Chamber Voice – March 2018

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President's Letter

Dear Friends,

Greetings to you all!

As you all know, the Cochin Chamber is the first Chamber of Commerce in the country to have a Digital Certificate of Origin. Now, in partnership with Docswallet, we have incorporated “Adobe Sign” to our Digital Documentation procedures. “Adobe Sign” is an E-Signature solution which eases the distribution process of Digital Documentation for our members.

Our commitment towards providing quality services at all times to our members and the business community as a whole, is now evident through the implementation of “Adobe Sign.”

On the business front, I would like to take this opportunity to applaud the bold move taken by the Government to ban the malpractice of “Nokku Kooli” which has been prevalent in our State for a long time. This will help the businesses in our State and from other areas to have a fair logistics solution.

As part of the Cochin Chamber’s Skill Development Initiatives, we have been organizing ‘Management Development Programmes’ (MDP) for a while now. In line with this initiative, we organized a one-day Workshop on “Selling Skills” on the 23rd of February 2018. Mr. Mark Antony Sequeira, Master Trainer, Executive Coach and HRD Facilitator was the trainer for the session. We had 26 participants, mainly from the Sales & Marketing and Business Development verticals of our Member and Non-Member Companies. The workshop had sessions that enabled the participants to enhance their all round selling skills. Overall the Workshop was a huge success and we believe that the participants had a great experience. Some pictures and a highlight video of the Workshop can be seen in the latter part of the Newsletter.

As mentioned in the last few Newsletters, PricewaterhouseCoopers is now the official Knowledge Partner of the Cochin Chamber. PwC India, has been kind enough to provide us with two quality speakers for the Seminar on “The Insolvency and Bankruptcy Code, 2016 & The Companies Amendment Bill, 2017” that we conducted in association with them on the 24th of February 2018. The sessions were addressed by Ms. Deepa Bhatia Chirayath, Entity Governance and Compliance Tax & Regulatory – PwC, India and Ms. Shweta Dubey, Director – Regulatory Service, PwC India. We had around 30 participants attend this Seminar.

The 5th CEO Forum Monthly Breakfast Meeting was organized on the 9th of March 2018, . Mr. G. Saseendran Unnithan, General Manager (Retd.), Canara Bank was the speaker on that day. He spoke on “The Crises facing the Banking Sector in the Country.” This topic was selected in light with the current problems being faced by the banking sector as a whole. Mr. Unnithan, a reservoir of knowledge on the subject, explained that the present crises facing the Banking sector will not prolong or affect the working of the other banks, the industry or the economy of the country.

The Chamber is also planning to do a programme on the GST E-Way Bill in the coming weeks. The Chamber Secretariat will inform you as and when the programme is finalized. I believe that this Seminar will be of great help to the Supply Chain and Logistics community in this area as we near the implementation of this new Bill.

Please feel free to get in touch with the Secretariat for any further clarifications regarding any of the services or the programmes that we have scheduled in future.

I trust that you will all keep supporting the Chamber as always for the betterment of the Business Community in our State.


Shaji Varghese


Recent Events

One-day Power Packed Workshop on Selling Skills


The Cochin Chamber of Commerce & Industry organised an action packed Workshop on “Selling Skills” on Friday, 23rd February 2018 at “Hotel Abad Plaza, Ernakulam.”

The trainer for the session was Mr. Mark Antony Sequeira, Master Trainer, Executive Coach and HRD Facilitator. The 1st session involved understanding the expectations of the participants from the Workshop and explaining the purpose, objective and the goal of the Workshop. The participants were introduced to each other to enable active participation in the case studies and activities that followed.

The sessions that followed had Brainstorming/Presentation and Group discussion sessions, role-plays of various sales situations, enactment of quick sales pitches etc. These sessions generated enthusiasm among the participants and also initiated learning from each other. Self Assessment Questionnaires and tips on Sales Common Sense, analysis of their selling skills etc. so as to understand and improve where they can improve themselves were part of the Training Programme.

