QBiz: No GST on Free Services by Banks; No Hike in RBI Repo Rate
Top business stories of the day.
1. RBI Rate Hike Seen Unlikely in 6 June Monetary Policy Meeting
Reserve Bank of India’s (RBI) monetary policy committee (MPC) is likely to keep policy rates unchanged on Wednesday, 6 June, but may raise them at its next meeting in August, say economists.
Of the 15 economists surveyed by Mint, 11 expect the central bank to keep the repo rate — the rate at which the central bank infuses liquidity in the banking system — unchanged at 6 percent. Only four economists expect RBI to raise rates by 25 basis points (bps).
“Although the headline and the core CPI (consumer price index) inflation for April 2018 revealed negative surprises, an immediate rate hike may be premature given the lack of clarity on factors like the 2018 monsoon, minimum support price (MSP) and fiscal risks,”said Naresh Takkar, managing director and group chief executive officer, ICRA.
2. Public Sector Banks Step up Filing of Cases Against NPA Accounts
Nudged by the government to detect fraud in non-performing loan accounts (NPA), public sector banks have filed more than 90 cases against errant companies and individuals with investigation agencies.
This comes at a time the banking system is grappling with high levels of bad debt and many instances of customers defrauding banks.
As part of the clean-up exercise to revive the health of public sector banks, the department of financial services had asked banks to review all NPA accounts of more than Rs 50 crore for fraud as it looked to push banks to act promptly and stringently against fraudsters.
Banks were also directed to get copies of passports of all individuals linked to companies where loans above Rs 50 crore have been given.
3. No GST on Free Services Provided By Banks, Clarifies Govt
Free services provided by banks to customers who maintain a minimum balance account will not be liable to the Goods and Services Tax, the government clarified in a Frequently Asked Questions document. This comes after the government had earlier asked banks to pay service tax and GST retrospectively on free services provided to select customers.
Show cause notices were issued by the Directorate General of Goods and Services Tax Intelligence asking banks to pay back-taxes on free services provided by them since 2012. BloombergQuint had reported on 8 May that government may withdraw these notices.
“...where the services are supplied by a supplier without consideration to an unrelated recipient or a person other than a related or distinct person, the same would not amount to supply and not liable to GST,” says the new document.
4. ONGC Logs Rs 4,000-Crore Loss on Gas Production Due to Cap on Prices
State-owned Oil and Natural Gas Corp logged a Rs 4,000 crore loss on natural gas output in the previous financial year as the government mandated price for the fuel was less than the cost of production.
“We need at least $4 per million British thermal unit to break-even as compared to the current gas price of $3.06 per mmBtu,” a senior company official said.
As per a new mechanism approved by the government in October 2014, the price of domestically produced natural gas is to be revised every six months – 1 April and 1 October, using weighted average of rates prevalent in gas surplus markets like Henry Hub (US), National Balancing Point (UK excluding Russia), Alberta (Canada) and Russia.
Using this formula, the price for April to September came to $3.06 per MMBtu as compared to $2.89 in previous six months.
5. FPI Outflow Hits 18-Month High at Rs 29,714 Crore in May
Foreign investors pulled out Rs 29,714 crore from the capital markets in May, making it the biggest outflow in 18 months, primarily due to a surge in global crude prices.
This comes following an outflow of Rs 15,561 crore from the capital markets (equity and debt) in April. Before that, foreign investors had pumped in Rs 2,662 crore in March.
According to the latest depository data, foreign portfolio investors withdrew a net sum of Rs 10,060 crore from equities and another Rs 19,654 crore from the debt market in May, taking the total to Rs 29,714 crore or $4.4 billion.
6. Airbus SE Front-Runner for $6.6 Billion Vistara Order? All We Know About the Expected Deal
Airbus SE is favoured to pull in an order from Singapore Airlines Ltd affiliate Vistara for as many as 60 new-engine single-aisle airliners to gain a stronger foothold in the booming Indian market, according to people familiar with the negotiations.
The airline is leaning toward buying the A320neo jets after a contest with Boeing Co’s 737 Max model, according to the people who asked not to be identified as the information isn’t public. The carrier will make an announcement soon, one of the officials said. The A320neo has an an average list price of about $110 million, valuing the deal at $6.6 billion before discounts that are common in large aircraft purchases.
The airline hasn’t signed a final deal yet and talks are continuing. An Airbus spokesman declined to comment. A Vistara spokeswoman said the airline will announce its fleet expansion plan at an appropriate time.
(Source: The Financial Express)
7. Air India Seeks Restoration of Equity Infusion From Govt
Air India has asked the government to “restore” equity infusion in the carrier, after it failed to find any takers for its disinvestment.
The loss-making carrier has already received more than Rs 26,000 crore under the bailout package announced by the former UPA government in April 2012.
“We have sought restoration of the equity infusion in Air India and have written to the government last week in this regard,” a senior airline official said.
The official, however, did not disclose the amount of the funds the airline was looking at.
The UPA government had approved a turnaround plan under which Air India is to receive a total equity infusion worth Rs 30,231 crore up to 2021, subject to meeting certain performance thresholds.
(Source: The Economic Times)
8. Flipkart Deal: Tax Department Will Act Once Walmart Obtains Regulatory Nod
E-commerce major Flipkart has shared some details with the Income Tax authorities on its $16-billion deal with US-based Walmart, but the Income Tax Department will act only after regulatory approvals have been obtained, an official said.
The department is currently studying the details received from the company, the official said, adding that they can issue notices seeking details of taxes withheld once the transactions are completed.
Last month, the tax department had written to Bentonville, Arkansas-based Walmart saying that the US company can seek guidance about the tax liability under Section 195 (2) of the Income Tax Act.
Under Section 195 of the Act, anyone making payment to non-residents is required to deduct tax (commonly known as withholding tax).
(Source: Bloomgerg Quint)
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