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Board cites non-compliance with SEBI rules to reject recognised association status request; traders miss tax benefits

Safe bet: Any derivative transaction entered in a recognised stock exchange is not treated as speculative. Supreet Sapkal

The Central Board of Direct Taxes (CBDT) has rejected the National Stock Exchange’s request to grant ‘recognised association’ status to the commodity derivatives segment, citing violation of certain Securities and Exchange Board of India (SEBI) norms and Income Tax rules.

The approval was sought by exchanges so that traders could get tax benefits by using theplatform. Derivatives trading in recognised exchanges is not treated as speculation. According to Sec 43(5) of the Income Tax Act, any derivative transaction entered into at a recognised stock exchange is not treated as speculative, and losses can be set off against normal business profit. According to sources, the CBDT observed that certain changes are required to ensure client code modification in genuine cases. To be eligible recognised exchanges, they should satisfy the conditions prescribed in the Income Tax rules, which essentially say they should be SEBI-compliant, should ensure client code modification in genuine cases only as they have a significant tax evasion potential, and that vigilance mechanism should be strong.

“The applicant is not fulfilling the conditions mentioned at rule 6DDC(i) (non-fulfilment of conditions as specified in SEBI’s approval letter dated 19.09.18 and rule 6DDC(v) (lack of mechanism in place to verify whether only genuine errors are modified) and the applicant is also in the process in implementing changes in its system which has to be completed first for the purpose of effective surveillance of transactions happening in its platform,” a communication from CBDT to NSE said.

Rule 6DDC deals with recognised exchange status. NSE launched commodity derivatives trading in October 2018 and currently offers contracts in gold, silver and brent crude.

“Therefore, it may not be appropriate to grant recognition to the applicant as a ‘recognised association’ for the purpose…at this stage,” it said.

Following the CBDT’s decision, NSE has decided to re-file the application.

“We have filed the application. It is under process,” a NSE spokesperson said.

NSE has also discussed the matter with other exchanges and SEBI. All the exchanges are expected to issue a circular shortly in which brokers will be asked to mention the reason for client code modification in institutional trades as well. In April 2012, SEBI had warned NSE “to be more cautious and perceptive in discharge of its regulatory duties” after a regulatory probe, initiated at the behest of the Department of Revenue, found that there were very high instances of client code modifications, with March 2010 alone accounting for such modifications to the tune of nearly ₹55,470 crore.

“NSE has taken a laid-back attitude towards the problem and either totally ignored or perfunctorily imposed minor penalties to the brokers. It failed to apply its mind to the unusualness of the happenings. I therefore find that NSE acted negligently in discharge of its regulatory duties,” stated the SEBI order issued on April 2, 2012.

With domestic sales taking a plunge, firms are now eyeing export markets and shared mobility

Trimming stock: Most auto companies are cutting down production to reduce inventory at factories. Paul Noronha

As the market continues to lose appetite for demand and the situation is unlikely to improve in the near term, auto majors finding the going difficult are adjusting to the new normal.

While most auto companies are constantly cutting down production to reduce the inventory on factory premises and at dealerships, they are focussing on export markets to make up for the losses in the home market.

As per the Society of Indian Automobile Manufacturers (SIAM) data, domestic auto sales for August plunged 25% year-on-year.

As shared mobility has become an intrinsic part of urban mobility and a segment of buyers is staying away from owning cars, passenger vehicle manufacturers are seen investing in shared mobility and providing leasing options to attract buyers.

Leasing options

On Tuesday, Honda Cars India Ltd. (HCIL) announced the launch of its new car leasing services in association with Orix, a car leasing and rental company.

As a part of this association, leasing options will be available for Honda CR-V, Honda Civic and Honda City for both corporate customers and individual customers. The leasing option can be availed by self-employed professionals, businessmen and salaried individuals as well, the company said.

Rajesh Goel, senior VP and director, Sales and Marketing, Honda Cars India, said, “Car leasing enables customers to enjoy the perks of using a car without having to purchase it. Car leasing is gaining popularity in India.”

Recently, Mahindra & Mahindra Ltd. committed to invest ₹201 crore in shared mobility company Meru Cabs, whereby it can deploy a large number of its vehicles on the fleet and “remain relevant in the changing scenario.”

Daimler India Commercial Vehicles, a wholly owned subsidiary of Daimler AG, Germany, on Tuesday announced India as a global export hub for BS VI trucks and buses. It said it will begin exports of India-built trucks by 2021/2022. It plans to export fully-built vehicles, engines and parts to countries like Mexico, Chile and Brazil that will soon migrate to similar emission norms.

Domestic auto volume from across the segment had declined due to lower retail demand coupled with inventory correction by some players, analysts said.

“After inventory de-stocking, existing inventory continues to remain at higher-than-normal levels for most players, which would continue to impact the wholesale dispatches in the second half of this year. A few firms also announced production cuts in the last three months to adjust inventory levels in light of demand situation,” Mitul Shah, research analyst, Reliance Securities, said.

Shamsher Dewan, VP and sector head, Corporate Ratings, ICRA said: “Near-term outlook for the sector appears challenging, with OEMs still undertaking stock reduction measures to rationalise dealer inventory levels.” The effect of the increase in axle load is yet to go away and will continue to hurt truckmakers, may be till next year.

Tourism agency expects 40,000 more visitors for ICC T20 World Cup

Nishant Kashikar

India currently is the most sought after tourism market for Australia.

