Taxation
Government notifies GST Council, in effect from Monday
Following presidential assent last week to the GST Bill, the Union Finance Ministry on Monday notified the provisions of the Constitution Amendment Act that allows for setting up the Goods and Services Tax (GST) Council.
 
"The Central Government hereby appoints the 12th day of September, 2016 as the date on which the provisions of section 12 of the said Act shall come into force," a ministry notification said.
 
According to the provisions of the Constitution Amendment Act, the GST Council will have to be set up within 60 days of its notification. 
 
It is to be chaired by the Union Finance Minister and will include State Ministers as members.
 
The GST Council will decide on the tax rate, will recommend the taxes to be subsumed and exempted from GST, the rates of taxation and the model Central, State and Integrated GST laws.
 
It will also decide the threshold for levy of the tax, as well as the dispute resolution mechanism, among other important issues.
 
Noting that 20 states had already ratified the GST, President Pranab Mukherjee said in Chennai on Saturday that it was the GST Council's responsibility to have one uniform rate of GST tax to be introduced all over India.
 
The government targets to implement the new pan-India indirect tax regime from April 1, 2017. 
 
The Centre will have to pass the Central GST and Integrated GST Bills, while the states will need to approve their respective GST legislations.
 
The GST is a single indirect tax that proposes to subsume most central and state taxes like Value Added Tax, service tax, central sales tax, excise duty, additional customs duty and special additional customs duty.
 
The states will, however, be able to adopt a GST structure that is different from that recommended by the GST Council. The council recommendations will not be binding on the states.
 
The Bill says the GST Council will make recommendations to the Centre and the states on issues such as taxes, cess and surcharges that might be subsumed in the GST tax rate. Parliament and state assemblies have the right to accept those recommendations in their GST Bills.
 
While the pan-India overhaul of India's indirect tax regime has got the mandatory support of more than half the states, Tamil Nadu's ruling AIADMK had walked out before the voting on the Bill began, both in the Rajya Sabha and the Lok Sabha.
 
The party had wanted some changes in the Bill, such as imposition of four per cent additional tax on inter-state trade and transfer of money thus collected to the state of origin of the goods.
 
The Centre is to compensate the states for revenue losses for the first five years after the implementation of the GST if the states' revenues come down under the new tax regime.
 
Meanwhile, at a meeting here with the Empowered Committee of State Finance Ministers on GST last month, India Inc pitched for an 18 per cent standard rate on the ground that this rate will generate adequate tax buoyancy without fuelling inflation.
 
The opposition Congress had earlier demanded an 18 per cent cap on the GST rate.
 
The Federation of Indian Chambers of Commerce and Industry (Ficci) suggested that to check inflation and the tendency to evade taxes "the merit rate should be lower and the standard rate reasonable".
 
"As per the current indications and reports, goods will be categorised as being subject to merit rates (12 per cent), standard rates (18 per cent) and de-merit rates (40 per cent)," Ficci said in a release following a meeting here with the Empowered Committee.
 
"Certain goods will be exempted from the GST while bullion and jewellery will be charged at one-two per cent," it said regarding classification of goods for applying GST rates.
 
On the implementing of GST, Ficci said that in order to provide adequate time to trade and industry to prepare "for a hassle-free rollout of the GST regime", a minimum of six months should be permitted from the date of the adoption of the GST law by the GST Council.
 
"Additional time would be required in case the GST law as passed by Parliament or state legislatures is significantly different from the one adopted by the GST Council," the statement added.
 
In a meeting here with Revenue Secretary Hasmukh Adhia last month, industry chambers had expressed concerns about the draft GST law, flagging issues like dual administrative control and wide discretionary powers for tax authorities.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Will the strong coal price rebound sustain?

Asia’s policy-fuelled coal-price rebound may fade away, as demand is likely to remain sluggish, says a research note. Fitch Ratings, in the report says that it believes the strong gains in Asia thermal-coal prices in recent months – with the benchmark Newcastle 6,000kcal/kg coal price having appreciated 32% in August 2016 and averaged $54.2 per metric tonne – are unlikely to be sustained as they were driven more by production regulations than demand fundamentals. Demand continues to be weak, with China coal consumption having fallen 4.6% yoy in first half of 2016 and India imports down.

"Supply-demand dynamics remain unbalanced in Asia’s thermal-coal mining industry, while the pricing outlook is highly subjective to policy risks. We believe Shenhua’s strong balance sheet and vertical integration will allow it to maintain a strong credit profile. However, high debt levels and weak liquidity – including refinancing risks – continue to weigh on the credit profiles of PT Indika Energy Tbk (CCC) and Yanzhou Coal," the ratings agency says.

 
Fitch, talking about the situation in India, says the country is on its way to boost self-sufficiency in coal, with a 5.1% yoy gain in production in first half of 2016. It says, "The higher prices of seaborne coal prompted power plants to increase the use of domestic coal, causing first half of 2016 imports to drop 13.1%. The doubling of the volume-based clean-energy tax in February 2016 increased demand for high calorie-value coal, as evident from increased imports from South Africa (+26%) and Australia (+1%) at the expense of low-grade Indonesian coal (-22%) in May 2016."
 
 
China’s coal production dropped 9.7% in the first half of 2016, as the government slashed the number of working days to 276 a year from 330 in April 2016. Tightened supply caused imports to rise 8.2% in first half of 2016; they dipped 0.2% in July as seaborne coal prices edged up. Available supply remains sufficient even after as only 95 tonnes of excess capacity, or 2% of China’s annual production, were eliminated in July 2016. China is considering increasing flexibility in working-day controls if prices rise too steeply, according to government officials.
 
