Nifty Eyes 8150; SBI Tanks 5%, Auto & Oil Stocks Lead

Bussing stocks11:55 am Exclusive: Speaking to CNBC-TV18 from the sidelines of Pune Inc Conclave Power Minister Piyush Goyal said demonetization has huge advantages. It will take India to digital banking and make it a cashless society.

He said the government will use the money from demonetization to pump prime economy.

When asked what one should expect from the Union Budget on February 1, Goyal said ‘Good things’. He said: “The Finance Minister over the last three Budgets – July’14, Feb’15 and Feb’16 has consistently worked on a series of measures. He focused on a sustainable framework for India’s development.”

FM Arun Jaitley never tinkered with rates, minor changes but looked at structural improvements, so that India could move towards and economy, which like China sees 2-3 decades of high-level growth, said Goyal.

11:45 am Sameer Nair Group CEO of Balaji Telefilms says that new shows have a much lower margin and hopes to have 10 shows on air by FY17 end.

TV business gross margin is likely to be up 25 percent by this fiscal year, he believes.

The plan now is to get next releases of movies in the next fiscal year, he says, adding that film business will likely book profit in FY18.

Balaji Telefilms will look to air new shows on Sony, Sun TV and Doordarshan.

11:30 am Exclusive: The demonetization move by the government on November 8 seems to have put the buzzing FMCG sector on a pause mode.

Industry sources told CNBC-TV18 that top FMCG companies like HUL , Nestle India , ITC, as well as Dabur are adopting a ‘wait and watch’ mode with regards to new product launches and may defer new launches of high-end, premium products by one-two quarters.

They would look at geography specific launches to minimise the impact of demonetization, say sources, adding that the worst hit categories are luxury chocolates, premium cookies and ice-creams.

Nestle, ITC may defer launches in premium chocolate, confectionery & cookies space, and HUL, Dabur may defer product launches in premium personal care space, say industry sources.

The market has recovered from early weakness but the Nifty is almost nearing 8150. The 50-share index is up 6.80 points at 8121.10 and the Sensex is up 21.34 points at 26337.68. About 1457 shares have advanced, 652 shares declined, and 112 shares are unchanged.

Bharti Airtel, Cipla, Hero MotoCorp, BHEL and Bajaj Auto are top gainers while ICICI Bank, Wipro, TCS and Axis Bank are losers in the Sensex. SBI is down 5 percent intraday on Monday after RBI increased cash reserve ratio (CRR).

India is proving to be immune from the heavy selling in global emerging market debt, as Prime Minister Narendra Modi’s clampdown on undeclared cash has sparked expectations of a rate cut and pushed issuers to take advantage of low yields.

Indian Railways Finance Corporation, NTPC, Vedanta Resources, Exim India and Axis Bank all rushed to print rupee notes last week to access cheaper funding.

“The debt market is very compelling,” said Killol Pandya, head of fixed income at Peerless Funds Management. “Issuers that were otherwise going to banks are approaching the bond market as banks are yet to cut lending rates.”

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Indian Economy achieved robust growth rate despite volatility and uncertainty in global economy: FM

arun-jaitleyThe Union Finance Minister Arun Jaitley said that in the First Half of the Current Financial Year 2016-17, the Indian Economy has achieved robust growth rate despite volatility and uncertainty in global economy.

He said that this was made possible by a slew of policy measures undertaken by the present Government including enhanced public investment, kick starting stalled projects, improving the status of financial inclusion significantly among others.

The Finance Minister Jaitley was making the Opening Remarks during his Fourth Pre-Budget Consultative Meeting with the representatives of Indian Trade and Industry Associations/Groups here today.

The Union Finance Minister Arun Jaitley asked the representatives of Business and Trade Sector to increase the private sector spending especially in infrastructure sector. He said that the Government has taken many steps to improve governance by bringing in transparency and efficiency through systematic changes. Jaitley said that the present Government has given greater thrust on fiscal federalism and improving business environment through reforms in policies and regulation among others. Jaitley said that strong macro and micro economic indicators including fiscal fundamentals and follow of fiscal discipline present sound prospects for the Indian economy in future as well.

Various suggestions were received during the aforesaid Consultative Meeting. Major recommendations were as under:

  • Reduction in Corporate Tax and withdrawal of tax incentives which will result in higher collections due to better compliance and will make India an attractive investment destination.
  • Complete elimination or a major reduction in Minimum Alternate Tax (MAT) and higher public investment in infrastructure and social sector.
  • Higher investment in irrigation and rural infrastructure sector as this will increase the spending capacity of the rural people which in turn will create demand for various items and increased economic activity.
  • Increased focus on skill development by focusing more resources on training of trainers’ Programmes.
  • Tax concession to both individual tax payer and Corporate Sector. Minimum exemption limit in case of Personal Income Tax be raised to Rs.5 lakh. After demonetization, since banks will have lot of funds, therefore, interest rate be reduced for manufacturing and other sectors especially for micro, small and medium enterprises.
  • States should levy heavy taxes on industry especially manufacturing sector mainly in higher energy/power charges which make them uncompetitive.
  • Make instrument of cheque more stronger especially after demonetisation by blocking the amount of cheque in the drawer’s account and making amendments in Sec 138 of Negotiable Instruments Act for heavy penalty in case of bouncing of cheques.
  • Measures be taken to revive private sector investment especially in infrastructure sector. Suggestion was made to give infrastructure status to Broadcasting Sector.
  • To give more incentives to promote women entrepreneurs.