The participants unanimously agreed that they found the sessions extremely useful and that they were motivated to achieve more in their respective workplaces.

The session, attended by 26 participants concluded by 6 pm with a team photo shoot.

Seminar on "The Insolvency and Bankruptcy Code, 2016 & The Companies Amendment Bill, 2017"


The Cochin Chamber of Commerce & Industry in association with the PricewaterhouseCoopers, India organised a Seminar on the Companies Amendment Bill, 2017 and the Insolvency and Bankruptcy Code, 2016 on Saturday, 24th February 2018 at Hotel Abad Plaza, Ernakulam. The sessions were addressed by Ms. Deepa Bhatia Chirayath, Entity Governance and Compliance Tax & Regulatory – PwC, India and Ms. Shweta Dubey, Director – Regulatory Service, PwC India.

The Seminar discussed the various amendments in the Companies Act and how organisations will be affected when these changes will become effective. The session also covered the Insolvency and Bankruptcy Code in great detail.

Chief Executives, Company Secretaries, Chartered Accountants and other Insolvency Professionals attended the half day session that ended with lunch at 2 pm.

Mr. Shaji Varghese, President of the Chamber and Mr. S.P. Kamath, Executive Committee Member of the Chamber also spoke on the occassion.

CEO Forum Breakfast Meeting - "The Crises facing the Banking Sector in the Country"


Mr. Shaji Varghese, President of the Cochin Chamber of Commerce & Industry, delivered the Welcome Address.

Mrs. Nisha Menon, PwC India, shared a few tips on Income Computation and Disclosure Standards and place of Effective Management.

Mr. G. Saseendran Unnithan, General Manager (Retd.), Canara Bank, the main Speaker for the day, spoke on the current issues facing the Banking Sector in India and outlined the genesis of the problems being currently faced.

Mr. C.S. Kartha, Immediate Past President of the Cochin Chamber of Commerce & Industry, presented a Memento to Mr. Unnithan.

Mr. V. Venugopal, Vice-President of the Cochin Chamber delivered the Vote of Thanks.


Metro revenue increasing as patronage goes up

Tax and Regulatory Updates from PricewaterhouseCoopers

International Tax

The Indian perspective on US tax reform legislation

US President Donald Trump on December 22, 2017 signed into law, tax reform legislation {the 2017 tax reform reconciliation act (“the Act”)} that will have far-reaching implications across the world, including in India. The changes to the US corporate and international tax rules are intended to make the US more competitive in the global market and could affect global trade and business. The United States and India are significant trade partners and, in light of the changes, Indian companies need to assess the challenges and opportunities presented by the new US tax law. The provisions of the new law generally are effective for tax years beginning after 2017, but special effective dates apply for particular changes to US tax laws. Some of the key measures are as follows:

  1. Reduction in the Corporate Tax Rate                                                                            The rate reduction from 35% to 21% and the repeal of the Corporate Alternate Minimum Tax has resulted in making the US a more competitive destination for businesses and could also increase the valuation of US Businesses.                                                                                                      ObservationsHowever, it may be noted that there is a possibility that Indian tax authorities may undertake stricter review of US Controlled Foreign Companies (CFC) of Indian Multi National Entities (MNE) likely to trigger ‘place of effective management’ (PoEM) in India. 
  2. Deduction of dividend received                                                                                      100% deduction of dividend received by a US corporation from specified foreign corporations (SFCs) allowed from financial years beginning after 31st Dec’17. However, any foreign taxes paid in relation to such dividends by the SFC in a foreign jurisdiction will not be eligible for US foreign tax credits (FTCs). These dividends were earlier taxed @35% in the hands of the US corporation, subject to FTC.                                                                      ObservationsIt may be noted that in this scenario Indian subsidiaries will continue to remain liable for Dividend Distribution Tax (DDT) on declaration of dividends, which may not be creditable in the hands of the US parent corporation because such dividends would be exempt in the United States. From an overall group perspective, this would generally result in lower taxes on repatriation of profits from an Indian subsidiary to its US parent compared to the previous US tax regime. 

