In a letter to Union finance minister Arun Jaitley, Punjab finance minister Manpreet Badal also sought the inclusion of electricity, real estate and petroleum products under GST. “We may also have a look at the entire gamut of tax rates and exemptions so that a long-term blueprint is available for our forward path,” he said.
Originally, only essential items such as wheat, rice and food grains were included in the exempted category, but the list expanded after many states sought inclusion of mass-consumption items in their states.
Making a strong pitch for a comprehensive review of all exemptions while revising the threshold, Badal said, “Most progressive regimes globally promote high thresholds for exemption but with few exemptions. Somehow we have started with low thresholds and subsequently have given a very large number of exemptions.”
In his letter to Jaitley, the Punjab finance minister also said there should be a common composition limit for goods and services.
These demands assume significance in the backdrop of the upcoming general elections and could be a sign of the opposition Congress getting more assertive with increased representation in the council following its victory in three recent state polls, defeating the Bharatiya Janata Party.
The meeting of the GST Council held on December 22, following the poll results, was a politically charged affair with some Congress state ministers opposing cuts in tax rates of some products to 18% from 28%.
Representatives of BJP-ruled states demanded that this opposition be recorded in the minutes of the council, citing a contradiction with the Congress party’s public demand that all goods be taxed at 18%.
Congress state government representatives, on the other hand, objected to Prime Minister Narendra Modi making an announcement with respect to reducing the number of items in the 28% slab ahead of the meeting of the council, the apex decision-making body for GST.
The council had thus far managed to keep politics out of its deliberations, with most issues getting decided by consensus.
Punjab also sought reconstitution of the law review committee, in view of the upcoming general election, to look at the entire law holistically. “We should avoid the temptation of another knee-jerk reaction and work towards making our GST truly world-class,” said Badal.
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From IL&FS to PSB mergers, the year gone by for India Inc
ilfs.jpg.webpDefaults in repayment obligations by IL&FS, followed by rating downgrades, shook the financial system this year.
Fresh lending by NBFCs, including housing finance companies, took a hit as they diverted cash to meet the outstanding liabilities. It halted the upswing enjoyed by NBFCs over last five years. It started with IL&FS defaulting on commercial paper due end-August and later in September. On October 1, the government moved the NCLT and superseded the board. The government appointed a new board headed by Uday Kotak to revive it by selling assets and raising funds.
Soon, the business models of NBFCs were questioned, assetliability mismatch discussed and borrowing rates hardened. RBI started looking at asset-liability norms. Either they were too reliant on short-term borrowings, or the underlying asset being financed was illiquid.
Valuations of NBFCs and housing finance companies corrected and price to book halved in the last quarter of the calendar year. Supertech Realty’s default in interest repayment led to concerns of defaults by developers. Since October, growth in lending of NBFCs and HFCs has slowed down. The scrutiny would ensure that good business models will survive and emerge stronger.
LIC-IDBI Bank
LIC bailed out debt-laden lender IDBI Bank by buying 51% stake in it. The deal was seen happening at the behest of the government using public money. IDBI Bank has NPAs of 30% of the total advances. The investment was done after the insurance regulator gave a special permission to LIC to breach the investment guidelines. There were concerns raised on this investment decision and returns on investment. LIC will also have to draw a plan to revive the bank, reduce the non-performing loans, and plan future recapitalisation.
The Rupee
The rupee plunged to a record low this year as emerging markets, including Turkey and Argentina, spooked global investors. On October 11, the rupee hit 74.48 against the dollar amid a bout of overseas fund outflows from emerging markets.
But the sentiment reversed later, shortening the odds in favour of emerging market investments as global crude oil prices slumped about 40% from their peak.
Although the rupee remains one of the worst emerging market currencies, it started gaining strength from November onward. The local unit now ranks as one of Asia’s best performing currencies.
PSB Mergers
In September, the government announced the merger of Bank of Baroda, Dena Bank and Vijaya Bank. Analysts looked at it as the beginning of a consolidation in the public sector banking sector, reeling under capital pressure and bad debt woes. In this merger, BoB is seen as a strong lender that can absorb the smaller peers. The order sent a message that the government needs PSU banks to play a role in the economy and cannot let them fail. The merged entity is expected to have deep penetration and expand faster. Larger scale and a strong CASA base, along with a pan-India presence brought about by the merger, should improve access to capital for the merged banking entity. This brings Dena Bank out of restrictions imposed under the Reserve Bank of India’s Prompt Corrective Action framework. The merger is likely to aid in better risk pricing of loans and support recovery in profitability over the longer term.
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Axis Bank MD & CEO Shikha Sharma retires
axis_bccl.jpg.webpAmitabh Chaudhry will be the new managing director and CEO of the bank with effect from January 1, 2019, it said further.
Chaudhry, the former MD and CEO of HDFC Standard Life Insurance Company, was in September named the MD and CEO of Axis Bank for a period of three years, with effect from January 1, 2019. Earlier on December 8, Axis Bank had inducted Chaudhry as additional director on its board, three weeks ahead of his taking over as the new managing director and CEO of the private sector lender.
Chaudhry, 54, started his career in corporate banking with the Bank of America in 1987, where he worked in diverse roles. He is a BTech (Electronic & Electricals) from the Birla Institute of Technology & Science, Pilani and an alumnus of the lndian Institute of Management, Ahmedabad.
In July 2017, the board of Axis Bank had approved the reappointment of Sharma, who was to start her fourth term as MD and CEO from June 2018.
However, in April this year, Sharma wanted her new term to be reduced to seven months from a three-year tenure without citing any reasons, which was accepted by the board.
It was learnt that the RBI had asked Axis Bank’s board to reconsider the decision to reappoint Sharma amid concerns over rising bad loans on the bank’s books. She had completed her third term as the bank’s head on May 31.
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Punjab for fewer GST exclusions, higher exemption threshold
3.jpg.webpIn a letter to Union finance minister Arun Jaitley, Punjab finance minister Manpreet Badal also sought the inclusion of electricity, real estate and petroleum products under GST. “We may also have a look at the entire gamut of tax rates and exemptions so that a long-term blueprint is available for our forward path,” he said.
Originally, only essential items such as wheat, rice and food grains were included in the exempted category, but the list expanded after many states sought inclusion of mass-consumption items in their states.
via GST: Punjab for fewer GST exclusions, higher exemption threshold
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