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GST Meet Inconclusive as Centre, States Differ on Dual Control


The second day of the Goods and Services Tax Council meeting was not as fruitful as the first, as a consensus on the administrative control of businesses and cross-empowerment proved elusive. The States continued to seek greater control of assessees.

“This issue is very contentious, and its consequences still have to work themselves out. So, there is a requirement of cross-empowerment coupled with defined jurisdictions,” said Finance Minister Arun Jaitley after the fourth meeting of the GST Council on Friday.

Two options

The Council discussed two options: horizontal and vertical division of assessees, the Minister said. Under the proposal for horizontal division, States would be given single control of all assessees with an annual turnover of up to ₹1.5 crore, beyond which there would be cross-empowerment of Centre and State officials. In the vertical division, both the Centre and the States will get a fixed number of assessees.

Sources indicated that most States were keen to go for the horizontal division of assessees.

“The pros and cons of the formations were discussed today. We don’t want to rush into anything as the consequences are unseen,” said Jaitley. The mechanism of administrative control would also be uniform for both services and goods producers, he further said, pointing out that there were several activities such as work contracts and restaurants that pay both service tax as well as central excise duty or value added tax.

Stressing that a substantial part of the discussions on dual control has now been completed, Jaitley said he has called an informal meeting with State Finance Ministers for November 20 to find a solution.

Meeting deferred

The meeting of the GST Council, which was earlier scheduled for November 9 and 10, has been deferred. It will now meet on November 24 and 25 to approve the issue as well as finalise the draft model legislations for Centre, State and integrated GST as well as the compensation law.

Officers will now begin discussions on the four draft laws and finalise their reports by November 15, following which States will be given a week to study them.

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GST will Come on Time, but Multiple Rates will Dilute Benefits

India moved a step closer to creating a national sales tax but a deal on rates reached on Thursday will hit some businesses harder than others, while its complexity will dilute any boost to growth and undermine its reliability as a revenue generator.
The Goods and Services Tax (GST), due to be rolled out from April 1, 2017, had been billed as the one reform that could help Prime Minister Narendra Modi deliver on his jobs and growth agenda. In a key Modi win, parliament amended the constitution in August to clear the way for the GST, which would unify Asia’s third-largest economy into a common market for the first time.
But Thursday’s bargain between Finance Minister Arun Jaitley and his counterparts from India’s 27 state governments has exposed the difficulties of dealing with so many stakeholders.
The GST Council, set up to oversee the tax, agreed on a more steeply progressive structure for goods than earlier foreseen with rates of 5, 12, 18 and 28 percent, depending on the kind of product involved. The top rate, Jaitley said, would apply to the kind of goods bought by middle-class Indians.
On top of that, essentials like grains that make up half the consumer price index would not be taxed at all. Finally, a “cess” – a separate central tax – would be added to the top 28 percent GST rate on luxury cars and harmful products like tobacco and fizzy drinks.

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Four-Tier GST Final with 5% as Floor Rate, 28% at Peak, says Arun Jaitley

Goods and service tax

The Centre and the states have managed to hammer out a broad consensus on the contentious issue of fixing tax rates under the proposed goods and services tax (GST) regime, marking a significant step forward in the rollout of the new tax regime by early next fiscal. On Thursday, a four-tier GST rate structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent was approved by the GST Council.

Chaired by Union Finance Minister Arun Jaitley, the Council met in New Delhi for the fourth time to thrash out vexed issues of rates and dual control, wherein it was decided to fix 5 per cent duty on mass consumption items and a 28 per cent rate on items such as packaged consumer goods. This is a departure from the Centre’s earlier proposal of a 6 per cent floor rate and 26 per cent peak rate.

Briefing reporters after the meeting, Jaitley said all GST decisions were made by consensus, except on fixing the 28 per cent rate slab for which “Kerala FM had an alternative view”. Though some states such as Kerala wanted a 40 per cent tax on demerit goods, members of the GST Council finally decided in favour of fixing a higher rate of 28 per cent and levying a cess on the differential between the 28 per cent rate and current tax incidence for demerit and luxury goods.

About 50 per cent of items in the Consumer Price Index (CPI) basket, along with food grains, will be exempted from the proposed GST while white goods and goods with effective tax rate of 30-31 per cent but being used by lower middle class, will be in the lower tax slab. “We have been able to finalise the rate structure today and the rate structure would be the following: that there will be a zero tax rate in which several items, which approximately constitute 50 per cent of the CPI basket, would be included. We won’t call it the exempted item.

