QBiz: GST Prep Review Before Rollout; Oil Prices Post Qatar Ban
The Quint’s roundup of the nation’s business news of the day.
1. GST: PM Modi Reviews Preparedness Ahead of 1 July Rollout
Prime Minister Narendra Modi on Monday reviewed the preparedness for the new indirect tax regime – the Goods and Services Tax (GST) – which will be rolled out from next month. The meeting was attended by Finance Minister Arun Jaitley, Revenue Secretary Hasmukh Adhia and senior officers from the Central Board of Excise and Customs (CBEC). This was the first review by the PM after the GST Council finalised the rates and the second since 2 May.
The Prime Minister specifically reviewed aspects of implementation such as IT readiness, human resource readiness, training and sensitisation of officers, query handling mechanism and monitoring, according to a release by Press Information Bureau (PIB). The Prime Minister was informed that GST systems such as IT infrastructure, training of officials, integration with banks and enrollment of existing taxpayers will be in readiness well in time for the 1 July implementation date, it said, adding that information security systems were discussed in detail.
2. For Ola and Uber, India's Shared Taxi Market is the Next Battleground
Uber Technologies Inc. and Ola (ANI technologies Pvt. Ltd) are spending heavily to expand ride-sharing, a category considered the next big growth driver for both cab hailing firms. Shared rides account for 25-30 percent of overall trips on Ola and Uber in key cities such as Mumbai, Delhi and Bengaluru, three people aware of the matter said. Both firms have either dropped fares or are running promotions for ride sharing to attract new customers. For instance, Uber has capped carpooling fares at Rs 49 for the first 8 km in Delhi, Bengaluru and Chennai.
Ola is offering Share Pass, a subscription-based service launched in November last year that offers carpooling at a flat fare, at a steep discount. Ola is also offering a share pass for five trips at Re 1. Usually, the firm offers a five-ride pass for Rs 149, while the ones for 20 and 40 rides costs Rs 249 and Rs 349 per month, respectively, for the first 8 km.
3. Why Oil Prices Won't Spike After Saudi Arabia-Qatar Row
Escalation of sectarian conflict and violence in the Middle East could derail oil supplies from the region and lead to a spike in prices, according to a report by Vandana Hari of energy markets researcher Vanda Insights. But the decision of Saudi Arabia, and three other Arab countries, to cut off most diplomatic and economic ties with Qatar, is unlikely to lead to such a scenario, she adds.
Six nations severed diplomatic relations with Qatar due to its alleged ties with Iran and Islamist groups in the region. The WTI active contract rallied sharply to as much as $48.42 per barrel after the announcement, before falling to around $48 per barrel. The risk would be Qatar walking away from the agreement with OPEC nations to curb its supply from 6.48 lakh barrels per day. This could lead to higher supply and a downward pressure on oil prices.
Read the report at The Quint
4. GST: Consumer Electronics Retailers Brace for Transition Pain
India’s consumer electronics retailers have been de-stocking amid fears that a transition to a universal Goods and Services Tax next month will disrupt the $12.5-billion market. While some large chains like Vijay Sales and Future Group’s Ezone are offering discounts to exhaust inventory, smaller retailers have been buying from dealers to only fulfil existing orders.
They don’t want to be saddled with too much stock as the new indirect tax regime kicks in. Kamal Nandi, Business Head and Executive Vice-President, Godrej Appliances, said in response to an emailed query by BloombergQuint:
With all the news about a likely price hike of 2-3 percent, we have seen a surge in the retail sales.
However, trade partners focused on de-stocking due to ambiguity around input tax credit on central GST on transit and current stocks, he said, before the final transition rules were announced on Saturday. The GST Council allowed input tax credit of 60 percent of applicable Central GST for items in the 18 percent tax bracket, and kept the cap at 40 percent for products taxed at below 18 percent.
5. India Said to Seek Job Creation Pledge From Apple in Lieu of Tax Breaks
India wants Apple Inc to commit to investment and jobs creation before it will consider the company’s plea for tax breaks to manufacture iPhones in the country, people with knowledge of the matter said. Prime Minister Narendra Modi’s government has asked the US company to lay out details of the money it plans to pump into the country and the potential number of jobs the investment will create, the people said asking not to be identified as the talks are private. The move comes amid concerns that growth in Asia’s third-largest economy isn’t helping add jobs.
6. Economists See RBI Holding Rates Even as Inflation Concerns Abate
The Reserve Bank of India is likely to hold rates once again during the upcoming monetary policy announcement on Wednesday, a poll of 10 economists showed. Despite the fall in Gross Domestic Product (GDP) growth in the January-March quarter, economists believe that the central bank would wait to see more macroeconomic data and developments on inflation over the next few months. While all 10 economists agreed that the regulator would maintain its ‘neutral’ stance, they also expect it to change its outlook on inflation for the rest of the year.
7. Govt May Merge PSU Banks Without Waiting for Improvement in NPA: FM
The government on Monday said it is examining the possibility of further consolidation in the public sector banking space without waiting for their finances to improve. Merger of five associate banks and Bhartiya Mahila Bank with the country's largest lender SBI took place in April. Jaitley said in an interview with CNBC-TV18:
Internally there was a thinking after the SBI amalgamation took place to wait for the rest till the health of the banks improve. We have now re-looked at the whole system and there are some institutions within the public sector banks which can be consolidated even in the present circumstances. We are seriously examining them.
Even Reserve Bank of India Governor Urjit Patel in April had said the Indian banking system could be better off if some public sector banks are consolidated to have fewer but healthier entities, as it would help in dealing with the problem of stressed assets.
8. The Indian Telecom Industry's Debt Problem in Three Charts
India’s top seven telecommunications companies saw their total debt burden rise 20 percent in financial year 2016-17. From Rs 3,02,321 crore in the previous year to Rs 3,59,940 crore. Vodafone India Ltd was the only one among the seven which saw a 22 percent fall in its total debt after parent Vodafone Plc infused equity worth Rs 47,700 crore to repay loans.
The mounting debt burden has not only resulted into rising finance costs for the companies but has also diminished their ability to repay debt. Recently, Anil Ambani-owned Reliance Communications Ltd.s’ debt was downgraded to default rating by multiple rating agencies citing “significant stress on its cash flows and high level of debt”.
9. COAI Seeks Cut in GST Rates for Telecom in Letter to Finance Ministry
Telecom operators have approached the government for a reduction in the 18 percent GST rate, saying the benefit of input credit is not enough to fully compensate the higher tax incidence in the new regime. Firms under industry body Cellular Operators Association of India (COAI) have emphasised that reduction in GST rate is important given that the industry is already suffering from "poor financial health".
We request that the applicable GST rate for the telecom industry, which is already suffering from poor financial health, is reduced, so as to not increase the burden from current levels.COAI Letter to Revenue Secretary
The letter comes just days before the meeting of the GST Council on 11 June, in which the Centre and states will review demands by various industries to lower the proposed tax rates on certain goods and services.
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