India cuts taxes on petrol, diesel ahead of Diwali to boost economy
The Indian government on Wednesday reduced taxes on petrol and diesel in a bid to improve consumer sentiment, as Asia’s third-largest economy recovers from the shocks of severe lockdowns to control the spread of the coronavirus.
The excise duty on petrol has been reduced by Rs5 ($0.0671) per litre, and that on diesel by Rs10 ($0.1342) per litre, the government said in a statement.
Following the federal move, at least ten states ruled by Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP), or his allies, said late Wednesday they would go further and reduce local fuel taxes by as much as Rs7 a litre.
The tax relief comes on the eve of the Hindu festival of Diwali, which marks the beginning of a busy festive season in India, typically marked by increased consumer spending.
Recent months have witnessed a steady growth in consumer spending in India, with a relaxation on curbs on travel and business operations due to a dip in the number of coronavirus cases.
But high fuel prices have been hurting the margins of corporates as well as farmers, who contribute a significant chunk to the economy. The cut in fuel taxes is likely to come as a boost to manufacturers and farmers.
“Given that inflation expectation is building up, there was a need to relook at the tax component,” said NR Bhanumurthy, economist and vice chancellor at the Bengaluru-based BR Ambedkar School of Economics. “This will cool down the inflation expectation to some extent, which will augur well for sustained GDP (gross domestic product) growth.”
Modi’s government has faced increasing criticism from its main opposition Congress party over rising fuel prices in recent weeks. In a country where a majority of the people live on less than $2 a day, taxes make up a large component of fuel prices: a litre of petrol comes at Rs110.04 while diesel comes at Rs98.42 in New Delhi.
Before the cut to prices announced on Wednesday, taxes made up about 52 per cent of the price of petrol and about 47 per cent of that of diesel.
Spiking global oil prices have pushed up the retail prices of petrol and diesel to a record high this month in India, which is the world’s third-biggest oil importer and consumer and ships in about 85 per cent of its oil needs from overseas.
Global oil prices surged to $86.40 a barrel on October 26 – the highest since October 2014 – battered by the hit to economies from the Covid-19 pandemic, although they since eased to about $82.5 per barrel.
UAE’s sole establishments and family business owners have a VAT status to tackle
A number of family business owners in the UAE have multiple business interests out of which some are structured under a holding company format while others could be sole proprietorships/establishments of the family members.
Such non-company establishments are kept when the family members have businesses that are independent of the overall family business, leading to alienation of their personal interests. We look at two issues that have emerged for sole establishments in the last three plus years since VAT was introduced.
First, the separate VAT registration granted to independent sole establishments and, second, the issue of VAT grouping of such sole establishments with the llc entities of family business. At the time of the introduction of VAT, the UAE Federal Tax Authority allowed a large number of individual owners to VAT register each of their sole establishments as separate entities and given separate Tax Registration Numbers (TRNs).
Do way with multiple TRNs
The FTA later clarified that sole establishments are not independent of their owners and, consequently, there shouldn’t be separate TRNs issued to them. As part of one ownership, they are supposed to be given one TRN.
The FTA clearly mentioned that where separate TRNs have been issued to different sole establishments, the owner need not do anything on his own. Rather, the FTA will itself pick up such cases and instruct the owner to carry out the needed amendments.
It has been observed that the FTA advises owners having multiple sole establishments to retain a single TRN for all entities and de-register the rest. This is specifically seen in VAT registration amendment applications where the FTA has sought a declaration from the owner to confirm if he or she has other sole establishments.
A cumbersome process
Two points emerge from this issue. First, should owners wait for the FTA to come back and instruct them to make amendments to their VAT registrations, specifically when they know that such request would anyways come when any application for TRN amendment is filed with the FTA?
The second – and bigger – issue that would arise from getting one TRN for all the entities and de-register the rest is the hassle of informing vendors and customers of the new TRN (for all sole establishments), making amendments in the banking channels, potential non-recovery of VAT on invoices the vendors may issue using the old TRN. An elaborate way would have to be entered into to ensure no disruption of work.
The FTA in 2018 had also allowed the sole establishments to become part of the VAT group. Technically – and as clarified by the FTA in the VAT Guide – individual owners are natural persons and not legal persons, and natural persons are not allowed to be VAT grouped.
Legal vs. natural
So effectively, some of the sole establishments that are owned by individuals – and therefore to be treated as natural persons – have inadvertently become a part of the VAT group with other llc entities. It is possible that some of the sole establishments that are part of the VAT group could be non-functional and may not have any business activity.
In that case, there is a strong probability of the FTA imposing a penalty for continuing to have a non-functional entity registered for VAT. The imminent need for family business groups is to assess if any sole establishments are still part of the VAT group and, if yes, de-register and register it as an independent sole establishment.
While registering it as a sole establishment, it is important to ensure that the owner does not have any other sole establishment that could already be VAT registered. Similarly, the possibility of converting the sole establishments into llcs could also be explored to avoid having all the sole establishments under one TRN.
Benefit from VAT refund, FTA tells Expo participants
Dubai – Participants can apply for a refund for expenses in direct connection with Expo 2020.
Official participants in Expo 2020 can claim Value Added Tax (VAT) refund for taxes paid on goods and services connected with Expo 2020 Dubai, the Federal Tax Authority (FTA) said on Monday.
In a statement, the FTA said it has facilitated speedy processing of eligible Expo participants’ requests for registration, tax refunds, and prompt response to their inquiries. It has also enabled a direct communication channel with Expo 2020 Dubai to provide full support with advanced tax solutions. The FTA also offers telephone service designed to ease procedures and give priority to the registration of international participants.
