V R Associates, Chartered Accountants

RBI launches survey of manufacturing companies

Mumbai: The Reserve Bank has launched the next round of quarterly order books, inventories and capacity utilisation survey of manufacturing companies, a key input for the monetary policy formulation. The 65th round of survey is for the reference period January-March 2024 (Q4:2023-24), the central bank said. The Reserve Bank has been conducting the order books, inventories, and Capacity Utilisation Survey (OBICUS) of the manufacturing sector on a quarterly basis since 2008. The information collected in the survey includes quantitative data on new orders received during the reference quarter, backlog of orders at the beginning of the quarter, and pending orders at the end of the quarter. It also collects data on total inventories with a breakup between ?nished goods (FG), work-in-progress (WiP) and raw material (RM) inventories at the end of the quarter, item-wise production in terms of quantity and value. The level of capacity utilisation (CU) is estimated from these responses. "The survey provides valuable input for monetary policy formulation," the Reserve Bank said. While the survey findings are published by the RBI, it treats the company-level data as confidential and never disclosed. The next bi-monthly monetary policy is scheduled to be held from June 5 to 7, 2024.

Disclaimer: The information provided in this post is derived from Economic Times, dated April 10th, 2024. Readers are advised to exercise their own discretion and verify the information independently. Reliance on this information is at the reader's own risk.

🚨 Tax Scrutiny Alert: Domestic Startups Facing Income Tax Heat 🔍💼

In a recent development, several new economy ventures, predominantly in the fintech arena, have come under the income tax radar, receiving notices under Section 68 of the Income Tax Act. These notices lump investments received by startups with their earned income, leading to tax and penalty assessments on the combined amount.

One startup, registered with DPIIT, has been slapped with a hefty tax and penalty of Rs 37 crore on venture capital funding of Rs 40 crore, highlighting the severity of the issue. Under Sec 68, companies failing to explain funding sources adequately risk being taxed on capital raised alongside income earned.

💼 Balance Sheet Scrutiny: A founder of a fintech startup recounts receiving a notice demanding balance sheets of investors from the previous fiscal year. Despite submitting relevant documents, including PAN cards, tax demands persist, creating financial strain on startups.

💰 Venture Funds in Crosshairs: Alternate Investment Funds (AIFs) have also received tax notices, raising concerns about the challenge of showing income on a standalone basis for these funds. The government's amendment to Section 68 via the Finance Act 2022 adds to the complexity, mandating the disclosure of venture fund sources.

🔍 Robust Scrutiny Procedures: The Central Board of Direct Taxes (CBDT) emphasizes faceless scrutiny proceedings based on dynamic jurisdiction, with assessments expected to adhere to guidelines.

⚖️ Striking a Balance: Experts advocate for a balanced approach, ensuring tax compliance without hindering entrepreneurial spirit. It's imperative for regulatory bodies to foster an environment where legitimate investments are safeguarded against undue scrutiny.

The evolving tax landscape poses challenges for startups, underscoring the importance of proactive compliance measures and a supportive regulatory framework.

Source: Economic Times, 29th Mar 2024.