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Service tax to move up from 15% to 18% under GST: Hasmukh Adhia

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Hasmukh Adhia

New delhi, April 13: Services sector is likely to attract a higher tax rate of 18 per cent from the current 15 per cent under the Goods and Services Tax (GST) regime, thus making services “slightly” more expensive, Revenue Secretary Hasmukh Adhia has said.

Yes, for the services sector the standard rate may move to 18 per cent,” said Adhia in an interview.

However, those exempted at present — like healthcare, education and agriculture — are likely to remain so.

Whatever is in the present exempt list, we will try to continue it. We would recommend this to the Council and it will take a view on it. Most probably they should agree. Our attempt is not to upset too many things in one go,” he said.

At present, the services sector is taxed at 14 per cent with two additional cesses — Swachh Bharat Cess and the Krishi Kalyan Cess attracting half a per cent each — taking the burden to 15 per cent.

The GST law says that agriculturalists — who employ themselves or their family members — will not come under GST even if their turnover is over Rs 20 lakh annually. Those who are employing persons and have a turnover of over Rs 20 lakh a year will have to register under the GST.

Currently, sericulture, floriculture, dairy, horticulture, fishing that usually employ outside labourers on a large scale are exempt from service tax as they come under agriculture. But whether these will attract tax under the GST is still debatable.

Those who are dealing in anything except what we have defined as ‘agriculturalist’ will have to register (under GST). But whether their products are taxable or not will have to be decided by the Council,” he said.

We have not yet decided on the exemption list. That will be decided separately by the Council, I don’t think it will want to tax many agriculture products,” said Adhia.

He also said that some services which currently have less than 15 per cent tax rate may attract lower rates.

Wherever the services at present attract lower than 15 per cent rate of service tax because of certain reasons, we will try to maintain that. Transport sector, for example, attracts lower than 15 per cent tax right now. We will put these in either 5 per cent or 12 per cent,” he said.

The Revenue Secretary also noted that since petrol and petroleum products have been kept zero-rated under the GST regime, transport can be a good candidate for 5 per cent tax rate.

Currently, there are about 60 services which are exempt from service tax, including education, healthcare and religious pilgrimage.

In terms of goods, Adhia said that whatever is the exact incidence of excise plus VAT, the fitment will be into a tax slab closer to that. But depending on whether the goods are put in the higher slab or the lower slab, the taxes may increase in a few cases.

“Most of the items will be as per formula, only a few items will need discussion. In a few cases, the taxes may increase, but not in all cases. Every year, the Council will meet and revise rates,” he said.

Though the GST Council took 13 meetings to decide on the enabling laws, Adhia said that since fitment of goods and services is a straightforward thing, it should not take too much time.

The Council is slated to meet on May 18-19 in Srinagar to decide on GST Rules, after which the fitment discussions will be taken up.

Adhia said that the government is determined to roll out the GST regime from July 1 despite some industry stakeholders demanding further postponement of the new tax regime.

We are determined to roll out GST from July 1, it doesn’t seem to be a problem. The live testing of GST is scheduled to begin from first week of May,” he said.

Adhia agreed that GST will have a greater compliance burden as companies having physical presence in more than one states need to do multiple registrations and pay taxes separately to each state.

“I won’t say it will complicate, but yes there is a slightly greater compliance burden on the centralised service sector operators because they have to pay tax to all the states. Centralised registration is not possible in the GST model,” he said.

“GST is a consumption-based taxation model, in which states want to calculate how much services are provided in their jurisdiction. That’s why the returns have to be filed separately for every state,” he added.

(By Meghna Mittal, IANS)

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PNB fraud: Assocham calls for privatising PSBs

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Assocham
ASSOCHAM

New Delhi, Feb 18: In light of the massive Rs 11,300 crore ($1.8 billion) scam allegedly involving jeweller Nirav Modi that has hit state-run Punjab National Bank (PNB), industry chamber Assocham said on Sunday that the government should surrender its majority control of banks, which should be allowed to function like private sector lenders.

In a regulatory filing earlier this week, PNB said it had detected the gigantic fraud in one of its Mumbai branches, putting the quantum of fraudulent transactions at $1,771.69 million. The amount is equivalent to eight times the bank’s net income of about Rs 1,320 crore ($206 million).

“The PNB’s fraudulent transactions worth Rs 11,300 crore should act as a strong trigger for the government for reducing its stake to less than 50 per cent in the banks which should then be allowed to work on the lines of private sector lenders with a full sense of accountability to their shareholders protecting interest of depositors,” Assocham said in a statement here.

“The public sector banks (PSBs), ironically, are slipping from one crisis to the other and there is a limit the government can keep bailing them out at the cost of taxpayers’ money, even if it is the principal shareholder in these lenders,” it said.