Participants can apply for a refund for expenses in direct connection with Expo 2020, for example VAT incurred on the construction, installation, alteration, dismantlement of the exhibition space for the Expo 2020 or VAT incurred on goods and services for the operation, presentation and events within the Expo site as per a Cabinet decision.
“The FTA has been cooperating with all relevant authorities to prepare for a smooth and efficient implementation of the procedures for the refund of Value Added Tax paid on goods and services connected with Expo 2020 Dubai,” explained Khalid Ali Al Bustani, director-general of the FTA.
“The FTA has established a daily direct communication channel with the Expo 2020 Bureau of International Participants to enhance coordination and ensure fast processing of applications from participants in Expo 2020 Dubai, whether in regard to VAT registration requests by the participating countries, or processing of refund requests, as well as promptly responding to their enquiries,” said Al Bustani.
The FTA’s telephone service to facilitate and expedite VAT registration procedures for international participants offers clear instructions and details about the registration requirements, delivered by the FTA Registration Department. Priority is given to VAT registration requests from international Expo participants.
Al Bustani clarified that the FTA had already completed VAT registration processes for several participating countries, and the FTA processes the requests submitted through the electronic system of the VAT refund scheme for goods and services connected with Expo 2020.
“The FTA also processes special VAT refund requests, submitted through the integrated platform office, dedicated to receiving and processing requests by participants not registered for VAT. The integrated platform office will appoint a tax agent to review the special refund requests and forward them to the FTA on [email protected] to be reviewed by FTA experts,” Al Bustani said.
“The FTA is applying the mechanism for the refund of VAT paid on goods and services connected with Expo 2020 Dubai through transparent, accurate and facilitated procedures according to best practices,” he said.
“This comes as part of its contribution to the intensive efforts of all relevant bodies in the UAE to ensure the success of this international event, which began on the 1st of October 2021 with the participation of 192 countries. Expo 2020 Dubai is an important international platform for the UAE as it brings the world together for six months and embodies its vision of international cooperation,” said Al Bustani.
The FTA has issued a comprehensive guide for Expo participants, which addresses five categories of taxes that can be refunded. The first category is VAT incurred by official participants on goods and services in direct connection with the construction, installation, alteration, decoration, and dismantlement of their exhibition space. The second category is the VAT incurred by the official participants on goods and services in direct connection with the works and activities of organizing and operating the official participant’s exhibition space, as well as any presentations and events taking place within the Expo 2020 site.
Indian CAs play key role in supporting the UAE’s banking industry
The UAE’s banking system is one of the robust banking systems in the world and the Indian chartered accountants in Dubai have been playing significant role in strengthening the UAE’s banking industry, said experts at ‘The Banking Summit’ organized by ICAI (Dubai) Chapter.
Sunder Nurani, chairman, ICAI (Dubai) Chapter, reminded the members that as guardians of public trust, the chartered accountants should always ensure that their actions as CFOs, financial controllers, accountants and auditors should support the banking system positively as they are involved extensively compiling and auditing of financial statements — one of the criteria for the credit evaluations by the banks.
Nurani also spoke about the brief history of banking sector in the UAE and how the banking sector has evolved over the years with latest series of bank mergers. He briefly touched upon the recent profitable results published by the major banks which portrays continuous recovery of UAE economy from the pandemic.
The guest of honors, who addressed the chartered accountants in the summit include, Ibrahim Al Mheiri, head of Islamic Banking, Mashreq Bank; Mohamed Al Ali, managing director and head of cash management-advisory and solutions corporate institutional banking, FAB; and Nishant Ranjan, chief executive, GCC operations of Bank of Baroda. The guest speakers, who shared their insights and views include, Dhiraj Kunwar, managing director, business banking, RAK Bank; and Kumar Muthiah, divisional head, ADCB Bank Group.
Ibrahim Al Mheiri shared his experience on how the banking sector has changed over years especially after the Covid-19 pandemic. He said the current trends in banking sector are into investing in the technology and how to improve customer experience.
He emphasised that technology continues to find space in the banking sector resulting in continuous shift in the way banks work. He elaborated that SME sector is the backbone of UAE economy and thus is an important sector for the banks.
Mohamed Al Ali shared how the pandemic transformed the way banking works from traditional mode of physical banking to digital era. He congratulated Chartered Accountants for playing an important role in contributing to the UAE economy.
Nishant Ranjan said the EXPO 2020 has started, it’s more appropriate even for banking sector to replicate the theme of the Expo i.e. opportunity, sustainability and mobility which is espoused by the visionary leaders of UAE. He elaborated how banks are focusing on contactless payment solutions, upgrading the ATMs, introducing new customer engagement channels, finding ways of cost optimisation through paperless transactions by using digital footfalls and leveraging the rise in adoption of fintech and digital payments during this pandemic.
The event was also graced by other senior bankers in UAE such as Dhiraj Kunwar who engrossed the audience by sharing how SME banking is going through a transformation in terms of product, technology and risk management. Kumar Muthiah also graced the occasion and lucidly elaborated on how corporates need to conduct banking business and the importance of how smooth conduct of business can move the Bankers to lend against character than collateral.
Anurag Chaturvedi, vice-chairman, ICAI (Dubai) Chapter, mentioned that banking is critical element in unicorn making and credit with financial institutions developed through diligent business with sound and timely financial decision making. Businesses understanding the compliance requirements from banks to avail finances.
Harikishan Rankawat, secretary, ICAI (Dubai) Chapter, highlighted the importance of getting timely banking support for the SME sector in UAE which will enable this segment to reach the next level.