Convergence Plus
Policy & Regulation
Friday, September 20, 2019
IT Fears Impact as US Moves on New H-1B Process

BIG WORRY Indian cos are concerned that the process would favour US tech firms over them. The US has moved a step closer to changing how the H-1B visa issuance process is carried out from next year that would impact Indian IT services firms.

Last week, the Office of Management and Budget said it has completed a review of a proposed regulation from the Department of Homeland Security (DHS) that would mandate employers to register without paying the H-1B visa fees of those employees who they intend to sponsor for H-1B visa permit. A lottery system would shortlist people for the work permit, following which the applications will be acccepted.

Indian companies are concerned that the process of issuing visas would be non-transparent and would favour US technology companies over them. ET reported on August 9, that Indian IT firms have seen higher rejections for their visa applications, as the Trump administration looks at hiring more locals.

The DHS body also did a review of increasing the visa fee, a move once finalised would come into effect by April 2020. The revised fees has not been announced yet.

Once the proposed H-1B registration rule is published in the next few days, US Citizen and Immigration Services (USCIS) will open it for public comment before being finalised. Poorvi Chothani, managing partner at the Mumbaibased immigration law firm Law-Quest, said that USCIS should solicit feedback from interested stakeholders before the electronic registration system is implemented to make sure they roll out a viable and sustainable system.

“It is important that USCIS confirms by mid-September, 2019 whether it intends to mandate use of the electronic registration for the H-1B CAP petitions that will be filed in April 2020 for FY 2021. This is important because a large number of companies begin their H-1B cap filing process as early as August, and no later than January, depending on the industry.” (Source: Economic Times)

Govt wants fair competition, will not encourage monopoly: Prasad to telecom CEOs

Telecom Minister who met the industry honchos also assured them of government’s full support on outstanding issues such as cut in levies and refunds.

The government on Saturday told the telecom industry that it wants fair competition in the sector and will not encourage monopoly, while asked companies to prioritise quality of service and ensure “robust involvement” in 5G as also five-trillion dollar economy blueprint.

Telecom Minister Ravi Shankar Prasad who met the industry honchos also assured them of government’s full support on outstanding issues such as cut in levies and refunds.

“I highlighted to them, the need for a robust involvement of the industry in 5G innovation, startups and creation of 5G products that can create India specific patents. I said that in the five trillion economy target, 25 per cent should be telecom’s contribution,” the minister said after meeting industry CEOs.

Prasad’s first interaction with the industry after he took charge of the telecom portfolio comes at a time when the sector is reeling under severe financial stress with cumulative debt of over ₹ 7 lakh crore. The meeting was attended by Bharti Airtel CEO Gopal Vittal, Vodafone Idea’s Balesh Sharma, Reliance Jio board member Mahendra Nahata and BSNL chairman P K Purwar.

Prasad said he has already taken up outstanding issues such as inputs tax credit and lowering of GST rate with the Finance Ministry and said that a proposal pertaining to reduction of universal service obligation (USO) levy is also under the telecom department’s consideration.

“I have asked companies to look at improving the quality of service. Also 43,000 villages are uncovered at present. I have told the industry to pool in their resources so that in one year, we can reach all the uncovered villages and they have agreed. The Department of Telecom (DoT) will provide all assistance,” Prasad said.

The minister also asked the companies to look at improving connectivity and digital ecosystem in religious sites like Kedarnath and Badrinath. The minister assured the industry of its support on the issue of installation of telecom towers. The industry flagged the issue of lapsed bank guarantees which they want returned and the ministry has asked the DoT to urgently look into the matter. “I have assured them three things...We want a fair competition. The government will not encourage any monopoly and will do its best for ease of doing business,” Prasad said.

The telecom sector is burdened with staggering debt levels and cut throat competition. Competition has only intensified since 2016, when Reliance Jio, owned by richest Indian Mukesh Ambani, stormed into the market and offered lifetime free calls and dirt cheap data. Jio’s offerings forced rivals to slash rates, affecting profit margins. Since the launch, rivals have either teamed up via merger, resorted to acquisitions or folded up. (Source: Hindu BusinessLine)

TV & Radio Companies Want Broadcast Policy to Protect Media Freedom

Broadcasters in a submission to the I&B ministry have also suggested that the sector should have a regulator of its own. The National Broadcast Policy that the information and broadcasting ministry is working on should safeguard media freedom, TV and radio companies have told the government. They have also suggested that the sector should have a regulator of its own, according to people with knowledge of the matter.

The I&B ministry has stepped up work on the policy, expected to be announced in the next few months, which will involve a review of all major rules, with a focus on increasing foreign direct investment (FDI) in the area.

