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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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Market Review: Amid volatility equity indices rise for 5th straight week

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SENSEX NIFTY MARKET

Mumbai, June 23: Despite volatility and a broadly bearish momentum, the key Indian equity indices rose for the fifth consecutive week, although with marginal gains.

Value buying by investors, primarily in banking, healthcare and auto stocks on Friday helped the indices end higher than the previous week’s levels.

The gains in the week ended Friday, were limited by global trade war concerns due to imposition of tariffs and counter-tariffs internationally.

Index-wise, the barometer 30-scrip Sensitive Index (Sensex) of the BSE rose by 67.46 points or 0.19 per cent to close at 35,689.60 points on a weekly basis.

The wider Nifty50 of the NSE closed the week’s trade at 10,821.85 points — up 4.15 points or 0.04 per cent — from its previous close.

According to analysts, market breadth was negative in all the five trading sessions of the week.

“Markets ended the week with marginal gains after trading in a rangebound manner for a major part of the week. It was nevertheless the fifth consecutive week of gains for the Nifty50,” said Deepak Jasani, Head of Retail Research at HDFC Securities.

Shibani Kurian, Senior Vice President and Head of Equity Research at Kotak Mutual Fund told IANS: “Volatility in the market continued during the week ended June 22, 2018 amidst rhetoric of intensifying trade wars between the US and China and the possibility of imposition of further tariffs against imports from China.”

According to Equity99’s Senior Research Analyst, Rahul Sharma, stock specific actions were the flavor of the week, “wherein HDFC twins (HDFC, HDFC Bank) shimmered, gaining more than 2 per cent”.

Further, during the week all eyes were on the outcome of the Organisation of Petroleum Exporting Countries’ (OPEC) meet, said Prateek Jain, Director of Hem Securities. OPEC, was expected to decide on raising its oil production to cool down oil prices and eventually on Friday it announced an agreement to raise oil output by nearly one million barrels per day.

On the currency front, the rupee closed at 67.84 against the US dollar appreciating by 18 paise from its previous week’s close of 68.02 per greenback.

In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors sold scrip worth Rs 2,088.81 crore, while the domestic institutional investors purchased stocks worth Rs 4,720.76 crore during the week.

Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) divested equities worth Rs 4,528.63 crore, or $665.71 million, in the week ended on June 22.

Sectorally, the top gainers were the Bank Nifty, pharma and energy indices, while the top losers were metal, public sector banks and IT indices, Jasani told IANS.

The top weekly Sensex gainers were ICICI Bank (up 6.57 per cent at Rs 300.85); HDFC (up 3.86 per cent at Rs 1,902.40); HDFC Bank (up 2.52 per cent at Rs 2,081.80); Tata Motors (up 1.63 per cent at Rs 308.15); and Yes Bank (up 1.41 per cent at Rs 335.20 per share).

The major losers were Coal India (down 5 per cent at Rs 265.10); Vedanta (down 4.23 per cent at Rs 228.65); ONGC (down 3.63 per cent at Rs 159.45); Wipro (down 3.34 per cent at Rs 257.95); and Infosys (down 2.66 per cent at Rs 1,246.45 per share).

IANS

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Oil prices rally after OPEC meeting

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OPEC

Vienna, June 23 (IANS) Oil prices surged as investors were closely watching the Organization of the Petroleum Exporting Countries (OPEC) meeting.

The West Texas Intermediate for August delivery on Friday rose $3.04 to settle at $68.58 dollars a barrel on the New York Mercantile Exchange, while Brent crude for August delivery was up $2.50 to close at $75.55 a barrel on the London ICE Futures Exchange, Xinhua news agency reported.

The OPEC on Friday announced an agreement to raise oil output which, in accord with non-OPEC producers, had been reduced last year in order to boost prices that had been in free fall mainly due to a supply glut.

Following a ministerial meeting here of the 14-nation cartel, the statement released, however, did not provide any details of the production increases to be allocated among members.

Current OPEC Chairman, the UAE Energy Minister Suhail Mohamed Al Mazrouei, told reporters after the meeting that the increase agreed upon is “a little bit less than 1 million barrels” over OPEC’s current output.

OPEC and non-OPEC producers, including Russia, had put in place 1.2 million barrels per day (bpd) cut from January 2017, which helped boost crude prices go over $80 a barrel last month.

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Nepal, China to enhance cooperation under Belt & Road Initiative

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Belt and Road initiative

Beijing, June 22 (IANS) Nepal and China have agreed to execute projects under the Belt and Road Initiative (BRI) to enhance connectivity that encompasses ports, roads, railways, aviation and communications within the overarching framework of Trans-Himalayan Multi-Dimensional Connectivity Network.

In a joint statement issued during the visit of Nepali Prime Minister K.P. Sharma Oli, the two sides agreed to take practical measures to promote cooperation in all fields mentioned in the MOUs that included conducting a feasibility study of Kerung-Kathmandu railway, reconstruction of two friendship fridges, protocol on the utilization of Tibetan highways for cargo transport and investment and cooperation on production capacity.

On the railway pact that aims to extend the Chinese railway network to Kathmandu, the joint statement said: “Nepal and China underscored it as the most significant initiative in the history of bilateral cooperation and believed that it would herald a new era of cross-border connectivity.

Other pacts reached during Oli’s visit from June 19-24 were setting up of a mechanism for facilitation on the implementation of China-Nepal Cooperation Programmes and Projects in the Himalayan nation, MOUs on strengthening cooperation between their Foreign Ministries, cooperation in fields of energy and human resource development.

Beijing and Kathmandu also agreed to work together in areas of economy, trade, investment, industrial capacity, post-disaster reconstruction and other mutually beneficial areas, according to the statement.

Another takeaway of the visit was an early finalization of the joint feasibility study on the China-Nepal Free Trade Agreement (FTA), establishing cross-border economic cooperation zones and an agreement on completing the post disaster recovery of two frontier inspection stations on Nepal-China border.

Beijing agreed to support the Chinese-funded banks for opening their branches in Nepal. It said that it was ready to negotiate the financing modalities of the projects on road, railway connectivity, hydropower and transmission lines, among others, proposed by Nepal.

The two sides will also boost cooperation between the law enforcement agencies on information exchanges, capacity building and training. They will negotiate the Treaty on Mutual Legal Assistance in Criminal Matters and Treaty on Extradition to fight against illegal border crossing and transnational crimes.

There will be more exchanges and cooperation between China and Nepal in areas of education, culture, tourism, media, think tanks, youth and people-to-people relations.

China said it will provide more government scholarships every year to Nepal, whereas Kathmandu said it will facilitate the teaching programme of volunteer Chinese language teachers.

“The two sides agreed to strengthen cooperation in the UN and other multilateral forums and to safeguard common interests of developing, least developed and landlocked developing countries in particular,” the joint statement added.

The two countries will also view and support each other’s participation in the regional cooperation process and enhance coordination and cooperation within the SCO, SAARC and other regional cooperation mechanisms within the agreed frameworks and guidelines.

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