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VAT troubled e-commerce giants Amazon and Flipkart looking Telangana as an alternate

Business Standard - article snapshotTelangana industries minister Jupally Krishna Rao assures 100% transparency and 15 days requisite permission will be given to setup industry in their state, giving competition to neighboring states which are lagging behind in new age business law and tax reforms.

Telangana, India’s youngest state, is slowly becoming the go-to state in the South for big businesses. In attracting investments from industry majors, the state is giving tough competition to its neighbours Andhra Pradesh and Karnataka.

In the past year, Telangana has become the favourite of major e-commerce, retail and aviation companies. While Amazon has one of its largest fulfilment centres in the state and is planning to open another, Flipkart has decided to set up its largest warehouse in Hyderabad. In its first major investment in India, Swedish furniture major IKEA has bought 13 acres near Hyderabad.

US aviation giant Boeing will set up a defence plant in the state, in association with the Tata group. This will be the biggest investment in defence sector in the country so far.

Speaking to Business Standard, Telangana industries minister Jupally Krishna Rao said: “We assure 100 per cent transparency to industry. Also, any sector trying to set up in our state is assured that all requisite permissions will be given in 15 days.”

The state also had abundant government land, which makes it easier to deal with businesses exploring new geographies, Rao said. “Also, our taxation policies are streamlined and transparent, making us an ideal destination for investments.”

On its part, India Inc has witnessed a fresh approach. “The new government realised bringing investment would help it get resources to work on other social initiatives. The government is giving an earnest push to the manufacturing sector, getting approvals for projects has become much easier and a start-up culture is being encouraged. Telangana could soon be the next big hub in southern India,” said Vanitha Datla, chairperson of the Confederation of Indian Industry, Telangana.

She added the state government had promised if projects coming to the state were good, it would either match or provide better taxation policies compared to other states.

Recently, e-commerce giants such as Amazon and Flipkart faced a number of taxation issues in Karnataka. The Karnataka tax department pulled up Amazon for allowing sellers to register fulfilment centres as additional place of business. This led to the state cancelling the licences of many small merchants registered on Amazon.

“With respect to Karnataka, we have always maintained the situation is one in which laws have not kept pace with the new-age online business models that enable a faster, convenient and nationwide access to customers for sellers, especially small and medium businesses, at significantly low costs. We continue to work with the state government and are optimistic about a resolution,” said an Amazon spokesperson.

Amazon has also been demanding exemption on value-added tax (VAT) payment, saying its fulfilment centre only stocks, packs and dispatches products; it doesn’t do business directly. As such, it wants the government to collect VAT from sellers.

Amazon claims the Telangana government has been providing support. “Telangana has been home to our IT operations for a while. In the past year, the state government’s support and the ease of doing business has encouraged us to make further significant investments. Additionally, we have a huge seller and a customer base in the state,” the Amazon spokesperson said.

Flipkart is also seeking clarity on e-commerce-related taxation and VAT issues in Karnataka and this has been cited as the main reason why the company has set up its largest fulfilment centre in Telangana.

Experts say Karnataka’s loss is Telangana gain. “Every company that has to grow in India has to have a hub in the South. Earlier, Karnataka was the favoured destination. But now, the state is unclear on a lot of policies and that is creating a problem for industry. Issues related to VAT have caused major friction between e-commerce companies and the state. Telangana is earning major brownie points on that front,” said Deepak Dhamija, co-founder of Aristotle Consultancy Pvt Ltd.

Source – Business Standard

How investment options stack up

The article is published in the leading financial journal DNAINDIA on 21st April 2015. Our Partner Mr. Sanjeev Lamba sharing his views on investment options.

It is very common to see people seeking investment options only when the need arises, which is at the end of the financial year for tax saving purposes. At the eleventh hour, many salaried people are anxious about investments and “receipts management”.
New joinees might find it particularly daunting. Perhaps, this is because they find it too complicated or too boring to give it time.
But there are a number of good investment options available for the retail investors to put their money in, and reap good returns. The only thing that one should keep in mind is the trade-off between risk and return.
Let us have a look at some of the investment options. First in the list is mutual fund. It is a basket of more than one security (equity or debt). Depending on the desired returns and risk appetite, investors can choose a suitable mutual fund.
A diverse portfolio can help one mitigate risks and ensure good returns. But, these investments are “subject to market risks”. In the current scenario, there are a number of schemes being launched under the umbrella of Government’s “Make in India” plan, which appears to be a top priority plan of the Government. If this is true, mutual fund schemes associated with it will give extraordinary returns in the coming four to five years.
Equity Linked Savings Scheme (ELSS) is a tax saving mutual fund scheme, which is also a top option available for the retail investors. ELSS not only gives the tax benefit, but also provides very good returns if one considers past performance as a measure of the same.
One of the tax saver mutual fund schemes has given more than 100 times returns in last the 18 years. Mutual funds also have the Systematic Investment Plan (SIP) option where the investors can invest small amounts at regular intervals instead of paying the entire sum at once.
A benefit of SIP is to gain an average price of the investment when market linked price are not certain. Mutual funds such as ELSS and SIP are good options, particularly for salaried employees, who are ready to take a little risk and “save-tax” at the same time. ELSS is the thing to look for.
Another popular and conventional option is Public Provident Fund (PPF). During the FY2015-16, investors can reap interest at around 8.7% on their PPF account, which is almost the same as the interest offered on fixed deposits. PPF is one of the safest investment options.
However, fixed deposits offer lesser tenure than the 15 years lock in-period for PPF. Further, if one is risk averse and satisfied with relatively low returns on investments, life insurance is also a good option. It not only gives a return, but it also assures the family in case of any unfortunate events.
To add to the options, if one wants to set aside money towards retirement plans, National Pension Scheme (NPS), a long term investment plan, is a good investment. And in case one plans to buy their dream house, big banks like SBI, HDFC, and others have cut down the interest rates on home loans. Hence, home loan can also be an attractive option. Home loan has its own tax benefits, and one can get deduction of interest amount under section 24 of the Income Tax Act.
However, if one is disinterested in the conventional plans and is ready to take big risk in consideration of big returns, this may be the time to invest in the stock market, especially in the infrastructure, energy, banking, and capital goods sectors.
The writer is director, Aristotle Consultancy Pvt Ltd