The fear of GAAR had spooked stock markets which tanked 2% on Monday on concerns that all short-term capital gains made by FII and P-Note investments would be taxed. The Sensex, however, recovered today rising over 200 points
New Delhi: Amidst fears that foreign institutional investors (FIIs) may be taxed for short-term capital gains in stock markets, the government today said it will examine and modify the General Anti Avoidance Rules (GAAR) if required, reports PTI.
“I will examine and modify GAAR as and when required. This is essential for anti-avoidance,” Mr Mukherjee said in Parliament today.
In his budget for 2012-13, finance minister Pranab Mukherjee had said that the government wanted to introduce GAAR in order to “counter aggressive tax avoidance schemes, while ensuring that it is used only in appropriate cases, by enabling a review by a GAAR panel”.
Securities and Exchange Board of India (SEBI) chairman UK Sinha had said yesterday the government “is going to have a new look at tax avoidance, so they are going to work in that way”.
The fear of GAAR had spooked stock markets which tanked 2% on Monday on concerns that all short-term capital gains made by FII and P-Note investments would be taxed. The Sensex, however, recovered today rising over 200 points.
Meanwhile, finance ministry sources seeking to allay fears that Participatory Notes—an instrument through which FIIs unregistered with SEBI invest in stock markets—said that the income tax (I-T) department will have to first prove the intention of avoidance before making GAAR applicable.
“GAAR is not created to target any class of financial instruments. The onus of proving tax avoidance lies mainly with the government and partially on the assessee,” sources said.
“All benefits which a person is entitled in a DTAA (Double Taxation Avoidance Agreement) treaty can be overruled or denied if GAAR is invoked,” sources said.
Provisions of GAAR will be applicable from 1st April and not with retrospective effect.
With a major cash-crunch leading to delayed payments of salaries and other dues for over three months, a spokesperson said the airline was putting in place a “holding plan” pending re-capitalisation and “there are several stations to which operations have been temporarily suspended”
New Delhi: Ailing Kingfisher Airlines on Tuesday said it has temporarily suspended operations from several major cities, including Kolkata and Hyderabad, and has asked nearly half of its 7,000-odd employees to stay at home till it managed to infuse fresh funds, reports PTI.
The airline, burdened by a debt of over Rs7,000 crore, also did not rule out laying off some staff saying a decision on the issue would depend on various decisions to be taken by the government and its bankers about funding and related issues.
With a major cash-crunch leading to delayed payments of salaries and other dues for over three months, a spokesperson said the airline was putting in place a “holding plan” pending re-capitalisation and “there are several stations to which operations have been temporarily suspended”.
“Since we could resume operations after getting re- capitalised, most staff at these stations have been asked to stay at home whilst remaining on the company's rolls,” an airline spokesperson said.
Airline sources said the cash-strapped carrier, which used to fly to about 60 destinations, would now fly to less than 30 cities. Among the destinations from where operations were being temporarily suspended were Kolkata, Hyderabad, Patna, Lucknow, Thiruvananthapuram and Bhubaneswar.
They said that between 40%-50% of about 7,000 staff have been asked to stay at home, but they would remain on the Kingfisher rolls.
Regarding speculation about the airline’s plans to retrench some staff, the spokesperson said “we are in a ‘holding’ pattern right now and are waiting for various decisions from the government and our consortium of bankers on the FDI (foreign direct investment) policy, working capital funding, etc. All of these will have a major impact on the staffing decisions we will have to make.”
The Kingfisher spokesperson said the airline has begun this year’s summer schedule by operating approximately 120 daily flights with 20 dedicated aircraft.
For the past two months, it was flying 28 planes and 140 flights as part of a curtailed winter schedule as against 400 daily flights with 64 aircraft it had proposed earlier.
Kingfisher has also paid Rs44 crore towards TDS arrears, which was due on or before 27th March, as directed by the Income Tax Appellate Tribunal in Bangalore, the spokesperson said.
“Our keen intent is to get re-capitalised and to bounce back as a major player in civil aviation... We will also protect the interests of all stakeholders, suppliers and service providers as an integral part of our recapitalization plans,” he said.
A consortium of 13 PSU banks, including State Bank of India, have an exposure of Rs5,608.07 crore to Kingfisher as on February this year, including Rs1,408.45 crore for SBI alone. The airline has an accumulated loss of over Rs6,000 crore.