3. Deemed Repatriation ‘Toll Charge’

This is imposed on the on the foreign Earnings & Profits (E&P) attributable to cash and other liquid assets at an effective rate of 15.5%, and on all residual foreign E&P at an effective rate of 8%. This is to be paid over eight years and is imposed on the US shareholder’s pro rata share of certain foreign subsidiaries’ previously untaxed foreign earnings (determined as of November 02, 2017, or December 31, 2017, whichever is higher). FTCs for the portion of earnings actually subject to US tax (i.e., after the deduction provided against the toll charge) are available to offset the toll charge. Once the toll charge is paid in the United States on undistributed earnings of a SFC, no further tax will be levied upon an actual distribution by the SFC to its US parent of those earnings.                                                                                Observations: US corporations must pay the toll charge on undistributed E&P accumulated by the Indian subsidiary, even though the E&P is not yet distributed as dividends. Meanwhile, India will continue to levy DDT upon actual distribution of dividends by the Indian subsidiary. The mechanics for calculating the toll charge and creditable foreign taxes are complex. Timing differences between payment of the toll charge on undistributed foreign E&P of an Indian subsidiary and availability of the FTC for taxes paid in India will need to be considered.

4. Base-erosion and anti-avoidance tax (BEAT)                                 

Imposition of 10% minimum tax (5% for 2018 and 12.5% after 2026) on payments to related foreign persons by a US Corporation, if

  • 10% of ‘modified taxable income’ exceeds taxpayer’s regular tax liability (over certain allowable credits). Modified taxable income generally means the taxable income of the US corporation plus any base-eroding tax payments made to foreign related persons
  • The US corporation has an average annual gross receipts for the preceding three tax years of at least USD 500 million on a group aggregate basis; and
  • Base-eroding payments to related foreign persons equal or exceed 3% of aggregate deductible expenditures                                                                      Observations: This could make outsourcing to overseas jurisdictions like India less attractive, going forward. Companies, while addressing concerns regarding the impact of the BEAT, will need to comply with the arm’s-length standard from the foreign company perspective. Companies also should review the BEPS and OECD initiatives in the context of revisiting their operating models and capital structures.

5.  Limits on Interest Deductibility.

Limit imposed on deduction of business interest up to 30% of ‘adjusted taxable income’ (ATI). This limit is applicable only for taxpayers whose average gross receipts in the preceding three years exceeds USD 25 million. The disallowed business interest may be carried forward indefinitely, for tax years beginning after 2017. For tax years beginning after December 31, 2021, ATI will be computed without regard to deductions for depreciation, amortization, or depletion; i.e., the limit will be based on EBIT, and therefore lower.                                                Observations:  Given the limitation on interest deductions by US corporations, Indian MNEs with debt funding into US subsidiaries should revisit their existing funding mix and, where necessary, restructure their existing US financing structures and future funding plans.                             PwC Comments: The Act makes sweeping changes to US domestic tax law and the rules regarding cross-border transactions involving US corporations. The Act is intended to make the United States more competitive in trade and business in the global markets and uses a ‘carrot and stick’ approach seeking to discourage shifting of operations outside the United States, while incentivizing domestic investment. Businesses should endeavor to understand the provisions of the Act and evaluate the impact on operations and investment structures. 

Direct Tax

Supreme Court dismisses revenue’s appeal in a batch of over 80 cases, holding that Rule 8D is prospective in operation. 

In a recent decision, the Supreme Court (SC) has dismissed the Revenue’s appeal against the Bombay High Court (HC) decision, wherein it was held by HC that the applicability of Rule 8D of the Income-tax Rules, 1962 (the Rules) is prospective in operation, and hence, applicable for assessment year (AY) 2008-09 and onwards only. It may be noted that Rule 8D.           PwC Comments: The SC reinforces the principle laid down by its earlier decisions that every statute is prima facie prospective unless it’s expressly mentioned and a retrospective operation should not be given to a statute when it takes away or impairs an existing right or creates a new obligation or imposes a new liability. The provisions of Rule 8D shall apply prospectively with effect from AY 2008-09 only.

