TIME TO ROLL BACK PETROLEUM PRICES

TIME TO ROLL BACK PETROLEUM PRICES

by:S.K.SARDA
President: Sikkim Chamber of Commerce

The sharp decline in crude oil prices is good news for India.
India’s trade deficit has grown to a worrisome level because of a rise in the oil import bill. And government finances, too, are under strain because of fuel subsidies. So, the recent drop in global crude oil prices should give the economy some breathing space on both fronts.

The underlying cause of lower oil prices is weak demand, as less fuel is burnt in a slowing global economy.

The Crude Oil prices which were hovering at $ 70 per barrel, a year back suddenly started its uptrend to $ 90 in Jan this year and then speeded up to $ 147 on 11th July 2008. Economic forecaster then put the price end December at $ 200 per barrel.

But luck has it; the inflationary pressure put by the rising crude on the prices of raw materials and then on the final consumer prices dampen the demand leading to declining crude prices. The economists now say that the price can head down to $ 90. It is currently at $ 108 per barrel on 3rd Sept 2008.

We all know that in the modern times all products that we consume have a smaller or larger impact of crude prices. Transportation which contributes more than 30% in the product prices is bound to roll up the prices of end product in the hands of consumers.

In the process all suffers- manufacturer, transporter and then finally the consumer. The man sitting at the end of the ladder suffers the worst.

It is, therefore a good news that when the festive season is about to set in soon, crude prices are going down in the international market.

But in India, where the prices are controlled, unless the Government announces the reduction of petroleum prices, the benefit cannot come down to the street.

It is surprising that when the crude prices jumps up, Union Government decides to immdly make it effective on the pockets of consumers, but on the other hand when crude prices decline, their is no rush to reduce the prices. The government thus wants to profiteer and delays the reduction. This is not at all good.

The common man is already suffering from 12.5% inflation. His hard earned money is already eaten up by the rising prices. The festive season is about to come in. It is, therefore, urgent to reduce the prices of petroleum products . Crude oil is already on the downward trend in the international market.

Let us encash it to spread joy on the faces of the unorganized Indian masses who had a difficult time this summer. The Government should not fall into the trap of oil companies, who are out to make profits.

INCOME TAX CONFUSION IN SIKKIM PERSISTS

IT confusion not only limited to non-exempted category
Assessee stares at penalties

Amalendu Kundu
GANGTOK, September 2: Although the Centre has implemented the Central Income Tax Act (1961) into Sikkim after a gap of 18 years, all the stakeholders including the state government seems to be confused over the assurances made by the Union Finance Minister for ‘prospective implementation’ of the order for assessing the non Sikkimese from the accounting year 2007-08.

The state government has already ceased its Sikkim Income Tax Manual 1948 on June 16 this year.

As per the amendments made in the Central Income Tax Act, Sikkim Subject holders have been exempted from paying Direct Taxes.

The confusion among those non-exempted people stems from the amendments made in the Central Act itself and assurances given by Union Finance Minister himself in the Parliament.

Enacted section 10 (26 AAA) is not in conformity with the Finance Minister’s statement that the Central Act would be applicable here with ‘Prospective Effect’ since the enacted section suggest that the tax is applicable from April 1, 1991.
After various representations, Central Board of Direct Tax (CBDT) issued a notification on July 29 this year in which it clarified that the Act would be applicable from April 1, 2007.

Unfortunately again one has to understand here complications which would arise by virtue of the aforesaid notification.

Problem seen here is that the financial year 2007-08 (period from which tax has been levied) has already concluded on March 31, 2008. The last date of submitting Income Tax returns for assesees not covered by statutory provisions of ‘AUDIT’ being July 31, 2008 has already lapsed and the assessees covered by Audit is fast approaching on September 30 this year.

Defaulters will have to face penalties under various provisions of Central Income Tax Act.

Secondly, as per the provisions of the Act, tax has to be deducted at source (TDS) while making payments to employee (salary), contractors, freight, commission, rents, royalty, interest and others. The said TDS has to be deposited with the Central Government within the due date, latest by the end of the financial year.

In case no TDS is made or if made but not deposited by the end of the financial year, then the entire expenditure is to be disallowed u/s 40(a) (ia) of the Central Income Tax Act and the assessee (if govt or non govt) is liable to pay tax to the same.

As Central Income Tax Act has introduced recently none of the assessee in the state of Sikkim have deducted tax under the Act and depositing the same to the credit of Central government one has to obtain a Tax Deduction Number (TAN) and a PAN, which no one has obtained.

Now the question raised is whether the entire claim of such expenditure will be disallowed and the assessee would be asked to pay tax and penalties?

If we go by the language of section 10 (26 AAA) and subsequent Notification dated September 29, 2008, the exemption granted is to ‘Sikkimese Individual’ and the ‘Non Sikkimese Individual’ (upto AY 2008-09).

The question arises to the taxation of persons ‘other than individuals’ those being HUF's, Firms, Corporates. Will such entities face taxation retrospectively?
It is opined that the spirit of the Union Finance Minister was not to exclude such ‘other persons’. A clarification in this respect should come from the CBDT to avoid litigations and future complications.

According to renowned chartered accountants from Kolkatta, all the government or non government organizations will be entitled to deduct tax on payments made to persons whether Sikkimese or a non Sikkimese. Such payments may be of various natures like salary, Contractual, Rent, Commission, Consultancy, Interest etc.

Such Individuals will have to file their Income Tax Returns under the provisions of the Income Tax Act, 1961 and can claim refund of tax if it is proved to the satisfaction of the Income Tax Department that their income is exempt by virtue of sec 10(26AAA) or otherwise.

So now it is understood that every individual will face the doors of the Income Tax Department. Needless to say that large scale confusion remains unsorted with both the salaried as well as business organization community about implementation of deduction or non deduction of tax as source, said the chartered accountants.

