Convergence Plus
Policy & Regulation
Monday, November 18, 2019
Govt to vet responses by Amazon, Flipkart on their India operations

Govt to vet responses by Amazon, Flipkart on their India operations. Decision on future action will be taken depending on whether the responses indicate violation of rules, say officials

E-commerce companies including Amazon and Flipkart have submitted their responses to the queries sent to them by the Department for Promotion of Industry and Internal Trade (DPIIT) on their operations in India, which are now being vetted by the government to see if existing rules might have been flouted, an official has said.

Queries on business details such as top sellers, pricing of goods by vendors, capital structure and inventory management system were posed to the e-commerce companies following complaints by brick-and-mortar retailers as well as online vendors alleging that these companies may be violating FDI rules.

“The DPIIT is in the process of going through the responses given by the companies to the queries. Future action will depend on the information received,” the official said.

The Confederation of Indian Traders (CAIT) has complained to the Centre about alleged violation of FDI rules by e-commerce majors and accused them of predatory pricing, deep discounting, controlling inventory and influencing prices. The DPIIT then sent questionnaires to the e-commerce companies asking them to disclose information such as the names of top five sellers on their platform and the price of goods sold by preferred vendors and support to sellers to examine if they had a connection with sellers which could lead to the companies influencing prices of the items sold on their platform. “It is too early for the DPIIT to comment on the information received as it is still being examined. If everything is in order we will let the matter be. If not, then it can be taken up with the appropriate authorities,” the official said. The CAIT, in a press statement on Friday, said that it had convened a meeting of its National Governing Council on November 10 to take stock of the current situation and finalise the strategy for a movement to be launched from November 13. (Source: The Hindu Businessline)

Department of Telecom directs circle heads to treat Airtel, Tata Teleservices as separate companies

Asks them to audit customer acquisition form of both companies separately. The telecom department has directed all circle heads to treat Bharti Airtel and Tata Teleservices as separate entities, as it is in process to challenge their merger in the Supreme Court, according to an official source.

The Department of Telecom (DoT) has also asked all its entities to deal customer acquisition process and all compliance related issues of both the companies as separate companies.

“The department has written to all telecom circles heads on November 6 that it has not yet taken on record the transfer or merger of the demerged undertakings of TTSL to Bharti Airtel and Bharti Hexacom and transfer or merger of the demerged undertakings of TTML to Bharti Airtel,” an official source said.

Bharti Airtel on July 1 announced that the consumer mobile business of Tata Teleservices Ltd (TTSL) has now become its part. “The DoT has written that it is in process of two separate special leave petitions before the Supreme Court,” the source said.

The department, in the communication to the circle heads, asked them to audit customer acquisition form of both companies separately and even the compliance related to subscriber base should be handled separately.

“DoT has directed circle heads that there should be segregation of CAF audit process of Airtel and Tata Teleservices such as submission of separate subscriber database, submission of separate sampled CAF’s, calculation of separate compliance percentage and issuance of separate demand notice for imposition of penalty of Airtel and Tata Teleservices,” the source said.

Bharti Airtel has been submitting Tata Teleservices subscriber base as part of its overall customer base July onwards. When contacted, Bharti Airtel spokesperson said both the parties have operationalised the merger following the telecom tribunal TDSAT’s (Telecom Disputes Settlement and Appellate Tribunal) order directing the DoT to take the merger on record and approval of the schemes of arrangement by the NCLT, Delhi and NCLT, Mumbai.

“The DoT was duly notified of the same. The Registrar of Companies has also taken the merger on record. Needless to say, Bharti Airtel adheres to the highest standards of corporate governance and compliance,” the Airtel spokesperson said. In June, Airtel recorded mobile subscriber base of 320 million and Tata Teleservices 10.7 million. In July, Airtel reported mobile subscriber base of 328.5 million which includes customer base of Tata Teleservices as well. (Source: The Hindu Businessline)

Resolution Professional to Chair RCom AGM Today

In what is probably the first for any major corporate, a resolution professional will chair and address the shareholders of the Anil Ambani-run bankrupt Reliance Communications at the annual meeting with shareholders here on Monday. Companies in the diversified group will be holding their annual general meetings (AGMs) in the financial capital.

On the venue front, there is a change from the past as the financially embattled group has chosen to hold the meetings in a city college instead of one of the biggest auditoriums in the city.

In his heydays, Anil's father Dhirubhai, widely credited for creating the equity cult, used to book cricket stadiums located to address the mammoth shareholder meets.

Post-division of the businesses, both Anil and Mukesh Ambani companies held their shareholder meets at the sprawling Birla Mathoshree auditorium in south Mumbai.

Starting at 10 am the AGMs of Reliance Capital, Reliance Infra, Reliance Power, Reliance Home Finance and finally Reliance Communication will be held at the audio of the KC College, where Anil Ambani was a student, officials said. (Source: Economic Times)

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)

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