Tribunal holds that depreciation cannot be claimed on non-compete fees as it is not an intangible asset. 

In an appeal filed by the Income-tax Department (Revenue) in the taxpayer’s case, the Delhi bench of the Income-tax Appellate Tribunal (Tribunal) has held that non-compete fees paid for acquiring a running business as a going concern does not qualify as an intangible asset eligible for claim of depreciation under section 32 of the Income-tax Act, 1961 (Act). In doing so, the Tribunal relied on an order of the jurisdictional Delhi High Court.                                                                                                                                      PwC Comments: The issue on deduction for depreciation on non-compete fees has not reached finality.


Tribunal holds that CBDT’s circular denying deduction on ‘freebees’ given to medical professionals by pharmaceutical companies is violation of MCI Regulations.

In a recent decision, the Pune bench of the Income-tax Appellate Tribunal (Tribunal) observed that the circular issued by Central Board of Direct Taxes (CBDT), denying the claim of freebees given to medical practitioners as expenses, was enlarging the scope of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 read with subsequent circular issued by Medical Council of India (MCI).

The Tribunal has held that the CBDT’s circular is without any enabling notification or circular of the MCI and violates the MCI Regulations. Hence, held that pharmaceutical companies are outside the scope of circulars issued by the MCI.                                                                                                                  PwC Comments: The Tribunal reaffirms that the pharmaceutical companies are outside the ambit of circular of CBDT. Expenses incurred by pharmaceutical companies in providing freebees to medical practitioners are not subject to disallowance under section 37(1) of the Act.  CBDT cannot impose a new burden by enlarging the scope of a different regulation passed under a different law.

Jaipur Tribunal applies percentage completion method for recognizing revenue on advances received by developers.

In a recent decision, the Jaipur Income-tax Appellate Tribunal (‘Tribunal’) held that in case of a taxpayer engaged in the development of township projects, advance received from the buyers on unregistered sale agreements should be recognized as income in the year in which the advance is received. Further, for computing the amount of income to be recognized as income the Tribunal held that the taxpayer should apply the percentage completion method (‘PCM’) only on the amount of advance realized by the taxpayer during the year, and not on the amount of total sale consideration. In cases where the sale agreements were registered, the Tribunal rejected the tax officer’s (‘TO’) stand that the entire sale consideration should be recognized as income in the year in which the sale agreement is registered, and held that the revenue should be recognized by applying PCM on the amount of total sale consideration.                                    PwC Comments: The Tribunal decision has laid down that with respect to advances received pertaining to the unregistered sale deeds, tax would be levied on the amount realized post application of PCM on the amount of such advances realized. Further, in the case of real estate developers, where a sale deed for transfer of a plot is registered, the whole agreed sale consideration cannot be brought to tax in the year in which such registration takes place. The specified activities which were closely linked to the sale of plot of land (which were construction of roads, provision of electricity etc. in this case) were yet to be performed by the taxpayer. The taxpayer will be obliged to perform the specified development activities even after the sale deeds were registered in favour of buyers.  The application of the PCM is therefore necessary for determination of revenue that can be brought to tax for real estate developers.

