Connect with us

Business Tit-Bits

What is the real reason behind the present rise in prices?

Akhilesh Bhargava

Published

on


Considering the constant hike in prices, is the hike in the interest rates in response to the surging consumer inflation or are there other factors involved? Mr. Akhilesh Bhargava, Business Editor of HW Business and Finance shares his insights on the matter.

Business Tit-Bits

The bogus turnover business

Akhilesh Bhargava

Published

on

The hawala operators had a business turnover consisted of giving bogus bills of purchase and sale, for almost any item and of almost any company too. These fake bills helped companies not just to show a rosy picture of performance, but to also evade taxes, by booking bogus expenses. In this episode of Business Tit-Bits, our Business Editor Akhilesh Bhargava discusses how implementation of GST led to crackdown on this bogus turnover.

Continue Reading

Business Tit-Bits

THE BOGUS TURNOVER BUSINESS

Akhilesh Bhargava

Published

on

business

It was about a decade ago, when a big havala dealer was raided by the sales tax and income tax authorities in Mumbai. He ran his shady operations from a small room, situated in a ‘galli’, in the old congested markets of Kalbadevi, Mumbai. From this one room office, furnished with a table and chair, he conducted turnover of thousands of crores. His so called business turnover consisted of giving bogus bills of purchase and sale, for almost any item and of almost any company too. He issued such bogus bills, received payment by cheque, which with the connivance of bankers he refunded back in cash, after deducting his commission of 3%. His fake turnover involved bogus sales and purchase of matching amount, resulting in no profit to him on paper, which was a fact, since his real income was the mere 3% commission that he charged. But he is said to have issued bills of over Rs.10000 crores (of popular items like cement, steel and metal products), giving him an income of Rs.300 crores, in this manner.

These fake bills helped companies not just to show a rosy picture of performance, but to also evade taxes, by booking bogus expenses. These bogus bills were at the root of the window dressing and the rampant manipulation of books of account by corporate India and both big listed companies, as well as small enterprises a were involved in this racket. Due to such a rosy performance that these corporates showed, with the help of these bogus bills, they not just became eligible for higher bank loans, many of which have gone bad, but they also hoodwinked investors on the stock markets, through higher share prices of their manipulated scrips. In order to avoid paying income tax, these corporates who took bogus sale bills, also took a matching amount of purchase invoices, such that there was no profit on their books of account.

This was a pan India practice and each commercial centre in India, whether it be Mumbai, Delhi, Kolkata, Ahmedabad, Indore etc. was found to have such racketeers, who were issuing such bogus bills for a paltry commission, but that helped huge tax evasion. These racketeers of hawala bills, chose to operate below the radar, by not paying direct or indirect taxes and not filing any tax returns, and were difficult to detect.

With the onset of the GST and the collection/integration of extensive data by the Income Tax Department and its real time analysis, the earlier flourishing business of these hawala men, has come to a grinding halt. All those who had taken such bogus bills were also raided/penalised/prosecuted by the tax authorities, thus killing the market for such illegal activities. While this action has ensured better tax compliance, it has also ensured that corporate financial statements are cleaner and more genuine. It is no longer easy for a corporate, to show a rosy picture of performance, on the basis of bogus bills. More than the stringent action by the tax sleuths, it has been the advent of technology that has helped to spot these racketeers and destroy their business.

Continue Reading

Business Tit-Bits

CORPORATES AND THE MAFIA

Akhilesh Bhargava

Published

on

real estate

The Business Line reports about the menace of the local mafia, operating with impunity in Chakan, Pune’s prime industrial belt, which houses manufacturing units of MNCs like Mercedes Benz, Bridgestone, Tata Motors, Phillips, Volkswagon etc. These big companies having been facing threats of extortion, intimidation, violence and obstruction and though they have not yet lodged a FIR with the local police, the German Consul General, has met the local Commissioner of Police, urging him into take immediate action. The police interestingly says that since no FIR has been lodged, it has been unable to act. Merely because no FIR may have been registered, that does not absolve the police of its duty to maintain law and order, or that it cannot investigate the matter. This menace is to do with the local land mafia, which operates under the patronage of local politicians, demanding jobs for locals, as also supply and scrap contracts, which is a lucrative business. This petty crime is no longer petty and needs immediate action by the cops/local authorities, because if it goes on, the easiest option for these big industries is to simply shut shop and relocate elsewhere, including overseas, thus denying India the jobs and development they create.

Such threats of local mafia are not restricted, just to industrial belts like Chakan. Real estate developers all over the country, particularly in territories like Gurugram and Mumbai, battle the street mafia, who are known to be hand in glove with the local authorities, on a daily basis. So severe is their threat/crime, that real estate projects lack certainty about profitability, cash flows, as also timely completion. This deadly mafia erodes the profits of builders, delays projects and is also a threat to the life of builders. A few builders have even committed suicide, unable to withstand their constant threats and extortion. So evident is this harassment, that private wealth bankers, even refrain from investing in real estate projects in Mumbai and Gurugram, due to the mafia induced uncertainty that looms over them. This mafia, the local authorities and the cops, are often found to be partners in this crime, which explains as to why they have a free run and get away with huge crime.

If this is the plight of the big ones at Chakan, that of the small and medium enterprises is utterly pitiable. The small ones are unable to withstand the might of these state protected street lords and are cursed with contingencies that eat away their profits and at times their capital too. In the absence of any worthy protection by the law or any effective legal recourse, they have no choice but to shut down or simply give in to the local mafia, for their sheer safety and survival. While the big ones like the Tatas could survive the agitation at Singur and move out of West Bengal, the small ones have no such financial tenacity to do so. The true ease of doing business must be measured by the absence of the local mafia pressures, instead of a tick in the box theoretical approach.

Continue Reading

Popular Stories

Copyright © 2018 Theo Connect Pvt. Ltd.