Threats of legal action “with punitive damages under the laws of defamation lead to a chilling effect on the publication of free and independent news and put undue pressure on journalists,” the Indian Broadcasting Foundation (IBF) told the ministry in its submission, ET has learnt. The policy should ensure a safe environment for journalists and the news media industry, it has said.

The foundation has also asked for the defamation law to be “reworked” to protect news channels. Several journalists’ organisations have previously protested against the continued criminalisation of defamation in India, saying this was a holdover from the colonial era and needed reform. A ministry official told ET that views were being sought from broadcasters and that the policy will mainly aim to remove regulatory barriers and reduce the obstacles for “investments, innovation and consumer interest”. The ministry also plans to collect views from content aggregators, distribution platform operators, infrastructure providers, manufacturers of equipment installed at the consumer end and other related devices, the academic community, innovators and startups.

The broadcasters have told the ministry that news media regulations in India are not unified. Multiple regulatory bodies have led to issues over the enforceability of decisions, they have said. A single law with one dedicated regulatory body needs to be devised exclusively for the broadcasting sector.

Apart from the IBF, the News Broadcasters Association (NBA) and the Association of Radio Operators for India (AROI) have held meetings with government officials on the proposed policy in the past few days.

An IBF member confirmed consultations with ministry officials had commenced a few days ago.

“The freedom of the news channels serve the larger purpose of the right of the people to be informed of a broad spectrum of facts, views and opinions,” the IBF told the ministry, according one of the persons cited above. “The survival of Indian democracy owes a great deal to the freedom of our press. The National Broadcast Policy should provide protection to news channels and (their) journalists as an essential part of the freedom of speech and expression as guaranteed in Article 19 (1) (a) of the Constitution of India.”

The submission by private radio operators is said to be similar in nature. Allowing private FM channels to broadcast news is the top demand, said AROI secretary general Uday Chawla. They currently have to carry All India Radio bulletins either live or deferred by 30 minutes. “Though AIR gives us the news for free, many of us don't use it because the format is not exciting. We would want freedom to play news reports and also have self-regulation,” Chawla told ET.

The IBF wants a dedicated regulator.
“There is a need for the government to establish a distinct and separate regulator that is staffed by experienced industry professionals who understand the broadcasting sector,” an IBF member said. “The policy should provide for a Broadcast Services Regulatory Authority (BSRA) and a Broadcast Services Appellate Tribunal (BSAT) as a part of sectoral regulators.” Some of the other demands include implementation of transparent and timebound registration, licensing and approval process, a single-window clearance system to reduce timelines, as well as simplification and reduction of regulatory compliances.

The policy will also seek to revamp state-run Prasar Bharati to improve standards besides cracking down on digital piracy and ensuring protection of intellectual property and copyright, a top government official said. It will also deal with sharing of infrastructure across platforms and promoting the indigenous production of consumer hardware to promote Make in India. A review of existing FDI policies to attract investment as well as startups to establish manufacturing facilities has also been proposed by the government.

The government has also been asked to allow a self-regulation code for content production and distribution for video streaming by overthe-top (OTT) services. Broadcasters have also sought recognition for industry self-regulatory bodies such as News Broadcasting Standards Authority (NBSA). (Source: Economic Times)

Northeast telecom delay concerns PMO

The Prime Minister’s Office (PMO) has expressed concern over delay in implementation of critical telecom infrastructure work in the northeast, and has given instructions to hasten projects that are estimated to cost upwards of Rs 5,300 crore.

According to sources in the telecom ministry, the projects in northeast — one tendered through state-owned BSNL and the other by a government agency (further given to the Bharti Group) — envisage provision of mobile coverage to 8,621 villages, installation of 321 mobile tower sites, and strengthening of transmission network in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura.

However, while the project being undertaken by the Bharti Group has seen some progress, the one allotted to BSNL — covering Arunachal Pradesh and two districts of Assam, and worth Rs 2,250 crore — is still languishing with years of delay, prompting the nudge from the PMO. The principal secretary in the PMO had recently chaired a meeting where the review of the project was undertaken.

“The slow progress in Comprehensive Telecom Development Plan (CTDP), specially for Meghalaya, Arunachal and two districts of Assam was noted with concern,” a source said, while briefing about the PMO’s views.