Similarly the amendments made for Sikkim never mention any concession for the exempted Sikkimese people as to whether Wealth Act 1957 would also be applicable.
Even non deduction of TDS during financial year 2007-08 by government organization, semi government organization and non government organization will entail disallowance of expenditure and consequent levy of taxes and penalties.

Sikkim Chamber of Commerce has already submitted a memorandum to Union Finance Minister through Gangtok Income Tax Office requesting exemption for old business community at par with Sikkim subject holders and prospective implementation of the Central Income Tax Act on a later date to prepare the people who have to pay taxes mentally.
Source: Sikkim Express)

SCC MEMORANDUM TO FINANCE MINISTER

27thAugust 2008


Hon'ble Shri P Chidambaram
Finance Minister
Government of India
North Block
New Delhi 110 001


Sub: Implementation of Direct Tax laws in the State of Sikkim.
Ref: Difficulties in compliance


Hon’ble Sir,


We beg to refer Hon’ble Finance Minister’s speech in the Lok Sabha on 29th April 2008

“This( Income Tax Act 1961) will apply only prospectively”

Sir, the Income tax department has set up office in Gangtok on 6th of August 2008. We were given to understand that incomes of non Sikkimese individuals commencing from accounting year 2008-2009, would now be assessed by this office.

Subsequently, we came to know from the press that instruction No 8/2008 dt July 29, 2008 issued by CBDT directs that all non-Sikkimese individuals shall be assessed in accordance with the provisions of the Income tax Act 1961, for the accounting year 2007-08 and subsequent years.

However, the Government of Sikkim vide circular No 2/Fin/Adm dt 16th June 2008 intimates “And therefore, consequently, the Sikkim Income Tax Manual of 1948 shall not be acted upon any further in respect of any assessee within the State, with immediate effect.”

As the Sikkim Income Tax Manual 1948 ceased to operate only on 16th June 2008 and also in light of the Hon’ble Finance Minister’s assurance in Parliament for prospective implementation, the order for assessing the non Sikkimese individuals from the accounting year 2007-08 is not just and has created much anguish and confusion leading to a state of helplessness to co-operate in such unpractical situation.

In response to the queries of the Finance Ministry, GOI, on the Income tax issue Shri T T Dorjee IAS, Additional Chief Secretary, Government of Sikkim,on 16.4.2007 had rightfully written: “ The State Government would however like to reiterate its request that sufficient time should be given, before the direct tax laws are implemented, to create an awareness in the State on implementation of the direct tax laws and to educate and mentally prepare the people of the State of the new system of taxation and at the same time allow the State Government to sort out the transitional issues.”

It is regretful that quite inadvertently such an important issue raised and request made thereupon by Government of Sikkim, in larger public interest, in course of negotiations to arrive at the referred package, was ignored and the said Instruction No 8/2008 dt 29th July 2008 was issued by CBDT unilaterally.

Sir, your goodself would appreciate that we have been accustomed to our simple 10 page Sikkim Income tax Manual 1948 and quite understandably the people of Sikkim would require at least a few years of study and education to understand and be mentally prepared to operate as per a totally new, complicated and Greek voluminous Indian Income Tax Act 1961.

Even after 46 years since the Indian Income Tax Act was enacted in 1961, people at large in most States of India are finding difficulty in compliance and are often entangled in appeals and litigations a n d expecting the simple individuals of Sikkim to comply with the Act overnight at the switch of a button is definitely not meeting ends of natural justice or befitting our democratic nature.

Under the facts and circumstances stated above, we are to humbly submit:

For smooth and meaningful implementation and also to include the prospective assesses from Sikkim in the National Mainstream, an extensive education and awareness programme comprising of workshops and seminars to cover the prospective assesses be conducted in all nooks and corners of the State over a period of atleast two years, such that we are adequately educated and mentally prepared to contribute to development of the Nation a n d the Act be made applicable prospectively from 1.4.2009 i.e, accounting year 2009-10, uniformly on “ non Sikkimese” individuals and “other persons” as defined in Income tax Act 1961

May we stress here that our Hon’ble Chief Minister Dr Pawan Chamling has been repeatedly and time and again been assuring that the old settlers residing in Sikkim before the merger date i.e.,26th April 1975 have been inadvertently left out and they too would now be given the same benefits under Ladakh Model, in consultation with Government of India. And in this respect may it please be held on record, that these old settlers are in fact “LEFT OUT SIKKIMESE” and their reference as “NON-SIKKIMESE INDIVIDUALS” be please discontinued hereinafter, as they have an inseparable bond and sense of belonging with the soil of Sikkim, with highest regard for its Monarchs who always held them in high esteem.

And as such, the matter of implementation be deferred till the matter is settled.

With warm regards,

Yours faithfully,



President,
Sikkim Chamber of Commerce

Enclosures:
1. Instruction No 8/2008 dt 29.7.2008 issued by CBDT

2 Circular No 2/Fin/Adm dt 16.June 2008 issued by Government of Sikkim

3. Extract of correspondence of Addl Chief Secretary, Government of Sikkim dated 16.4.2007 ( Page No 293 of White Paper on the Direct tax laws in Sikkim Volume III)

4. Circular No 67 dt 23.9.71 issued by CBDT on exemption of Income tax to other residents of Ladhakh vide clause 26A of Section 10 of Income tax Act 1961

5. Copy of Sikkim Reporter dt June 23, 2008.. item ‘ Kranti is reformative…” He assured… Ladhakh Model…”

6. Copy of Sikkim Express newspaper dt 30 July 2008..item ‘CM assured the business community…follow the Ladhak Model to exempt Central Direct taxes for all Old business Communities and employees residing in Sikkim for decades..’