India Regulatory Brief: Gujarat Ahead of Maharashtra in Industrial Investment Survey, Sebi Prepares Guidelines for IPOs

March 23, 2015 Posted by India Briefing Reading Time: 5 minutes

Economic Survey: Gujarat Ahead of Maharashtra in Industrial Investment Survey

The pre-budget Economic survey clearly identifies Gujarat edging ahead of traditional powerhouse Maharashtra in industrial investment.

Between August 1991 to October 2014, the survey proved that despite Maharashtra attracting a hefty number of investment proposals, execution rates remained under 50 percent. The state’s Special Economic Zone (SEZ) policy, launched in 2006, also produced disappointing results with only 24 SEZs having been executed.

Of the total number of FDI proposals in India, Gujarat’s 12.23 percent share of executed projects edged out Maharashtra’s ten percent. As well as a superior conversion rates, Gujarat also attracts higher value investments than its neighbor Maharashtra.

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Sebi to Prepare New Guidelines for Start-up IPOs

Regulator Sebi will bring in a new set of guidelines for start-up IPOs in the next 3 to 4 months. E-commerce firms, start-ups and venture capitalists have all been lobbying for a relaxation of IPO norms.

Sebi, who is committed to safeguarding investor interests, has been accused of obstructing investment into the digital industry. The strong financials and extensive disclosures required by Sebi hamper internet-based companies whose valuations are usually linked to potential growth.

UK Sinha, Sebi’s chairman, has promised to create an ‘enabling environment’ for companies with strong track records but changes are unlikely to encourage bigger firms hoping for sizeable IPOs, who will still be looking to foreign markets for their listing.

The Environment Ministry Lifts Mining Ban in Goa

Iron ore mining in Goa will recommence after the environment ministry lifted a two-year ban intended to clampdown on illegal mining and environmental damage.

Goa is India’s biggest exporter state. Prior to the ban, the state received almost a quarter of its revenue from the mining industry. The renewal of 72 iron ore mining leases is expected to boost the local economy with Goa’s biggest miner, Sesa Sterlite Ltd., seeing its share price rise by 5 percent.

Low global prices, however, mean Goa’s low-iron ore is unlikely to make a significant impact on the international mining industry. Though Goa’s low-iron-content is largely exported – predominantly to China – Finance Minister Arun Jaitley resisted calls to cut Goa’s 30 percent export duty for low-iron-content ore in his budget for the next fiscal year. This could hamper Goa’s export rates into an already saturated market.

As suggested by the Supreme Court, Goa will implement a cap of 20 million tons of ore extraction per annum. 18 mines within a one-kilometer buffer zone around wildlife sanctuaries and 22 mining leases on forestland are also yet to receive environmental clearance.

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Method of Computation of Taxes on Advertising Adjusted

The Delhi High Court has ruled that the Indian tax department cannot treat advertising, marketing and sales promotion expenses as used for brand building for parent companies abroad. This may reduce multi-national companies’ tax burden, as marketing and advertising spending by the subsidiary will no longer be taxed as a transfer payment.

Previously, tax authorities said that if marketing and advertising spending exceeded an “industry benchmark” then it promoted the brand in a way that was beneficial to the parent company, but the new ruling puts limits on how much can be used to compute taxes. The decision came after appeals filed by multiple multi-national companies including Sony India, Haier Appliances and others.

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