%) under the Japan-India tax treaty. However, even a Japanese enterprise has to obtain PAN, so that application of the lower tax rate in their tax return is impossible, in many cases. | - It is requested that GOJ/GOI take steps to: -- deregulate the terms and conditions for applying the withholding tax provisions, and -- repeals the PAN acquisition requirement. |
- Japan-India Tax Treaties |
| (Action) - In Indian budget 2016, it was revealed that the amendment, under consideration, would exclude application of the higher 20% rate of withholding tax to non-residents without holding PAN, subject to satisfaction of certain conditions. |
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| (17) Irrational Entry Tax Levy | - With the purpose of protecting the in-state industries, entry tax of 5-15% has been levied on goods purchased from vendors outside the State. This tax, harmonised into the appreciably high 14% rate, materially impacts upon the purchase of raw materials. | - It is requested that GOI takes step to repeal the entry tax, which by itself deters the growth of industries. | |
| (18) Deemed Tax Levied on Equipment under CIF Offshore Purchase Contract | - On equipment that member firm's subsidiary (MFS) purchased under CIF contract, etc., MFS did not file tax return, it being an offshore transaction. Tax Authority, from time to time deems such offshore transactions also taxable, at times, demands payment of penalty and/or interest arrears. Such GOI's action serves as barriers for foreign enterprises' entry into India. | - It is requested that GOI makes tax assessment fairly, in a transparent manner. | |
| (19) Tax levied on Low Interest Loan to Employees | - On the internal loan under the welfare programme to MFS's employees, GOI demands raise in the loan interest rate as much as that of commercial banks. When the rate is still lower than that of commercial banks, tax is levied on the differences between them. It has drained the MFS's reserve fund set aside to cope with the emergency hospitalized operations, etc. for its employees. In the end, MFS had to de facto abandon the internal loan for welfare purposes for its employees. | - It is requested that GOI appreciates the necessity of the welfare fund for MFS's employees and takes measures in response to such needs. | |
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