The industry body said PSB senior managements spend bulk of their time “receiving and implementing directions from the bureaucrats even for innocuous issues.”

“In the process, the core banking functions, including all important risk mitigation and management, take a back seat.”

“The problem has become more grave with banks adopting new technologies which can prove both boon and bane,” it added.

In this connection, a Special CBI Court in Mumbai on Saturday remanded to police custody till March 3 three accused persons in the case.

The three includes a retired PNB Deputy Manager Gokulnath Shetty, Single Window Operator Manoj Kharat and an authorised signatory of the prime accused Nirav Modi’s group companies.

Besides these, the Central Bureau of Investigation (CBI) has named 10 other directors and officials as accused in the scam.

“Once the government equity in the banks is reduced below 50 per cent, there would be much more autonomy along with accountability and responsibility of the senior management,” Assocham said.

“The boards should then be truly taking the policy decisions while the CEOs would run the banks with full authority, coupled with the commensurate responsibility, instead of looking towards the bureaucrats for directions,” it added.

Assocham Secretary General D.S. Rawat in a statement urged the Reserve Bank of India (RBI) to take the lead to “engage with the industry in finding ways to do clean business in the entire financial sector, be it the public sector or private sector banks or even the non-banking finance companies.”

In this regard, Chief Economic Advisor (CEA) Arvind Subramaniam has also advocated more private participation in public sector banks.

Speaking at an event in Chennai on Saturday, Subramaniam said while the government was going for recapitalisation of public sector banks, the scrutiny, monitoring and disciplined deployment must be ensured only through greater private participation in banks.

According to him, there should be less public lending to private sector and the mode to achieve that is to have higher private participation in the banking sector.

He said more privatisation could be the way forward since there was no guarantee that better governance recommendations of banks, instead of privatisation, would be implemented effectively.

IANS

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$1.8 bn PNB fraud, macro-data hit equities’ movement

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Mumbai, Feb 17: The weekly trade in the Indian equity markets was almost flat. However, a slew of domestic developments like a $1.8 billion fraud reported by the Punjab National Bank (PNB) and release of major macro-economic data impacted the movements of the two key equity indices, analysts said.

On a weekly basis, the barometer 30-scrip Sensitive Index (Sensex) rose a tad by 5 points or 0.01 per cent to close at 34,010.76 points.

The wider Nifty50 of the National Stock Exchange (NSE) closed trade at 10,452.30 points — bit lower by 2.65 points or 0.02 per cent from its previous week’s close.

“Local factors were more at work during this week. Globally, the markets — especially the US markets — have done very well over the last six sessions. But upper moves in the domestic markets have been limited because of local factors,” Deepak Jasani, Head, Retail Research, HDFC Securities, told IANS.

“The market sentiments kept facing new challenges one after the other. This caused some concern in terms of their financial impact and/or political repercussions,” he added.

According to Jasani, it was the third consecutive week of losses for the Nifty50 index.

During the week, a massive-sell off in the banking sector stocks was triggered after the Reserve Bank of India (RBI) announced new norms to deal with non-performing assets on Monday.

Besides RBI’s latest move, the massive $1.8 billion fraud detected at one of the Mumbai branches of PNB — the country’s second largest public sector bank — on February 14 also spooked investors.

The markets were closed on Tuesday for Mahashivratri.

“The truncated week began with a gap-up opening on Monday; however, bulls failed to keep the momentum and eventually ended the week on lower note as the sentiments got further dented by a $1.77 billion fraud reported by the PNB earlier this week,” D.K. Aggarwal, Chairman and Managing Director of SMC Investments and Advisors, told IANS.

PNB shares started to decline after the bank detected a multi-crore fraud case and authorities blamed billionaire diamond trader Nirav Modi for the fraud along with wife Ami, brother Nishal and maternal uncle and business partner Mehul Choksi.

The bank’s shares plunged drastically following the news — over 9 per cent — along with the stocks of Choksi-promoted jewellery company Gitanjali Gems, which plunged almost 20 per cent.

On the macro-front, Aggarwal said: “The CPI (Consumer Price Index) fell marginally to 5.07 per cent in January, while industrial activity has shown growth of 7.1 per cent in December.”

“The December growth showed not only a robust year-on-year growth but also a strong chronological improvement in the industrial activity,” he added.

On the currency front, the rupee strengthened by 18-19 paise to close at 64.21-22 against the US dollar from its last week’s close at 64.40.

Provisional figures from the stock exchanges showed that foreign institutional investors sold off scrips worth Rs 2,849.1 crore, while domestic institutional investors purchased scrips worth Rs 2,368.01 crore during the week.

Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors off-loaded equities worth Rs 3,006.58 crore, or $467.77 million, during February 12-16.

