GST rate likely to be over 12%, says finance ministry

The combined GST, recommended by the Finance Commission, includes 5% at the Central level and 7% at the state level

The finance ministry on Thursday said that the proposed Goods and Services Tax (GST) rate is likely to be higher than 12%, which was suggested by the task force set up by the 13th Finance Commission, reports PTI.

The Finance Commission (task force) had recommended an overall GST rate of 12% "but it is likely to be higher than that", revenue secretary Sunil Mitra said at a CII seminar in New Delhi.

However, he clarified that he was not talking about the Central GST but the combined tax at the Union and state governments' level.

The task force had recommended 5% GST rate at the Central level and 7% at the state level.

GST was earlier scheduled to be implemented from 1 April 2010, but now the Central GST will replace most of the indirect taxes at Central and state levels like service tax, excise duty, value added tax (VAT), and local levies.
 

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Bankers to meet RBI on base rate issue on Friday

Bankers are worried that the new model will affect their business of giving short-term loans to corporate clients at cheaper rates (below PLR), as lending rates on such loans will go up at least by 2% in the base rate system

With the 1st April deadline to migrate to the base rate model fast approaching, bank chiefs are likely to raise concerns about the new system and seek an extension of the deadline during their scheduled meeting with top Reserve Bank of India (RBI) officials on Friday, reports PTI.

Bankers are worried that the new model will affect their business of giving short-term loans to corporate clients at cheaper rates—below the Prime Lending Rate (PLR)—as lending rates on such loans will go up at least by 2% in the base rate system.

According to bankers, the base rate, a function of the cost of deposits, may be in the range of 8.5%-9.5% for most banks, which were lending to top-rated corporates at much lower rates, sometimes as low as 6%.

"When the lending rates rise in the new system on account of (the) base rate model, we may lose corporate customers who may seek other avenues to raise funds," said Allen C Pereira, chairman and managing director, Bank of Maharashtra.

According to him, creating a separate benchmark for short-term loans would help lenders retain their long-time corporate clients whose demand for working capital forms a good part of banks' loan-books.

Bankers are likely to seek time till July to prepare for the migration to the new model as they feel the April deadline gives them very little time to complete the huge task of gathering segment-wise data required to arrive at their respective base rates.

"Each bank has to calculate its own base rate. Banks which don't have their full operations under core banking may find this difficult. They may need some more time," said M Narendra, executive director, Bank of India.

Similar views were expressed by a majority of the bankers in a meeting with the Indian Banks Association (IBA) last month. In a letter to the RBI recently, the IBA had sought an extension till July to implement the base rate model.

In a move to bring in more transparency into bank lending, the regulator had issued draft guidelines last month to replace the existing benchmark prime lending rate (BPLR) model with the base rate.

The actual lending rates charged to borrowers would be the base rate plus borrower-specific charges, which will include product-specific operating costs, credit risk premium and tenor premium.

The central bank was apparently unhappy with the practice of banks lending at much lower rates than the BPLR to top-rated corporates, while the common borrower had to borrow at higher rates.

Standard Chartered Bank's India chief executive, Neeraj Swaroop, said that the new model has both 'plus and minus' aspects, which should be discussed by all stakeholders.

Citibank's chief financial officer Abhijit Sen said that lenders might be forced to administer two types of interest rates, particularly in infrastructure and mortgage loans, for a significant time if the customer was unwilling to switch to the new model.
 

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Indian government approves linkage for 11 thermal projects

Coal linkages for 11 supercritical units of 660MW each, which will come up in the 12th Plan period of 2012-17, have been sanctioned

The Indian government is believed to have approved fuel linkage for 11 thermal power projects of NTPC Ltd and Damodar Valley Corp Ltd (DVC) totalling an investment of over Rs29,000 crore, reports PTI.

"Coal linkages for the 11 supercritical units of 660MW each, which would come up in the 12th Plan period (2012-17) have been sanctioned," a coal ministry source said.

These 11 units include nine units of NTPC's power plants at Nabinagar (3x660MW), Meja (2x660MW), Solapur (2x660MW) and Mouda (2x660MW) and two units of DVC's Raghunathpur plant in West Bengal.

The global tender for sourcing equipment for these units was floated in October last year.

Supercritical units are environment friendly and improve efficiency of thermal power projects. The equipment would be used in five power projects in Bihar, Uttar Pradesh, Maharashtra and Jharkhand.

The Cabinet committee on infrastructure gave its approval to the bulk tender in September last year.
 

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