27 May 2016

800 Companies In India Have Asked Ministry of Labour For Online Labour Law Compliance System In India

Ease of doing business in India is getting lots of attention of Indian policy makers. Whether it is the passing of the Insolvency And Bankruptcy Code, 2016 by the Parliament of India or pushing of the Digital India project by Indian government, businesses are going to be benefited by these exercises.

Indian government is also encouraging submission of online applications and licence requests and is working in the direction of launching a single platform for these purposes. This would not only reduce the number of applications an individual or company would be required to make to Indian government but would also help entrepreneurs in establishing their business in a trouble free manner.

Taking cue from this situation, over 800 companies have submitted a petition to the Ministry of Labour, requesting to make all the labour law compliances paperless , a move that they believe will help arrest the depletion of natural resources and improve ease of doing business. The petition appeals to the government to move all employers and employees' mandatory filing online over the next 24 months as "mandatory paper filing has neither improved the condition of our labour nor ensured better enforcement".

Compliance with labour laws requires corporates to use 500 crore sheets of paper or 6 lakh trees every year. Besides the environmental destruction, the lack of online submissions creates a huge administrative load for employers.

Meanwhile Finance Minister Arun Jaitley has said on Thursday that union government will pursue any amendment on labour laws only after unanimity among all the stake holders and agreed that the issue of minimum wages has to be given serious thought. The government has also unveiled labour reforms to make rules simpler and employee-friendly. It also seeks to do away with arbitrary inspections at factories, reduce paperwork and make India more investor-friendly.

We at Perry4Law Organisation (P4LO) believe that the proposed online labour law compliance system is just a single step in the direction of labour reforms in India. We need a holistic and techno legal policy to bring true labour reforms in India. For instance, as per a recent amendment in France's labour law, the nation's government has made it illegal for employers to send out work-related e-mails after typical working hours. The amendment has bestowed upon the employees the 'right to disconnect' and put their work life on hold when not in office. Similarly, labour law reforms are need of the hour and the ruling BJP government has to win the trust of the opposition for the same. We hope labour law reforms in India would see the light of the day very soon.

13 May 2016

Amazon And Its Sellers Are Facing Investigation In India For Falsely Claiming Central Value Added Tax (Cenvat) Credit

E-commerce is a relatively new concept in India and as such various aspects related to it are still developing. One such aspect is legal issues associated with e-commerce in India especially with conflict of laws issues. E-commerce laws in India are still maturing as we have basic level legal framework regarding e-commerce in India as incorporated in the Information Technology Act, 2000 (IT Act 2000). However, there is no clarity regarding legal or illegal usage of e-commerce platforms in India as on date.

Recently, the Indian government clarified about the Foreign Direct Investment (FDI) in E-Commerce Sector of India. But FDI and taxation related violations are still happening in India as Indian government has not taken a firm stand in this regard. A software for calculating e-commerce exports was also developed by Indian government. Nevertheless, legal violations by big e-commerce platforms of India still continues especially for online pharmacies, telemedicine, online gambling, e-health, m-health, internet of things (IoT), etc. E-commerce disputes resolution is another area that requires urgent attention of Indian government. Technology driven initiatives like e-courts and online dispute resolution (ODR) must be encouraged by Indian government for resolution of e-commerce disputes in India.

Now it has been reported that Amazon and 50 of its sellers are facing investigations for allegedly falsely claiming Central Value Added Tax (Cenvat) credit and evading tax of about Rs 118 crore. Aggregators such as Amazon pay service tax to the seller. Some sellers had not deposited the service tax with the government even after claiming it from the e-commerce giant. The Directorate General of Central Excise Intelligence (DGCEI) is investigating the matter. Traders are alleged to have misused the Cenvat scheme, which allows a manufacturer or service provider a relief from the taxes paid on inputs to manufacturing of final products or services. DGCEI had detected that bogus invoices of declared goods were issued to merchants through dummy firms. Verifications revealed that the firms said to be providing the goods were non-existent.

Officers of the DGCEI have conducted search operations at Amazon's business premises across the country and at its headquarters in Bengaluru, in January. "So far, the total tax evasion we have been able to establish is to the tune of Rs 118 crore, which could increase. We will soon issue show cause notices to respective sellers," a senior officer said. "We have recorded the statement of Amazon executives and are assessing the details provided by them," he added. Amazon India has confirmed that the DGCEI had raised some questions around their promotion programme. Amazon has cooperated with the authorities to the fullest extent and provided them with all the information that they needed. The DGCEI is also probing if Amazon had any involvement in the merchants claiming Cenvat credit.

10 May 2016

Legal And Regulatory Issues Of Cloud Computing In India

Cloud computing is a business model that relies upon shared computing resources in lieu of payment. Big technology companies can invest significant financial resources in cloud computing infrastructures that small and medium scale enterprises can use for a certain payment. The advantage for small and medium scale enterprises by using cloud computing model is that they need not to spend money upon building technology infrastructure. However, there are cyber security, data security, data protection, privacy and many more similar concerns that are resulting in lower adoption and use of cloud computing world over.