Indirect tax

Supreme Court holds that CENVAT credit of service tax paid on transport of goods from the place of removal to the buyer’s premises not available after 01 April, 2008

The Supreme Court while deciding on the captioned subject, held that the CBEC circular (on which both the CESTAT and High Court had relied on while ruling in favor of the taxpayer) was issued on the basis of the definition of ‘input service’ as on date of circular. The benefit of the circular could not be applied after the amendment in the definition of ‘input services’ with effect from 01 April, 2008. The Court held that, with effect from 01 April, 2008, CENVAT credit in respect of transportation of goods ‘from the place of removal’ to the customer’s premises is not admissible and that transportation ‘up to the place of removal’ is only allowed.              PwC Comments: There have been significant amount of litigation on eligibility of CENVAT credit of service tax paid on outward transport, involving both the periods i.e. prior to 01 April, 2008 and post 01 April, 2008. The SC has finally resolved the issue by holding that post 01 April, 2008 the credit will not be available on the transport of goods from the place of removal to buyer’s premises. For the period prior to 01 April, 2008, the SC has recently held in the case of Andhra Sugars, that the credit of transportation services from the place of removal to buyer’s premises is available. This was based on a previous SC decision in the case of Vasvadatta Cements and the 2007 circular. Businesses should now relook at the positions adopted in the past periods and evaluate the impact of these decisions on the positions taken. The revenue authorities are likely to conclude pending proceedings based on these judgements and may also issue fresh notices to companies, where credit on outward transportation have been taken.

Supreme Court holds that trade discounts are permissible deductions from total turnover and cannot be disallowed if original tax invoice issued did not indicate discount.

The tax authorities have always disputed the claim of post-sale trade discounts (cash or quantity discounts) claimed by the taxpayers on the ground that the said discounts were not linked to any sale invoices. Hence, claim of deduction towards such discounts from the sales turnover were disallowed. In a landmark decision, the Supreme Court (SC) held that all trade discounts are allowed as permissible deductions and the taxpayer would be entitled to a deduction of the trade discount so long as the taxpayer was able to establish from its accounts that the discount related specifically to sales with reference to which it was allowed.                              PwC Comments: The principle enunciated by the SC is that all trade discounts are allowable as permissible deductions and that it suffices if the taxpayer demonstrates that the discounts specifically relates to the sales with reference to which it is allowed even if it is not shown in the original sales invoices (as specifically required in the Karnataka VAT law).

In the Goods and Service Tax (GST) law it is provided that value of supply shall not include any discount which is given before, or at the time of supply if such discount has been ‘duly recorded in the invoice issued in respect of such supply’. In respect of discount given after the supply has been effected (post sale discount), such discount is allowed subject to terms of agreement, linking to relevant invoices and reversal of credit by the recipient. In line with this SC ruling, in the interest of trade and industry, it would be a welcome move if the Government considers amending the GST law to enable claim of post-sale trade discounts based on credit notes, without insisting on linking those discounts with original sales invoices.

Regulatory Issues

Relaxation in NPA provisioning norms on MSME loans given by banks and Non-banking Financial Companies.

Currently, banks and Non-banking Financial Companies (NBFC) are required to classify loan accounts as Non-Performing Assets (NPAs), in

case the principal or interest are outstanding for more than 90 days (for banks) and 120 days (for NBFCs – this will also become 90 days effective 31st March, 2018). Considering the representations received by Reserve Bank of India (RBI) highlighting the impact on cash flow of small entities during the Goods and Services Tax (GST) transition phase, the RBI has issued a notification. The notification liberalizing the NPA recognition criterion for banks and NBFCs vis-à-vis borrowers classified as micro, small and medium enterprises (MSME) under the MSME Development Act, 2006.

Loans given to the above borrowers can continue to be classified as standard assets in the books of banks and NBFCs subject to following conditions:

  • The borrower is registered under the GST regime as on 31 January, 2018.
  • The aggregate exposure, including non-fund based facilities of NBFCs to the borrower does not exceed INR 250 million as on 31 January, 2018.
  • The borrower’s account was standard as on 31 August, 2017.
  • The amount from the borrower overdue as on 01 September, 2017 and payments from the borrower due between 01 September, 2017 and 31 January, 2018 are paid within 180 days from their respective original due dates.                                                                                                                                                The Notification states that a provision of 5% shall be made by NBFCs against the exposures not classified as NPA. The above provision of 5% can be reversed as and when no amount is overdue beyond the 90/ 120 day norm. Further, if the interest from the borrower is overdue for more than 90/ 120 days, the same shall not be recognized on accrual basis.