The Australian government's global tourist promotion arm, Tourism Australia, expects the number of Indian visitations to reach five lakh by 2020 and cross 10 lakh by 2025 from some 3.72 lakh during the year ended March 2019.

Nishant Kashikar, country manager, India and Gulf, Tourism Australia said India was the fastest growing inbound market for Tourism Australia with five consecutive years of double-digit growth.

“In the last five years, there has been a 16% CAGR growth in Indian tourist inflows while the spending by them has gone up by 18% during the period,” he said.

A large number of Indian population was already in Australia — a huge Indian diaspora of 7.5 lakh people in addition to 90,000 students and a large base of Indian tech workers, he said.

“Our 2020 arrival goal for Indians was three lakh, but we had achieved this goal three years ahead of the target date in December 2017. That's the kind of interest we see among Indians for Australian destinations,” he explained. As the host nation of the ICC T20 World Cup for Women and Men in 2020, Australia is anticipating to sustain its growth trajectory in tourism.

The country has recently made its online visa processing simpler and more convenient with no personal visits or need for biometrics. Also, it believes that its currency stability gives it an added attraction among foreign tourists.

Mr. Kashikar further said, “We expect an additional, up to 40,000 Indian visitors to Australia in connection with these two sports events. We want to make the ICC T20 World Cup for Women a very big event as part of our focus on popularising women sports.

“We are working with ICC and travel partners to make these events a huge success.”

Commenting on the emerging travel trends in India, he said, “We see interesting trends emerging around tour and travel in India. For instance, the age of first time international travellers from India has been dropping from 55 to 25 and now, five years. A few generations ago, travelling overseas was a senior thing, it became a young thing and now a large number of small kids are part of the global travel from India.”

Maharashtra leads in the number of visitors to Australia ollowed by Delhi and Karnataka. Some 3.72 lakh Indians who travelled to Australia last year contributed ₹8,500 crore to the Australian economy.

Tourism Australia has decided to invest Australian Dollar five million to hold a a comprehensive campaign to promote these sports events in India.

Sector sales dip 24% to 1.94 lakh trucks; India to be DICV’s export hub for BS VI trucks, buses, says CEO

Satyakam Arya, CEO & MD, right, with Rohit Bhan, VP, sales & marketing, DICV at a press meet on Tuesday. Bijoy GhoshBijoy Ghosh

The Indian truck industry, which has been hit by the current economic slowdown, is likely to bounce back to growth by 2021, said a top official of Daimler India Commercial Vehicles (DICV).

“From 2014 to 2018, sale of trucks [more than] doubled to 3.78 lakh units from 1.8 lakh units,” said Satyakam Arya, CEO and MD, DICV.

“However, from the beginning of 2019, truck sales have been on the decline, due to several factors such as implementation of new axle norms, liquidity crunch and switchover to BS VI norms,” he said.

Year-to-date, the industry had sold 1.94 lakh trucks, a drop of 24% compared with the January-August 2018 period. “The market dipped in 2019 and will remain low key in 2020. Our growth will be in line with the industry growth,” he said. According to him, the sector is likely to witness 20-25% dip in 2019 (2.7 lakh units to 2.9 lakh units) and a 15% decline in 2020 (2.3 lakh units to 2.5 lakh units). The year 2021 would see a growth of 15% (2.7 lakh units to 2.9 lakh units).

To a question, he said the implementation of a scrappage policy would go a long way in arresting the decline. But, it called for the setting up of an authorised scrap centre with a mechanism to trade in scrap certificates.

Pointing out that non-availability of BS VI fuel was a major concern while pushing sales, he said DICV had urged oil companies to ensure that the fuel was made available from April 2020 onwards.

Transition to BS VI

“Daimler’s experience of already bringing 1.4 million Euro VI trucks and buses on roads means we are easily ready to transition our BharatBenz trucks and buses to BS VI by the April 2020 deadline. With this headstart, we will begin exporting India-built trucks by 2021-22,” he said.

Mr. Arya said that DICV had invested ₹500 crore to localise its Euro VI technology for India, completed two million kilometres of testing, developed new facilities and 1,000 new parts, and had achieved localisation of more than 80%.

He also said India would become the global export hub for DICV’s BS VI trucks and buses.

Depending upon the availability of BS VI fuel in India, DICV would officially launch an upgraded range of trucks and buses during the first quarter of 2020, he added.

Traceability app to be launched as a pilot from October 1

Trustea, a sustainability code and verification system for the tea sector, is planning to extend its certification programme from bulk tea to retail packs by September 2020, according to Rajesh Bhuyan, director, Trustea.

Working with small tea growers, estates and bought leaf factories since 2014, trustea has so far certified 620 million kg of Indian tea for sustainable production and compliance.

Its code has 11 ‘chapters’ which encompass compliance with wage regulations and presence of chemicals as per plant protection laws, among other things. It works with tea industry to address key sustainability issues like food safety, stagnating yields, pest and disease control, wages, worker welfare and livelihood improvement of small growers.

“Trustea validates that tea is produced in a sustainable manner under three pillars — environment, safety and livelihoods,” Mr. Bhuyan said, adding a traceability app would be launched as a pilot from October 1 to establish the compliance level of a particular pack of tea.

This app is being developed mainly for the small tea growers , he said, adding that an agricultural advisory service has also been integrated into this app.

The pilot would be done in Assam, West Bengal and south Indian States. Over a quarter of the tonnage certified by Trustea is grown by small tea growers.

Mr. Bhuyan said that the Tea Research Association was brought in two months ago to provide field support to Trustea certification process. Action for Food Production (AFRO) was also an implementation partner.

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