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After tax cuts, GST Council reduces rates on various items

The key sectors which would benefit from GST rate cuts are hotels, gems & jewellery, defence and automobiles.

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Panaji, Sep 20 : Friday proved to be a big day for India Inc. After a slew of tax concessions including reduction in corporate tax from 30 per cent to 22 per cent, the GST Council has lowered tax on a number of goods and services to spur demand.

The key sectors which would benefit from GST rate cuts are hotels, gems & jewellery, defence and automobiles.

Announcing the rate cuts following the GST Council meeting here, Finance Minister Nirmala Sitharaman said that hotels room with tariff of Rs 7,500 crore would now attract 18 per cent GST from 28 per cent earlier. The hotel rooms costing between Rs 1,000 and Rs 7,500 would attract 12 per cent GST. No tax would be levied on hotel rooms with rental upto Rs 1,000.

Among other rate changes, the Council has reduced rates for cups and plates made from leaves and hides to nil. The GST on caffeinated beverages has, however, been increased from 18 per cent to 28 per cent plus additional 12 per cent cess.

The Council has exempted specified defence items from GST to promote this key sector.

Among other major items, the Council has reduced compensation cess on passenger vehicles with seating capacity of 10-13 persons by 1-3 per cent, thus making them cheaper.

Railway wagons, coaches and rolling stocks would, however, now attract higher GST of 12 per cent from 5 per cent earlier.

The revised GST rates would become effective from October 1, 2019.

In a major boost to gems and jewellery sector, the Council recommended to reduce GST on cut and polished semi-precious items to 0.25 per cent from 3 per cent now.

The two back-to-back announcements are set to boost growth and investment.

With most engines of growth stuttering and GDP declining to six-year low of 5 per cent in the April-June quarter, pressure has been mounting on the government to revive the economy. Some external factors like US-China trade war has added to the woes.

In the wake of domestic and external headwinds, the Reserve Bank of India recently lowered its GDP forecast and pegged it at 6.9 per cent in 2019-20. Several rating agencies and research firms expect the growth to be in the range of 6.5-7 per cent.

The poor show in the first quarter of the current fiscal has prompted the Modi government to take measures to boost growth and lift business sentiment. Starting August 23, Finance Minister Sitharaman has announced four set of measures to put economy on fast track.

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Policy space exists to address growth concerns: RBI Governor

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Shaktikanta Das

Mumbai, Oct 18 : In what could mean further rate cuts by India’s central bank, RBI Governor Shaktikanta Das has said at the bi-monthly monetary policy committee (MPC) meeting here earlier this month that “there is policy space to address growth concerns”, according to the minutes of the MPC meeting released on Friday.

In 2019, the Reserve Bank of India (RBI) has delivered 135 basis points (bps) of cuts in its key lending rate.

Das, according to the minutes, saw domestic demand moderating significantly.

“As the inflation scenario remains benign with headline inflation projected at below target in the remaining period of 2019-20 and in Q1:2020-21, there is policy space to address growth concerns,” Das said.

“The weakening of private consumption, which, for long, has been the bedrock of aggregate demand, in particular, is a matter of concern,” the Governor added.

Besides, a number of MPC members expressed concerns over the transmission of rates. While Das said that “monetary transmission has remained weak” external member Chetan Ghate said the “monetary transmission has worsened since the last review”.

Das, however, cautioned the government, saying that “there is also a need to be watchful of the fiscal situation; however, the government has indicated that it would maintain the fiscal deficit”.

On the road ahead, MPC member Michael Debabrata Patra stressed that a full throttle effort by all arms of macroeconomic management is the need of the hour.

The RBI on October 5 announced a 25 basis point rate cut in its repo, or short-term lending rate for commercial banks, to 5.15 per cent, from 5.40 per cent, after the rate of gross domestic product (GDP) growth during the first quarter slumped to 5 per cent.

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Banking services may be hit Oct 22 as unions warn of strike

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Bank strike

New Delhi, Oct 18 : Banking services could be affected next week as two bank unions have warned they will go on a 24-hour long strike on October 22 to protest against the recent bank mergers, falling deposit rates and a call for job security.

The two unions – the All India Bank Employees’ Association (AIBEA) and the Bank Employees Federation of India (BEFI) – have informed the Indian Banks’ Association (IBA) through a notice that they will go on strike from 6 a.m. on October 22 to 6 a.m. on October 23.

State Bank of India has already said the impact would be minimum as most of its employees are not members of the participating unions.

“The membership of our bank employees in unions participating in the strike is very few, so the impact of strike on our operation will be minimal,” SBI said in the notice. It further said the loss from the proposed strike cannot be quantified as of now.

Other banks such as Bank of Maharashtra and Syndicate Bank have, however, expressed concern over providing customer services.

“The bank is taking necessary steps tor smooth functioning of branches on the proposed strike day. However in the event the strike materialises, the functioning of the branches/offices may be impacted,” Syndicate Bank said in a notice to stock exchanges.

Bank of Baroda, in a filing with the exchanges, said: “The Bank is taking necessary steps for smooth functioning of bank’s branches on the day of strike, in the event the strike materialises, the functioning of the branches may be affected/paralysed.”

AIBEA and BEFI said they are opposing outsourcing of regular and perennial nature of banking jobs, and privatisation of banking industry while demanding adequate recruitment of clerical and sub-staff and stringent steps for recovery of mounting bad loans.

Last month, the officers’ unions had called a two-day all India bank strike on September 26 and 27 that was later withdrawn on government intervention.

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Jio’s move of passing IUC charges to customers puzzling: Kotak

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mukesh ambani reliance jio

Mumbai, Oct 19 : A recent Kotak report has viewed Jios decision to pass on the IUC (Interconnect Usage Charges) to its customers as “puzzling” on several counts including the timing and the mode of recovery.

The report said that Jio’s decision less than three months before the current date of move to a zero-MTR regime is “baffling” and so is the chosen mode (IUC top-up vouchers).

“Having paid IUC ‘from its own resources while offering free voice to its customers’, per the press release, for nearly three years now, we are not sure why Jio could not have waited another couple of months for the final outcome (a new tariff order reversing the enacted regulation OR no new tariff order) of the ongoing consultation,” it said.

Further on the mode of recovery which is in the form of IUC top-up vouchers ranging from Rs 10 (124 minutes off-out allowance; no validity per the press release) to Rs 100 (1,362 minutes off-out allowance) was difficult to understand, the report said.

“In effect, Jio is making an additional recharge compulsory for off-out calling. This dilutes the �simplicity’ proposition of Jio’s pricing architecture,” Kotak said in the report.

Another puzzling aspect is the fact that Jio has decided to charge 100 per cent of its gross off-out traffic and isn’t just trying to recover the net IUC cost, it added.

Besides the report said, we are not sure why Jio continues to highlight Bharti’s and VIL’s �exorbitant’ voice tariffs for their 2G customers as a problem. Missed call behaviour is real and does result in Jio being a net IUC payer.

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