- Civil Appeal No. 2165 of 2012 (SC)

- Rule 8D is applicable in a scenario where the Assessing Officer is not satisfied with the correctness of the claim of expenditure made by a tax payer or where the taxpayer claims that no expenditure has been incurred in relation to earning of exempt income.

- ITA No. 1801/Del/2011

- Sharp Business Systems [2012] 254 CTR 233 (Delhi)

- ITA No. 1532/ PUN/ 2015

- Circular No. 5/ 2012 dated 1 August, 2012

- Circular of Medical Council of India dated 10 December, 2009

- ITA No. 105/JP/2017

- 2018-TIOL-42-SC-CX

- No. 97/8/2007-ST dated 23 August, 2007

- Andhra Sugars (2018-TIOL-45-SC-CX)

- Vasvadatta Cements (Civil Appeal No. 11710 of 2016)

- 2018–TIOL–47–SC–VAT–LB

- dated 07 February, 2017

Press Release

The Cochin Chamber of Commerce & Industry adopts Adobe Sign to simplify digital documentation process for its Members

The Cochin Chamber of Commerce & Industry today announced integration of Adobe Sign into their digital documentation process, in partnership with Docswallet, a blockchain digital locker services provider. With the use of Adobe’s e-signature solution, the Cochin Chamber is looking to ease the distribution process of digital documents for its members, make them legally valid and add a security and compliance layer.

The Chamber offers several documentation services such as certificates of origin, visa invitation letters, no objection certificates, attestations and more. These documents are then used by the Chamber members to apply for visas, export goods, register a foreign branch of the company etc. The new process will help reduce the complexity in export documentation, logistics, sending documents to multiple agencies for signing etc. With the implementation of Adobe Sign, the Chamber has witnessed greater efficiencies for its member community, with 90% reduction in turnaround time for document processing.

“We are committed to providing the highest quality of service in the most professional manner to our members and the business community in Kerala, and are pleased to partner with Docswallet for our end-to-end digital documentation process. With the recent implementation of Adobe Sign, we have been able to make the entire process of digital documentation easy, legal and reliable for our members,” said Shaji Varghese, President of the Cochin Chamber of Commerce & Industry.

Finance Bill 2018 passed by Lok Sabha

The Finance Bill 2018 and Appropriation Bill were passed by voice vote in Lok Sabha on the 14th of March. The Finance Bill 2018, has streamlined tax breaks for start-ups and exempted foreign companies from having to quote a permanent account number (PAN).

Unlike previous finance bills, there are no significant changes, with the Government deciding not to roll back any of the tax provisions, including the controversial levy of LTCG tax at the rate of 10% on the sale of listed shares. However, some minor relief has been given in terms of allowing indexation benefits for unlisted shares in certain tax-neutral transfers like inheritance, demergers and amalgamation. Indexation benefits allow the owner of shares to raise the cost of acquisition and consequently reduce capital gains.

The finance bill will now go to the Rajya Sabha. However, since it is a money bill, the Upper House can only suggest changes to it which may or may not be accepted by the Lok Sabha. Analysts say that the changes could give a boost to Start-up India and improve the ease of doing business for foreign companies in India.

At present, start-ups are allowed 100% deduction of profits for any three of seven years from their incorporation date. However, they had to comply with a stipulation that if their turnover exceeded Rs25 crore in the seven years since incorporation, they could lose out on the tax benefits claimed. The finance bill now seeks to correct this anomaly.

“The condition has been relaxed and says that turnover should not exceed prescribed limit for the year for which 100% deduction is claimed by the start-up. The move to link the turnover limit directly to the year of claim is welcome and limiting the requirement of quoting PAN for all transactions over Rs 2.5 lakh to only residents should improve the ease of doing business for foreign companies, trusts and partnership firms.


“The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge.”

Stephen Hawking

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