Monetary Policy 23 Jun 2017 by Tojo Jose

RBI warns banks to address big NPAs or to face action on insolvency procedures

RBI warns banks to address big NPAs or to face action on insolvency procedures

The Reserve Bank of India has warned banks to address big NPAs or face procedures under the new Insolvency and Bankruptcy Code on these accounts. In a communique to banks, the RBI urged settlement of 55 high value NPA accounts within six months. Earlier, the RBI’s Internal Advisory Committee (IAC) has identified 12 big NPA accounts that need immediate action. These NPAs accounts for nearly 25% of total NPAs of the banking system. The warning by the RBI comes after the government gave it the power to direct lenders to initiate the insolvency and resolution process in the event of default. According to experts, the RBI got power to initiate actions on NPA front as per the new

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Monetary Policy 15 Jun 2017 by Tojo Jose

Insolvency regime for financial Sector: RBI’s power to come down

Insolvency regime for financial Sector: RBI’s power to come down

The Cabinet has ratified an insolvency regime for the delicate financial sector. As per the Financial Resolution and Deposit Insurance Bill 2017, financial sector entities including banks, insurance companies and other entities related to the sector will come under the regime. The proposed Resolution Corporation under the regime interestingly gets the authority over Deposit Insurance. Besides it will get power to implement decisions related to financial stability which now comes under the RBI.  After the global financial crisis, major regulators in the West have enacted resolution regime that aims to rehabilitate financial sector entities that have a potential for failure. T

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Monetary Policy 13 Jun 2017 by Tojo Jose

CPI inflation registers its lowest since 2012

CPI inflation registers its lowest since 2012

Retail inflation measured by the CPI has recorded its lowest since 2012 when the index was launched. The new low was caused by contraction of food prices. According to the CSO’s inflation statistics published on Monday, inflation during May was 2.18%. inflation figure was 2.99% during the previous month (April). The current nationwide CPI unifies was launched by the CSO in 2012. Since then, the index has become the anchor index measuring inflation surpassing the significance of the WPI. According to the CSO data, decline in food prices has brought down the price rise. The Food and Beverages category recorded a price contraction of 0.2%. In another data published along wit

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Fiscal Policy 12 Jun 2017 by Tojo Jose

GST: tax rate on 66 items reduced and relief to small enterprises enhanced

GST: tax rate on 66 items reduced and relief to small enterprises enhanced

The GST Council’s 16th meeting on Sunday has brought down tax rate on 66 items in a fine-tuning exercise. The Finance Minister after the meeting also raised the exemption limit for the concessional composition scheme from Rs 50 lakh to Rs 75 lakh. Revision of other deserved items including that on hybrid cars are expected in the next meeting Items for rate cut Finance Minister Arun Jaitely who chaired meeting revealed the 66 items whose rate has been brought down. These include insulin, cashew nuts, pickles, ketchup, agarbattis, children’s drawing books, tractor components and others etc. Tax rate on children’s books were brought down from 12% to nil. For cine

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Monetary Policy 08 Jun 2017 by Tojo Jose

RBI brings advanced regulations for rupee denominated bonds

RBI brings advanced regulations for rupee denominated bonds

The Reserve Bank of India has made changes in Rupee denominated bond issue guidelines, enhancing the utility of RDBs from the Indian angle. RBI’s new regulations for RDBs - which are now a hit in the international market, aims at ensuring longer maturity period, lowering interest cost and to ensure that there is no malpractice in utilization of the proceeds among end users. Ever since the launch of the hit rupee denominated bonds by the IFC (International Finance Corporation) by the name ‘Masala bonds’, the RDBs are becoming attractive tool for both Indian issuers and for foreign investors. Most of the funds procured through RDBs are used to finance infrastructur

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Fiscal Policy 07 Jun 2017 by Tojo Jose

Anti-profiteering body is the next big work for the GST Council

Anti-profiteering body is the next big work for the GST Council

When the government is targeting on an anti-inflationary GST system, it is necessary to ensure that tax reduction on several commodities should brought down prices as well. Here, tax administers fear that when cost cascading effect and input tax credits are allowed, tax burden will come down. As a result, businesses may not bring down prices rather they may convert the tax reduction into profits. The situation is called profiteering. Checking this profiteering through anti-profiteering mechanisms is the task in front of the government. The GST Council proposed formation of an anti-profiteering body using the tax administrators to make sure that businesses are transferring tax redu

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Fiscal Policy 20 May 2017 by Tojo

GST Council sets four tier rate structure for services; standard rate at 18%

GST Council sets four tier rate structure for services; standard rate at 18%

The GST Council has finalized its prime work on services front by selecting 18% rate as the standard rate for the new GST network. As a result, bulk of the services will come under this rate including financial services, high end hotels, liquor licenses etc. There is a four-tier service tax slab with education and healthcare coming under exempted category as now. The four rates under the GST for services are 5%, 12%, 18% and 28%. Besides this, there is an exempted list that has zero tax incidence. Currently, services are taxed at 15% with a negative list comprising few sectors including education. Migration to a higher tax rate of 18% will not be inflationary as several services

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Fiscal Policy 14 Apr 2017 by Tojo Jose

GST’s rate on real estate sector is keenly awaited

GST’s rate on real estate sector is keenly awaited

Can GST save the real estate sector from its status of being the country’s largest destination for black money? Real estate players are worried that if the GST rate on the sector goes high and if the stamp duty continues in its current form, the sector cannot be saved. Chances are that 18% tax slab will be applied on real estate sector. If this happens, dealers may go for inventions to evade taxes. Any high rate is an invitation to evade than to pay the tax. The Parliament has cleared the GST during the budget session, and the tax regime is expected to be launched on 1 July. As per the legislation, land leasing, renting of commercial properties and purchase of under-constru

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Fiscal Policy 03 Mar 2017 by Tojo Jose

GST’s upper rate may go up to 40%

GST’s upper rate may go up to 40%

The Goods and Service Tax Council may raise the upward ceiling of the tax rate to 40% so that certain high rate inviting commodities can be taxed. Effectively, the new ceiling will raise the peak rate of centre and state rates individually to 20%. Under GST, both centre and states have equal ceiling rates. As per the original scheme, the maximum rate was 28% implying a peak rate of 14% for both the centre and states. The rate structure of GST will remain the same with four rates – 5%, 12%, 18% and 28%. Now in the next meeting of the GST Council, the 28 % rate will be replaced by 40%. A change in a clause of the model GST Bill inserting “not exceeding 14%” with &

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Fiscal Policy 17 Feb 2017 by Tojo Jose

GST Council to decide rate on gold in the next meeting; rate may get doubled

GST Council to decide rate on gold in the next meeting; rate may get doubled

The GST Council’s meeting on February 18 at Udaipur will decide tax rate on gold. Gold is at present attracting a sales tax of 1% and an excise duty rate of 1%. Reports indicate that states are arguing for a rate of 4%. At this rate, the centre and state may divide the tax revenues equally among them. Effectively, the proposed rate doubles the existing cumulative rate of 2%. Besides the excise duty and VAT (state sales tax), gold is having an import duty of 10%. A high rate may encourage smuggling and tax evasion. indirectly, such a rate will bring frictions between the dealers and tax officials. The 4% tax rate for gold is a rate outside the prescribed GST rates of 5%, 1

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