Nifty may move in a narrow range of 5,185 and 5,275
Clarification on the government’s proposed GAAR norms led the market higher in post-noon trade. We had mentioned in yesterday’s closing report that if the Nifty closes above any previous day’s high the downtrend may reverse. Today the index managed to cross the previous day’s high but closed below that level. From here we may see the index moving sideways in a narrow range of 5,185 and 5,275. The National Stock Exchange (NSE) saw a volume of 78.20 crore shares.
The market opened higher on supportive global cues after US Federal Reserve chief Ben Bernanke reiterated the need to retain the ‘easy’ monetary policy for some more time to reduce unemployment. The announcement lifted US stocks overnight and also led to gains in the Asian pack in early trade today. Reflecting the positive trend, the Nifty opened 59 points higher at 5,243 and the Sensex resumed trade at 17,209, up 156 points over its previous close.
However, profit booking soon set in, pushing the indices to the day’s lows in the first hour itself. At the lows, the Nifty fell to 5,185 and the Sensex went back to 17,061.
The benchmarks were range-bound till about 1.30pm. The government’s clarification that it would not target the participatory notes in a blanket manner under its newly proposed General Anti-Avoidance Rule (GAAR) lifted the market to its intraday high in post-noon trade. At the highs, the Nifty rose to 5,278 and the Sensex jumped to 17,367.
Intense choppiness resulted in the benchmarks closing below the highs of the day. The Nifty closed 59 points up at 5,243 and the Sensex gained 205 points to settle at 17,257.
The advance-decline ratio on the NSE was 719:1010.
While the key benchmarks closed over 1% higher, the broader indices underperformed the Sensex. The BSE Mid-cap index lost 0.07% and the BSE Small-cap index fell by 0.17%.
Barring the BSE Power index (down 0.07%), all other sectoral gauges ended higher. They were led by BSE Consumer Durables (up 2.07%); BSE Fast Moving Consumer Goods (up 1.69%); BSE Realty (up 1.56%); BSE TECk (up 1.23%) and BSE Metal (up 1.22%).
DLF (up 4.31%), Cipla (up 3.79%); Sterlite Industries (up 3.56%); Hindustan Unilever (up 3.42%) and Bharti Airtel (up 3%) were the top gainers on the Sensex. The major losers were Maruti Suzuki (down 1.79%); BHEL (down 1.05%); Coal India (down 0.69%); NTPC (down 0.54%) and Sun Pharma (down 0.19%).
The top performers on the Nifty were DLF (up 4.52%); Cipla (up 3.81%); Sesa Goa (up 3.65%); Sterlite Ind (up 3.33%) and HUL (up 3.26%). The main laggards on the index were Maruti Suzuki (down 1.87%); Jaiprakash Associates (down 1.34%); HCL Technologies (down 0.97%); Grasim (down 0.90%) and BHEL (down 0.85%).
Markets in Asia, with the exception of the Chinese benchmark, settled higher on optimism from the US. A report indicating an unexpected improvement in German business confidence also supported the outlook.
The Hang Seng surged 1.60%; the Jakarta Composite advanced 1.18%; the KLSE Composite rose 0.32%; the Nikkei 225 jumped 2.36%; the Straits Times gained 1.49%; the Seoul Composite climbed 1.02% and the Taiwan Weighted settled 0.78% higher. Bucking the trend, the Shanghai Composite fell by 0.15%. At the time of writing, the key European indices were trading with gains of 0.25% to 0.64% and the US stocks futures were in the positive.
Back home, institutional investors were net sellers in the equities segment on Monday following an announcement by the government on Monday to tax on participatory notes (P-Notes), with the implementation of the General Anti-Avoidance Rules effective from 1 April 2012, as proposed in the Budget. While foreign institutional investors pulled out funds worth Rs135.29 crore, domestic institutional investors withdrew Rs200.94 crore.
Sadbhav Engineering today said it has bagged a Rs1,220 crore order from NHAI for four-laning of the Solapur-Bijapur section of NH-13. The project, to be executed on a BOT (Toll) basis, has a concession period of 20 years from the appointed date. The scrip closed 3.01% higher at Rs153.80 on the NSE.
Dr Reddy’s Laboratories, the country’s second largest pharma company, expects to sign a definitive agreement by June with Japan-based Fujifilm for a joint venture that will develop and produce generic drugs for the Japanese market. The stock settled at Rs1,684, a gain of 1.23% over its previous close.
KPIT Cummins, a product engineering and IT consulting firm, has entered into a Priority Customer agreement with Pune based InnovizeTech Software, to deploy their patent-pending software product—Sapience. The solution will be initially implemented in key business units by roles within KPIT Cummins. The stock declined 20.9% to close at Rs77.40 on the NSE.