The PMO also said since no stay has been granted by the Supreme Court on a special leave petition regarding the NE work, “delay in implementation of the project was avoidable”. The matter will now be decided by the Digital Communications Commission (DCC), the highest decision-making body on telecom matters, at its meeting on Tuesday. The plan had originally been approved by the Cabinet in September 2014, but has been going slow due to bureaucratic delays, lengthy tendering processes and even legal challenges. (Source: ETTelecom)

Buyback Tax Infosys, Others may Have to Pay 20% Levy Themselves

Repurchases worth ₹10,000 crore under progress; cos will not be able to make revisions to factor in the new tax. The government’s budget proposal to tax buybacks by listed companies could affect at least half a dozen share repurchases worth ₹10,000 crore that are already in progress. The list includes the ₹8,600 crore share buyback by Infosys, which has already begun. Since these companies have fixed their offer prices already, they will not be able to make revisions to factor in the new tax. Experts said such companies will have to pay the 20% tax themselves.

Previously, only share repurchases by unlisted companies were subject to such a tax. The measure is a part of anti-abuse provisions and aimed at curbing wrongful exploitation of the buyback route.

“The law does not provide any exemption for companies which have filed their prospectus with Sebi,” said Lokesh Shah, partner at law firm Luthra & Luthra. “Any buyback implemented on or after July 5, 2019, by listed companies is subject to the additional income tax, payable by the company, at an effective tax rate of 23.29% consequent to the buyback.”

Although the Infosys buyback opened for public subscription on March 19, the new tax will still be applicable since the rules apply to any payment a company makes for buybacks after July 5. The Infosys buyback will close on September 20 after which the company will make the payout to shareholders.

Share buybacks of Welspun, SKP Securities and Star Cements among others are in the offing.

Tax experts are awaiting clarity on how the buyback tax will be calculated. Currently, the tax on unlisted companies is calculated on the basis of the difference between buyback and issue prices. The government has extended the same formula for listed companies but that doesn’t take into consideration the fact that listed shares are frequently traded. Experts said tax should be calculated on the cost at which investors bought the shares and not the original issue price.

“Buyback tax is payable on the difference between buyback price and the price at which shares are issued by the company,” said Amit Maheshwari, partner, Ashok Maheshwary & Associates. “As of now, the way the section is worded, for calculating the amount on which the tax is applicable, the purchase price of investor would not be taken into account and hence could lead to potential double taxation to that extent.”

For investors, buybacks will be beneficial as they will not have to pay capital gains tax on these shares. Until now, gains made from buybacks were subject to capital gains tax in the investor’s hand. Now, companies will have to deduct the tax based on the amount payable on account of share repurchases.

The government extended applicability of the new tax to listed entities since several companies were using buybacks instead of high dividends to return money to shareholders. In 2007, the government had introduced 15% tax on dividend distributed by listed companies. This tax is deducted by the companies based on their total dividend payout. The FY16 budget saw the introduction of additional dividend tax (ADT), which applies to any individual getting dividends worth more than ₹10 lakh in a financial year. ADT, unlike dividend distribution tax, is charged in the hands of investors.

“Buybacks were also being used by promoters to shore up their shareholding and acted as a method used for stalling the fall in prices,” said Tomu Francis, partner, Khaitan & Co. “The route will now become relatively expensive.” (Source: Economic Times)

‘AP to unveil new IT policy in 100 days’

The Andhra Pradesh government will unveil a new IT policy within 100 days or so, and the State government will focus on developing Visakhapatnam as the IT destination, M Goutham Reddy, the State IT and Industries Minister, told the media here on Saturday.

He said the government would review most of the agreements signed by the previous Telugu Desam Party (TDP) regime and review the policies relating to IT and industry development. “If there are any good features and policies, we will persist with them. It is not our policy to undo whatever the previous government had did,” he said in response to a question.

After a review meeting with the representatives of IT Association of Andhra Pradesh (ITAAP) and IT companies at Tech Hub along with Tourism Minister Muttamsetti Srinivasa Rao, he said that the government would ensure balanced development in both urban and semi-urban areas by promoting BPOs and MSMEs to generate jobs for the locals. (Source: The Hindu BusinessLine)

Communications minister Ravi Shankar Prasad seeks relief package for telecom sector

He has also sought a cut in GST rate from 18% to 12%, which can help lower the monthly mobile bill of consumers. Communications minister Ravi Shankar Prasad has pitched for a series of relief measures, including lower licence fee, in the budget for the beleaguered telecom sector.

He has also sought a cut in GST rate from 18% to 12%, which can help lower the monthly mobile bill of consumers, but it’s a decision which is outside the budget and a call has to be taken in the GST Council, comprising state and Union finance ministers.

The recommendations are being portrayed as the government’s thrust on expanding Digital India through cheaper tariffs, while also paving the way for “affordable” mobile services, including upcoming 5G technology.

Prasad has proposed a 25% cut in the licence fee that companies pay to the government, sources told TOI. This can be done through a 2% reduction in the Universal Services Obligation Fund (USOF) levy, which could bring down the effective licence fee rate from the existing 8% (5% USOF and 3% administrative charges) to 6%.