We would call it zero-rate item and it was decided that food grains used by common people would be in this category. It would be zero-rated so that its impact in terms of inflationary pressure on common people is the least,” Jaitley said.

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GST Council fixes 5%, 12%, 18% and 28% tax rates

arun-jaitleyThe Goods & Services Tax (GST) Council has finalized a four-rate tax structure — 5, 12, 18 and 28 percent, Finance Minister Arun Jaitley today announced at a press conference.

The FM said that the government has kept about 50 percent of products in the consumer basket, such as food grains, as “zero-rated”.

Jaitley further said that cost empowerment issue will be taken up tomorrow.

Jaitley said that items of mass consumption will be under 5 percent slab. Additional revenue from the higher slab of 28 percent will be used for items in other slabs.

White goods category, which is presently taxed at 30-31 percent level, will be under the 28 percent category. These, however, will come with riders. While the cars will be under 28 percent category, luxury cars will be taxed much higher.

The GST panel has also approved cess on tobacco, luxury products and sin items. This cess will not be additional and won’t add to states or consumers burden.

Taxation on gold will be decided upon the revenue flexibility, Jaitley said.

FM further said that it is required to pay Rs 50,000 crore as compensation in the first year of GST.

The council will decide on flexibility of the compensation pool after 5 years, Jaitley said. Cess, on the other hand, will be reviewed every year.

The secretaries will meet soon to decide upon item wise rate slabs.

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GST within sight as Centre, states agree on four-rate structure

Goods and service taxIndia took a big step towards rolling out a unified goods and services tax (GST) with the Centre and states agreeing on a four-slab structure –5, 12, 18 and 28 percent—along with a cess on luxury and `sin’ goods such as tobacco.

The breakthrough, which came about in the finance minister Arun Jaitley-headed GST Council meeting on Thursday, is slightly different from what the Centre had proposed last month.

The Centre had proposed a four-tired rate system–6, 12, 18 and 26 percent—along with a 4 percent levy on gold.

The final rate structure agreed on Thursday has brought down the lowest slab by one percentage point to 5 percent, while raising the highest rate by two percentage point to 28 percent.

Around 50 percent of the items in the retail inflation basket, primarily food items, will be kept out of GST.

“There will be a zero tax on such items. The object of this is to ensure that the GST structure is not burdensome on the common man,” Jaitley told newsmen after the GST council meeting.

A lower tax slab of 6 percent is proposed for those essential commodities on which no excise duty is levied at present by the centre but a 5 percent value-added tax is levied by the states.

There will two standard rates of 12 percent and 18 percent that will be applicable to a majority of the taxable goods.

The effective tax on most white goods such as refrigerators is between 30 to 31 percent, which includes a 12.5 percent central excise duty, state value added tax (VAT) of 14.5 percent and cascading effect about four percentage points.

After GST, the effective tax rate on most of these goods will come down to 28 percent.

The finance minister said that the additional revenue earned by raising the peak rate from the earlier proposed 26 to 28 percent, will be set off against the revenue loss from slashing the lowest rate to 5 percent from 6 percent, and also transferring a number of goods from the 28 percent category to 18 percent.

A decision on tax on gold has been deferred. “It tax on gold will be decided after the fitment of the remaining items,” Jaitley said.

A secretaries’ panel will now decide to work out the nitty-gritty of the fitment system, clubbing hundreds of goods in the four slabs

The principal rationale behind this tax structure is that items which are presently taxed at rates closer to the range of each of the slabs will be fitted into the particular rate of the slab.

A decision on taxation of services will be taken later, Jaitley said. The GST council has also agreed on the Centre’s proposal to impose a cess on luxury goods for five years to create a dedicated corpus to compensate states for potential revenue losses after migrating to GST.

The Constitutional amendment guarantees a five year compensation to these States.

The Centre estimates total compensation to states for losses arising from a transition to GST to be around Rs50,000 crore in the first year. This will be met through a fund—Rs26,000 crore will come from the corpus generated by the levy of the clean environment cess on coal and Rs 24,000 crore collected from the cesses to be levied on demerit goods such as tobacco, luxury cars, pan masala and aerated drinks.

These goods will continue to be taxed at their current rates. For instance, tax on tobacco will continue to remain at about 60 percent.

“The cess will come with a sunset clause of five years,” Jaitley said. “This will be reviewed on a year-to-year basis and the council will decide the flexibility of this pool,” he said.

If compensation were to be funded by the taxes would have been burdensome as it would have involved raising funds to the tune of Rs 1.72 lakh crore, the finance minister said.

“Paying compensation out of tax will be burdensome for the consumers,” he said.

“The cess is not an additional levy and its incidence will not be a single rupee on the consumer”.

The council will again on Friday to decide on the dual control issue and work out an agreement on the division of powers between the Centre and the states on collecting taxes.

Once an agreement is reached on rates, the council will again meet on November 9-10 to decide on the draft GST legislations.

The government has targeted to rollout GST from April 1, 2017.
“We are moving on schedule,” Jaitley said.

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