Gold options best suited to needs of small businessmen
Q: I deal in gold, both in the Gulf and through my family entity which is managed by my brother in India. There is considerable fluctuation in gold prices and I want to reduce losses which arise as a result of unpredictable changes. I am told that gold options would help to restrict the loss. Can you please explain?
A: Gold prices have consistently displayed significant levels of volatility. During 2016-17, the annualised price volatility in gold has been around 13 per cent. This would mean that a firm dealing in gold and having an annual turnover of Rs100 million would be exposed to a price risk of Rs13 million. Gold options are best suited to the needs of small businessmen who are prone to high risks. The option buyer has to pay a one-time fee to acquire the option of buying gold which is called call option. The option buyer can also have the option of selling gold which is called put option. This provides a hedge against adverse price movement by locking in at a specific price. In short, the only loss which you suffer is the fee which is paid while acquiring the option. It is like premium paid to acquire an insurance cover.
Q:We are importing lot of goods from India. Indian firms with which we deal are complaining that they are having liquidity problems because they have to furnish a bond with the requisite bank guarantee if they do not pay the Goods & Services Tax when they export goods from India. Small exporters are mainly affected by this requirement. Has anything been done to alleviate their problem?
A: Earlier, a notification was issued in July 2017 where an exporter who did not wish to pay the GST was required to furnish a bond which required a bank guarantee to be provided. This created a liquidity problem for exporters. On a representation made by the exporters’ association, the Government has responded by issuing a fresh notification on 4th October, 2017, superseding their earlier notification.
Under the new notification, exporters who do not wish to pay the GST can file a letter of undertaking in Form RFD-11. This undertaking is to be furnished on the letterhead of the registered firm in duplicate. It has to be executed by either the working partner of the firm or the managing director or company secretary where the exporter is a company. In the case of a sole proprietary concern, the proprietor himself has to execute the undertaking. If the exporter fails to export goods or receive payment within the prescribed time in convertible foreign exchange, the facility for exporting without payment of the tax would be withdrawn until the time the tax is paid. This facility is also not available to persons who have been prosecuted where the amount of tax which is evaded exceeds Rs2.5 billion facilitating start-ups.
Q: I am a chartered accountant who has been employed in the Gulf for several years. I am returning to India later this year to start my practice as there is immense potential in view of various laws. I also want to teach at a management institute for which I have already been offered assignments. Can I do so? I wish to practice at my residence initially and I want to know whether I can place my signboard at the entrance.
A: A chartered accountant in practice is permitted to accept teaching assignments with the Coaching Organisation of The Institute of Chartered Accountants of India. However, for parttime or full-time lectureship for courses which are not related to the Institute’s examinations, prior permission of the Council of the Institute needs to be obtained. Generally permission is granted where the direct teaching hours devoted do not exceed 25 hours a week. When you are in practice, you can have a name board at your residence with the designation of a chartered accountant. However, you cannot put your firm’s name at your residence.. All documents need to be carefully verified to ensure that the title is clear and that the builder has complied with the terms and conditions stated in the plans approved by the municipal and other statutory authorities.