FDI Import Export Tax Environment
FDIImport ExportTax EnvironmentPresented by Prateek, Rohit, SohitRevenues spread across marketsPresence across IndustriesOfferings across countriesGlobal Network Delivery Model124 Solution Centers in 21 Countries.Competing for significant Local projects: Strong need for world-class IT support. USA China Hungary Mexico Brazil Uruguay
Strategic Acquisitions
Enter new geographies / market segments Gain domain / technology expertise Acquire Intellectual propertyMergers and Acquisitions YearAcquired CompanyCountryStake AcquiredJuly 2013Alti SAFrance100 % ( wholly-owned)
December 2008Citigroup Global ServicesUS100%Oct 2005Financial Network ServicesAustralia100 % ( wholly-owned)
Oct 2005
Pearl GroupUKStructured DealOct 2005
ChomicromChileStructured Deal
Alti SAA French IT services and consulting business had annual revenues of 126 million at the time of the acquisition. It has a strong presence in the banking, financial services and insurance (BFSI) as well as luxury, manufacturing and utilities sectors. Following Altis integration, today BFSI accounts for nearly half (49%) of TCS Frances revenue.
Contract WinsMajor contract awards that are helping TCS grow in continental Europe include:A multi-million, multi-year award by GDF Suez, won by Alti in March 2014. The deal pans across France, Belgium, and the Netherlands and is to rationalize and standardize CRM and billing applicationsA major IT infrastructure contract by Germanys Bombardier Transportation awarded in October 2013. The contract includes Remote Infrastructure Management (RIM), managing newly commissioned data centers and SAP Basis support.
Imports and Exports of TCSExport revenue constituted 92.13% of the total unconsolidated revenue in financial year 2012-13.Export revenue constituted 93.16% of the total unconsolidated revenue in financial year 2013-14.The particulars as prescribed under section 217(1)(e) of the Companies Act, 1956 are presented below Foreign exchange used and earned2013 - 142012 - 13Foreign exchange earnings62,260.8445,942.56CIF Value of imports622.56372.78Expenditure in foreign currency20,275.4015,602.18Analysis of Revenue growthGrowth attributable toFiscal 2014 (%)Fiscal 2013 (%)Business Growth17.2716.18Impact of Exchange Rate12.6112.65Total Growth29.8828.83The growth in business in fiscal 2014 was higher than that of fiscal 2013 primarily on account of increase in number of deals and(2) higher discretionary spending by customers.
The Rupee continued to depreciate in fiscal 2014 in relation to most of the currencies. Details are given on next slide.Foreign Exchange Fluctuations
Fiscal 2014 witnessed substantial movement in exchange rates particularly AFFECTING USD, GBP and EUR. Net impact of such movement in exchange rates on revenue of the Company has been a positive variance of 12.61% in fiscal 2014 (12.65% in fiscal 2013).Accounting of Foreign currency transactionsIncome and expense in foreign currencies are converted at exchange rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities other than net investments in non-integral foreign operations are translated at the exchange rate prevailing on the balance sheet date and the exchange gains or losses are recognised in the statement of profit and loss.Premium or discount on foreign currency forward, option and futures contracts are amortised and recognised in the statement of profit and loss over the period of the contract. Foreign exchange forward, currency option and future contracts outstanding at the balance sheet date, other than designated cash flow hedges, are stated at fair values and any gains or losses are recognised in the statement of profit and loss.For the purpose of consolidation, income and expenses are translated at average rates and the assets and liabilities are stated at closing rate. The net impact of such change is accumulated under foreign currency translation reserve.Income in foreign currency
Expenditure in foreign currency
Types of TaxThree basic types of taxation that government uses in generating tax revenue are:Income Tax: It is a direct tax, that is, one that is paid directly by the taxpayer on whom it is levied.Withholding tax: It is a tax levied on passive income earned by an individual or corporation of one country within the tax jurisdiction of another country.Value-added tax (VAT): It is an indirect national tax charged on the sales price of a service or consumption good as it moves through the various stages of production and/or service. Facts regarding Tax ExpenseTax Expense Rs 4,014.04 crores in 2013 to Rs 6,069.99 crores in 2014Tax as % of revenue -- 6.37% in 2013 to 7.42% in 2014Foreign tax Rs 496.48 crores in 2013 to Rs 697.05 crores in 2014Effective tax rate -- increased from 22.19% in fiscal 2013 to 23.90% in fiscal 2014
Effective tax rate increased due to:(1) increase in corporate tax rate in India due to increase in surcharge from 5% in fiscal 2013 to 10% in fiscal 2014 and (2) some of the SEZ units losing status of full exemption on expiry of five years.
Current income tax expense :Arises from: taxes on income from operations in India (Income Tax Act, 1961) taxes on income in foreign jurisdictions (tax laws applicable in countries)Minimum Alternative Tax (MAT)applicable to the Companys income excluding its income from SEZ. W.e.f. April 1, 2011, MAT became applicable to income from SEZ also. future economic benefits in the form of adjustment of future income tax liabilityPayment of MAT results in tax credit which according to the IT Act can be carried forward for subsequent ten years and adjusted against future tax liabilities. MAT has been recognised as an asset in the balance sheetIntercompany Pricing SolutionTata Consultancy Services ( TCS) along with KPMG, has devised an Enterprise Intercompany Pricing Solution (IPS)Companies operating in multiple jurisdictions face significant financial reporting and audit risks associated with intercompany pricing.Intercompany Pricing Solution (IPS) allows companies to more effectively plan and fully align financial results with their global supply chain structure objectivesBenefitsIPS : Improves the quality and reliability of data underpinning global intercompany pricing Provides real-time transparency to global inter-company pricing positions, including dashboard reporting Semi-automate the management of inter-company pricing objectives Realize tangible benefits by reducing financial reporting risk, tax audit risk, and achieve international transfer pricing objectives on a time-efficient basis