The telecom department is also seeking an immediate refund of Rs 30,000 crore blocked and delayed GST input credits owed to the mobile operators by the government. The move to reduce licence fee will benefit all operators such as Bharti Airtel and Vodafone-Idea, and could help them free up cash as they battle heavy debt and mounting losses.

“Mobile handsets, which are now a basic necessity, are charged 12% GST, while mobile services are charged at 18%. Mobile has become a necessity and utility for digital delivery of services to 1.2 billion subscribers, including the poorest sections of society. Thus, there is a need to bring down the high incidence of GST on telecom services… The reduction of GST rate would benefit a very large number of telecom subscribers.”

On the issue of license fee levy, Prasad said that a cut in USOF levy (charged for taking telecom services in uncovered and rural areas) can be done as mobile services have already grown by leaps and bounds over the past few years.
(Source: Economic Times)

White House seeks delay on Huawei ban for contractors

White House seeks delay on Huawei ban for contractors. The White House Office of Management and Budget has asked the U.S. Congress for more time to phase in a ban on federal contracts with companies that do business with Chinese telecom giant Huawei, part of a defense law passed last year.

The ban is one part of a multifaceted U.S. push against Huawei Technologies Co Ltd, the world's largest telecoms network gear maker, which Washington has accused of espionage and stealing intellectual property.

Huawei has repeatedly denied it is controlled by the Chinese government, military or intelligence services. It has filed a lawsuit against the U.S. government over the restrictions in the defense policy bill.

The defense law, called the National Defense Authorization Act (NDAA), placed a broad ban on the use of federal money to purchase products from Huawei, citing national security concerns.

It included a ban on direct federal purchases of Huawei equipment, which will take effect this year.

But the White House said the government needed two additional years to work out rules for another part of the law, which requires third-party suppliers and contractors to restrict their purchases and use of Huawei equipment.

"This is about ensuring that companies who do business with the U.S. government or receive federal grants and loans have time to extricate themselves from doing business with Huawei and other Chinese tech companies listed in the NDAA," Jacob Wood, a spokesman for the White House OMB, said in a statement.

Acting OMB Director Russ Vought asked congressional leaders and Vice President Mike Pence for the delay in a letter earlier this week. The letter was first reported by the Wall Street Journal.

Vought said the delay would "ensure the effective implementation of the prohibition without compromising desired security objectives," and said there would be a "dramatic reduction" in the number of contractors able to sell to the U.S. government without a delay.

Vought asked that restrictions against purchasing Huawei equipment imposed on government contractors begin in four years, rather than two years. The delay would allow "additional time to think through the associated potential impacts and possible solutions," he said.

The requested delay would not stop or affect the timing of a separate Commerce Department rule that added Huawei to its "Entity List," a blacklist that bans the company from buying parts and equipment from American firms without U.S. government approval.

President Donald Trump also signed an executive order last month that bars U.S. companies from using telecommunications equipment made by firms deemed to post a national security risk. (Source: ETTelecom)

US companies want India to change its policy on e-commerce, IPRs

Advocacy group to present new govt with suggestions on reforms. American businesses want the new Bharatiya Janata Party (BJP) government to usher in “bold reforms’’ across a spectrum of areas including e-commerce, data localisation, intellectual property rights, land and labour laws and policy formulation, according to a Washington-based advocacy group US-India Strategic Partnership Forum (USISPF).

“We are working on a document highlighting the reforms and changes US businesses would want to see in India and will hand it over to the Indian government next week,” said Mukesh Aghi, President, USISPF, who is in New Delhi interacting with officials from various Ministries and Departments including Commerce & Industry.

Policy change
Aghi said that the change in e-commerce rules earlier this year, that stopped companies with foreign investments to sell products of companies in which they held equity, had come as a jolt to foreign investors such as US-based Walmart, which had invested $26 billion in acquiring Indian e-commerce company Flipkart.

“The abrupt change in policy impacted investments. A government has to maintain the trust of investors,” he said. He added that US companies also wanted India to change its rules on data localisation that disallowed data of customers collected by businesses to be transferred and stored out of the country. Aghi said that American businesses were keen to invest in India and bring in technology but they would want reforms in the inflexible land and labour laws that hinder operations.

IPR laws
Changes in IPR laws granting more protection to patent holders and relaxation in price caps for medical equipment and medicines were some of the demands being made by US companies, Aghi added.

On the proposed withdrawal of Generalised System of Preferences (GSP) benefits that allow duty free imports of over 3,000 products from India into the US, the USISPF suggested to the US government that it should be continued as it was a gesture of goodwill and also helped create jobs in India. (Source:The Hindu Businessline)

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