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IACC flags points to streamline GST roll-out

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New Delhi, July 17: The Indo-American Chamber of Commerce (IACC) flagged points for the smooth transition of the Goods and Services Tax (GST) into a full-fledged tax structure.

Upon the suggestion list of the IACC is the need to bring alcohol and petroleum products within the ambit of the Central GST, said the apex bilateral Chamber synergizing India-US economic engagement.

This should be done in a calibrated manner since more than 60 per cent of the revenues were mobilised through tax realisations from these goods, IACC’s National Vice President Vasant Subramanyan said.

There is a strong pitch by the states not to give up the taxation of these sectors as the revenues from them constitute a major chunk of their resource mobilisation, the IACC said in a statement.

“A pragmatic approach to counter this will be citizens’ pressure for assigning this right to the Centre,” the statement released on Monday added.

Next in the order of importance, according to the IACC, is pruning up the number of slabs in the GST.

World over, GST or similar clone of a comprehensive indirect tax, would either have one slab or at best two.

In India, in effect, there are five slabs — zero per cent, five per cent, 12 or cent, 18 per cent and 28 per cent — which would make the tax structure complicated and difficult to comply with.

“We have to draw up a roadmap for further pruning the number of rates in a time-bound manner,” IACC’s Finance Committee Chairman S.K. Sarkar said.

“In the given situation, it is prudent to do away with highest slab/s and amalgamate it/them with the next lower slab,” Sarkar said.

The conceptual ambiguity in the GST structure was another important issue that has to be addressed, the Chamber said.

The manufacturing states feel that their interests have been jeopardised under the GST, which is a destination based tax, the IACC noted.

It is important to evolve pragmatic schemes that should address the genuine concerns of manufacturing states in order to shore up their faith in the dispensation, it said.

Small businesses in the manufacturing sector would not have it easy in the GST regime.

Under the excise laws, only manufacturing business with a turnover exceeding Rs 1.50 crore had to pay excise duty.

Under the GST, the turnover limit has been reduced to Rs 20 lakh, increasing the tax burden for many manufacturing Small and Medium Enterprises (SMEs).

Many of the SMEs would find compliance tough and even if they comply with the GST norms, it would be at an additional cost.

Most businesses use accounting software or ERPs for filing tax returns, which have excise, VAT and service tax already incorporated in them.

“The transition to GST will require businesses to change their ERPs either by upgrading the software or by purchasing new GST-compliant software. This will lead to increased costs of buying new software and training employees on how to use it,” Sarkar said.

Another anomaly in the GST structure is in the form of taxing branding packaged edible items if the brand name is registered under the Trade Marks Act. If it is not registered under the act, tax is not levied.

Introduction of the GST is seemingly affecting the textile industry at least in the short run.

It is expected that the tax rate under the GST would be higher than the earlier tax rate for the textile industry. Natural fibres (cotton, wool) which were exempted from tax, would be taxed under the GST.

A significant portion of the textile industry is in the unorganised sector or composition scheme. This creates a gap in the flow of input tax credit since tax credit is not allowed if the registered taxpayers procure the inputs from the unorganised sector.

Also, Composition scheme (turnover up to Rs 75 lakh) for traders, manufacturers and hotels may be done away with since this scheme militates against the GST principle of getting input credit across the supply chain.

In any case, this scheme does not appear to have too many takers, the IACC said.

On the export front, it is important to align two main export promotion schemes in India — the Merchandise Exports from India Scheme (MEIS) and the Services Exports from India Scheme (SEIS) with the GST.

Under these schemes, exporters with a certain amount of turnover are provided with duty credit scrips.

These scrips allow for the exemption of duties paid on the import of raw materials.

Under the duty drawback scheme, the exporters are provided with a refund of the customs and excise duties paid on the imported inputs.

The GST legislation has a provision on a duty drawback for these inputs. This implies a refund of the taxes paid on both imported as well as domestic inputs.

The duty drawback scheme helps those exporters who produce goods that are not being taxed but still have to pay taxes on the inputs used in their manufacture.

Due to a higher rate of tax under the GST, exporters might face a cash crunch due to the blockage of working capital.