“The benchmark index Nifty closed below 10,500 levels as banking stocks dragged after the PNB fraud case,” Arpit Jain, AVP at Arihant Capital Markets, told IANS.

“On the domestic front the country’s exports increased by 9 per cent in January, while trade deficit touched a three-year high of $16.3 billion due to an increase in crude oil imports,” he added.

Sector-wise, banks, consumer durables and auto fell the most, while metals, FMCG, and oil and gas indices ended marginally in the positive.

The top weekly Sensex gainers were: Tata Steel (up 2.52 per cent at Rs 688.30); Reliance Industries (up 2 per cent at Rs 921.70); Asian Paints (up 1.75 per cent at Rs 1,143.70); Dr Reddy’s Lab (up 1.55 per cent at Rs 2,212.75); and Hindustan Unilever (up 1.51 per cent at Rs 1,352.45).

The losers were: State Bank of India (down 9.85 per cent at Rs 271.75); Yes Bank (down 6.91 per cent at Rs 311.90); Axis Bank (down 5.41 per cent at Rs 537.75); ICICI Bank (down 4.05 per cent at Rs 321); and ITC (down 2.67 per cent at Rs 266.35).

IANS

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Banks stocks, rising trade deficit drag equity indices lower

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Mumbai, Feb 16: Indian equity markets on Friday closed in the negative territory for the third consecutive session as heavy selling pressure in banks, auto, capital goods and metal stocks, along with rising crude oil prices, dampened investors’ risk-taking appetite.

Market observers said macro-data which indicated widening trade deficit in the country, coupled with continued outflow of foreign funds, dented investors’ sentiments.

On a closing basis, the wider Nifty50 of the National Stock Exchange (NSE) declined by 93.20 points or 0.88 per cent to 10,452.30 points.

The barometer 30-scrip Sensitive Index (Sensex) of the BSE closed at 34,010.76 points — down 286.71 points or 0.84 per cent from its previous close.

The BSE market breadth was bearish as 2,145 stocks declined as against 667 advances.

In terms of the broader markets, the S&P BSE mid-cap index closed lower by 1.20 per cent and the small-cap index by 1.22 per cent.

“Markets corrected sharply on Friday after failing to cross the recent highs in the morning session. Market sentiments were weak due to a jump in India’s trade deficit in January,” Deepak Jasani, Head – Retail Research, HDFC Securities, told IANS.

“Also, a rise in global crude oil prices affected the market sentiment. Major Asian markets were closed due to a holiday, barring the Nikkei index which ended on a positive note, while European indices like FTSE 100, DAX and CAC 40 traded in the green,” he added.

Official data released on Thursday evening revealed that India’s exports plunged by 9.80 per cent to $24.38 billion in January, from $27.03 billion worth of merchandise shipped out in December 2017.

The data showed that the country’s imports during the month under review declined by 2.93 per cent to $40.68 billion in January 2018 from $41.91 billion in December 2017.

Vinod Nair, Head of Research, Geojit Financial Services, said: “Market slid despite a positive trend in global market. The alleged fraud in PNB (Punjab National Bank) dented investor’s optimism on banks and expect that the scam may extend to some other banks.”

Following a $1.8 billion fraud detected by PNB, shares of Gitanjali Gems plunged almost 20 per cent while those of PNB closed lower by over 2 per cent.

On the currency front, the Indian rupee weakened by 30 paise to close at 64.21 against the US dollar from its previous close at 63.91.

In terms of investments, provisional data with the exchanges showed that foreign institutional investors sold scrips worth Rs 1,065.99 crore while domestic institutional investors purchased stocks worth Rs 1,127.78 crore.

All the sub-indices of the BSE closed in the red barring the S&P BSE IT index which rose by 8.65 points.

Sectorwise, the S&P BSE auto index receded by 414.48 points, followed by banking index by 335.88 points, capital goods by 258.50 points, metal index by 242.75 points, and oil and gas index by 187.14 points.

Major Sensex gainers on Friday were: Kotak Bank, up 1.04 per cent at Rs 1,051.75; Infosys, up 0.96 per cent at Rs 1,124.85; Dr Reddy’s Lab, up 0.83 per cent at Rs 2,212.75; Asian Paints, up 0.62 per cent at Rs 1,143.70; and Tata Consultancy Services, up 0.39 per cent at Rs 2,937.20.

Major Sensex losers were: State Bank of India, down 2.55 per cent at Rs 271.75; Yes Bank, down 2.52 per cent at Rs 311.90; ICICI Bank, down 2.31 per cent at Rs 321; Bharti Airtel, down 2.07 per cent at Rs 419.45; and Maruti Suzuki, down 2 per cent at Rs 8,840.

IANS

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