Indonesia is losing lustre of its low-grade coal, the ratings agency says, adding Indonesia’s coal production and exports continued to fall, contracting 10.5% and 14.3% yoy respectively in 4M16. "The clean-energy tax hike by Indonesia’s largest buyer, India, and the increased freight rates to date in 2016 have together dented the economic attraction of low-calorie-value coal. We expect domestic demand to increase as more coal-fired power-generation capacity comes on stream – but the pace may continue to be slower than government targets," Fitch says.
 

 

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Nifty, Sensex highly overbought – Weekly closing report
We had mentioned in last week’s closing report that Nifty, Sensex have bucked the weakness, and headed higher. The major indices of the Indian stock markets have been on an upswing since Tuesday, but have not sustained all the gains. On Friday, the market was bearish with losses of around 0.85%-0.96% over Thursday’s close. Over the week, the major indices have closed with small gains. The trends of the major indices in the course of the week’s trading are given in the table below:
 
 
Positive global cues and healthy inflow of foreign funds pushed the Indian equity markets to a striking distance of all-time highs by the end of the session on Tuesday as healthy buying was witnessed in all the 19 sub-indices of the BSE, led by stocks of banking, automobile and consumer durables. The BSE market breadth was tilted in favour of the bulls -- with 1,624 advances and 1,126 declines. On the NSE, on Tuesday, there were 938 advances, 524 declines and 60 unchanged. The Indian stock markets were closed on Monday on account of Ganesh Chaturthi.
 
Reliance Capital, a part of the Anil-Ambani-led group, on Tuesday said it has raised $300 million through private placement of debentures with tenures of 5 and 10 years. "The issue size offered was $ 150 million with an option to retain oversubscription by way of a greenshoe option of up to $150 million). The issue was fully subscribed, including the greenshoe option, and will be listed," the company said in a regulatory filing. The company’s shares closed at Rs558.00, up 2.46% on the BSE.
 
Profit booking subdued the Indian equity markets on Wednesday, as the key indices closed the day's trade on a flat note. Selling pressure was witnessed in consumer durables, oil and gas, and finance stocks. The BSE market breadth was tilted in favour of the bulls -- with 1,404 advances and 1,356 declines. On the NSE, there were 801 advances, 807 declines and 68 unchanged.
 
State-run power equipment manufacturer Bharat Heavy Electricals (BHEL) on Wednesday reported a rise of 54.21% in its standalone net profit for the first quarter of 2016-17. The company's Q1 net profit stood at Rs77.77 crore from Rs50.43 crore reported in the corresponding quarter of 2015-16. The company posted a net profit after three consecutive quarters of losses. BHEL’s total income from operations for the quarter under review increased by 28.72% to Rs5,622.46 crore from Rs4,367.70 crore for the corresponding period of last fiscal. Its net sales edged up by 29.03% to Rs5,522.76 crore from Rs4,280.02 crore during the first quarter of 2015-16. According to the company, it has an outstanding order book position of Rs108,000 crore at the end of Q1 2016-17. The company’s shares closed at Rs159.80, up 15.50% on the BSE.
 
Healthy quarterly results, consistent buying by foreign funds and a rise in global crude oil prices buoyed the Indian equity markets on Thursday. The key indices closed the day's trade in the green as healthy buying was witnessed in stocks of healthcare, automobile and consumer durables. However, gains were capped due to profit booking at higher levels and caution ahead of a key global financial event. The BSE market breadth was tilted in favour of the bulls -- with 1,608 advances and 1,151 declines. On the NSE, on Thursday, there were 905 advances, 552 declines and 68 unchanged.
 
ICICI Bank on Thursday became the first bank in India to deploy ‘software robots that emulate human action, in its over 200 business processes thereby reducing the response time to customers by up to 60%. "We have re-engineered over 200 business processes which are powered by software robots across various functions of the bank. We plan to more than double the software robots to over 500 by end of this fiscal," Chanda Kochhar, MD and CEO, ICICI Bank, said. 
 
According to the Federal Reserve’s Beige Book released in the afternoon, reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest pace on balance during the reporting period of July through late August. "Labour market conditions remained tight in most districts, with moderate payroll growth noted in general. Price increases remained slight overall," said the Beige Book. The Fed has been in focus recently, with investors pondering over when the US central bank will decide to raise interest rates. The Federal Open Market Committee, the Fed's monetary policy arm, is set to meet on September 20-21. On the economic front, the number of job openings increased to 5.9 million on the last business day of July, the US Labour Department reported on Wednesday.
 
Profit booking, coupled with negative global markets and lower crude oil prices, dragged down the Indian equity markets during the mid-afternoon trade session on Friday. The BSE market breadth was tilted in favour of the bears -- with 1,470 declines and 1,113 advances. Initially on Friday, the benchmark indices opened in the red due to negative Asian markets. Besides, caution ahead of the release of key macro-economic data such as the factory output -- Index of Industrial Production (IIP) -- for July and inflation figures for August weighed heavy on the indices. In addition, depreciation in the rupee's value dampened investors' sentiments. Negative global markets due to ECB's (European Central Bank) decision not to inject more liquidity and profit booking led the equity markets to trade lower, pointed out market analysts.

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