Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
This could change business fundamentals for the better - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 18, 2009

    This could change business fundamentals for the better

    The average listed company has to comply with several laws as it goes about conducting its business. Of these, there are three pieces of legislation that arguably have the most impact on its business. First, there is the Companies Act, which governs the corporate form. Then there is the Income Tax Act, which taxes the income of the company. Finally, there are indirect taxes (Excise, Customs, Service Tax, VAT, Sales Tax etc.) which essentially tax consumption. The government is proposing several important changes in each of these areas of late.

    The Companies Bill
    The new Companies Bill takes a fresh look at what companies can and cannot do. It has been tabled in the Parliament in August this year and is currently being examined by a parliamentary committee. The new bill has a fresh take on several issues such as insider trading, independent directors, class action suits, public deposits, fair valuation, consolidation of financial statements, mergers & acquisitions and special courts. One of main criticisms of the bill is that the main Act has been shortened and powers have been delegated to 'rules' which will be formed under the Act.

    The Direct Tax Code
    The all important Income Tax Act is set for an overhaul with the introduction of the Direct Taxes code proposed to be launched by April, 2011. The new code stresses on simpler sections. It also proposes lower tax rates on the basis that lower rates improve compliance. However there are objections from several quarters regarding such areas as income from salaries and capital gains; taxation of charitable organizations, minimum alternate tax based on assets and international taxation. On its part, the government has assured that the suggestions regarding these areas will be incorporated in the bill.

    The Goods and Services Tax
    India is set to take the most important step ever towards indirect tax reforms with the introduction of the 'goods and services tax' (GST) from April, 2010. It will abolish the 'central sales tax' and include services under 'value added tax' (VAT). Hence, for the first time, state governments will be able to tax services. The GST will have a uniform tax rate structure through out the country. It will create a common market within India for the first time. Another key feature of GST is that a set off on all indirect taxes paid on inputs (be it material goods or services) will be provided. It maybe noted that about 150 countries around the world have GST. However, the preparations for the April 2010 launch seem inadequate at this point. The bill will be introduced in the winter session of the parliament and details are still not out. Also, it has implications on the financial relations between the centre and states in a federal structure like India. That needs to be sorted out.

    The importance of a legal framework cannot be stressed enough. It acts as the invisible infrastructure that supports business activity. Hence, in our opinion, the government's focus on updating business laws is welcome. The rapidly changing business landscape in India does require a legal framework which is in tune with the times. However, in the matters of law, the devil always lies in the details. Getting these details right requires a sustained push from the government. It is also requires a great deal of time for the back and forth between the various interested parties before the laws settle down.



    Equitymaster requests your view! Post a comment on "This could change business fundamentals for the better". Click here!

    1 Responses to "This could change business fundamentals for the better"


    Nov 18, 2009

    Well said. These measures, especially the Direct Tax Code and GST will enormously improve compliance and put a kind of brake on black money generation. Rightly said, the legal framework has to work better.
    Along with these steps, if corruption in high places can be checked, India's progress would be faster and sustainable.

    Equitymaster requests your view! Post a comment on "This could change business fundamentals for the better". Click here!

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)