As far as India is concerned, use of cloud computing is still at nascent stage. There are many policy and law related issues that are responsible for slow growth and adoption of cloud computing in India. Absence of an effective cloud computing policy of India is responsible for its limited utilisation in India. However, legal issues of cloud computing in India are the main reason for cautious adoption of cloud computing by businesses and entrepreneurs. For instance, we have no dedicated regulatory framework for cloud computing in India. In fact, the chief information officers (CIOs) in India are not comfortable using cloud computing for their businesses.

Even the cloud computing due diligence in India is missing and companies and individuals are using the same in great disregard of the various laws of India. Cloud computing service providers in India are required to follow cyber law due diligence (pdf). The cyber law due diligence for Indian companies is now well established but cloud computing and e-commerce service providers are not taking it seriously. There is an urgent need to regulate e-commerce websites operating in India by Indian government.

We believe that India must not use software as a service (SaaS), cloud computing, m-governance, etc till proper legal frameworks and procedural safeguards are at place. This has also been accepted by the CIOs community and it is now for the Indian government to do the needful. Similarly, cloud computing security in India is also required to be strengthened. As on date, use of cloud computing in India is not a viable solution as we are ignoring legal and security concerns. Cloud computing in India must be techno legal in nature and till it meets the techno legal requirements, it should not be used in India.

Besides regulatory framework for cloud computing in India we must also ensure high availability levels, appropriate data erasing mechanisms, data privacy at the service provider’s level, export restrictions upon data, data handling monitoring mechanisms, jurisdictional issues, cloud computing security issues, licensing issues for cloud computing, etc.

Privacy violations, data breaches, data thefts, cyber crimes, etc would definitely arise in cases of use of cloud computing in India. Even if a company or individual offers cloud computing services in India, it/he has to comply with many legal provisions and cyber due diligence requirements. The information technology act 2000 (IT Act 2000) has prescribed due diligence requirements for various business organisations and stakeholders. These due diligence requirements equally apply to cloud computing service providers in India.

These due diligence requirements are very stringent and cloud computing providers can find themselves in legal hassles if they ignore the same. Managing sensitive and personal data and information in India is no more a causal approach but it has become very stringent. With the proposal to codify law of torts in India, more and more civil proceeding for violation of privacy rights may be initiated against the cloud computing service providers. It would be a wise option to establish best practices and cloud computing policy by all stakeholders in their own larger interests.

16 Apr 2016

Google Tax Liability In India Is Going To Increase In Future

Taxation issues require good amount to tax management to reduce the incidence of taxation. While tax management is permissible yet tax evasion is a punishable offense in most jurisdictions of the world. An Oxfam report has revealed that as many as top 50 US companies, including the likes of Apple, Walmart, General Electric, Microsoft, Google and Coca-Cola have a whopping $1.4 trillion stashed in offshore tax havens. Indian government is aware of these developments and it has decided to deepen alliance with US to combat tax evasion in both countries.

Tax liability of Google in not new to India. In the past as well, questions about tax liability of Google has been raised by many quarters. Even the European Union wants Google and Bing to be more transparent about advertising in web search results.

According to the recent Indian Budget announcement, any person or entity that makes a payment exceeding Rs 1 lakh in a financial year to a non-resident technology company will now need to withhold 6% tax on the gross amount being paid as an equalisation levy. For instance, if a person spends a sum of Rs. 2 lakh on online advertisement from Google in a single financial year, he has to withhold 6% tax on the gross amount being paid as an equalisation levy.

The said rule is applicable when the payment is made to companies that don't have a permanent establishment in India. This tax, however, is only applicable when the payment has been made to avail certain B2B services from these technology companies. Specified services include online and digital advertising or any other services for using the digital advertising space. This list, however, may be expanded soon.

Online advertising industry in India is going to flourish at a great speed in the coming years. Firstly, individuals or companies using online advertising platforms of India do not need to withhold 6% tax on the gross amount being paid as an equalisation levy for availing these services in India. Secondly, Google has recently scrapped the page rank criteria and this would provide a level playing field to all websites and blogs that provide qualitative contents but are not very good at page rank. Now online advertisers would rely more upon good placement in search engines and Alexa rank than upon platforms that were manipulated through inflated page rank through negative search engine optimisation (SEO).

Google's online advertisement revenue is going to be affected by these developments. Further, the tax liability of Google is also going to increase in India if it wishes to generate revenue from India or Indian transactions. Google would also be required to comply with e-commerce laws of India that are still in a development stage. There are also writings on the wall that foreign companies and e-commerce portals would be required to be registered in India. Google needs to adjust its policies for India for optimum results while maintaining its dominance in the cyberspace.