“In order to address this issue, the Finance Ministry should evolve schemes to fast track process of refund within a stipulated time of say five days,” Subramanyan said.

IANS

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Market zooms: Sensex at 36K, Nifty50 at 11K

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Mumbai, Jan 23: Projection of India’s healthy economic growth outlook, along with bullish global cues lifted the key Indian equity indices to their new highs during the early morning trade session on Tuesday.

Accordingly, the S&P BSE Sensex and the NSE Nifty50 breached their previous respective intra-day high levels.

In the process, the barometer Sensex crossed the 36,000-points-mark and the NSE Nifty50 climbed above 11,000 points.

Market analysts pointed-out other factors such as positive Q3 results and buying support in oil and gas, banking, capital goods and consumer durables stocks aided in the key indices’ upward trajectory.

At 9.50 a.m., the 30-scrip S&P BSE Sensex, which had closed at 35,798.01 points on Monday, traded higher at 36,036.51 points, up by 238.50 points or 0.67 per cent.

At the National Stock Exchange (NSE), the broader Nifty50 quoted at 11,039.75 points, up by 73.55 points or 0.67 per cent.

IANS

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Gross NPA may rise to Rs 9.5 lakh crore by March: Study

“Fiscal 2018 marks beginning of third phase of ARCs which promises to change the landscape as new regulations and other changes kick-in.”

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Gross non-performing assets (NPA) in Indian banks are expected to rise to Rs 9.5 lakh crore by March, from Rs 8 lakh crore in March last year, said a ASSOCHAM-Crisil joint study.

Stressed assets in March 2018 are expected to be at Rs 11.5 lakh crore, the report titled “ARCs headed for a structural shift,” said.

“High level of stressed assets in the banking system provides enormous opportunity size for asset reconstruction companies (ARCs) which are an important stakeholder in the NPA resolution process,” ASSOCHAM said in a statement quoting the study.

It, however, said that owing to capital constraints, growth of ARCs is expected to come down significantly.

“While growth is expected to fall to around 12 per cent until June 2019, however the AUM (assets under management) are expected to reach Rs 1 lakh crore, and that is fairly sizeable.”

The study added that with banks expected to make higher provisioning over and above the provisions made for stressed assets, they may sell the assets at lower discounts, thus increasing the capital requirement.

The study also said that effective implementation of the Insolvency and Bankruptcy Code would be a remedy to the challenge of prolonged litigation and it can help improve the recovery rate of stressed assets’ industry further.

Power, metal and construction sectors contribute the bulk of stressed assets. According to an analysis of 50 stressed assets (forming nearly 40 per cent of stressed assets in the system), sectors like metal, construction and power form nearly 30 per cent, 25 per cent and 15 per cent respectively, while other sectors together form the remaining 30 per cent.

The report stated that 2018 would see a structural shift in the stressed assets’ space as increased stringency in banks’ provisioning norms for investments in security receipts (SRs) is likely to result in more cash purchases.

“Fiscal 2018 marks beginning of third phase of ARCs which promises to change the landscape as new regulations and other changes kick-in.”

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Key Indian equity indices open at fresh highs

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Mumbai, Jan 22: Key Indian equity indices opened at fresh highs during the early morning trade session on Monday, with healthy buying observed in oil and gas, energy and consumer durables stocks.

At 9.20 a.m., the wider Nifty50 of the National Stock Exchange (NSE) traded 8.05 points or 0.07 per cent higher at a new high of 10,902.75 points.

The barometer 30-scrip Sensitive Index (Sensex) of the BSE, which opened at 35,613.97 points, traded at a fresh level of 35,613.73 points — up 102.15 points or 0.29 per cent — from its previous session’s close.

The Sensex has touched a new high of 35,664.01 points during the intra-day trade so far.

The BSE market breadth was bullish as 454 stocks advanced as compared to 238 declines.

On Friday, positive global cues, coupled with upbeat quarterly corporate earnings and healthy buying in banking stocks, propelled the key indices to close at new record highs.

The Nifty50 closed at 10,894.70 points, while the Sensex closed at 35,511.58 points.

IANS

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