During the last three weeks or so, the oil marketing public sector undertakings (PSUs) viz. Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) have increased the retail price of petrol and diesel continuously almost every day. The cumulative increase works out to about Rs 9 per liter petrol and Rs 11 per liter in case of diesel. As a consequence, the current price of both the fuels in Delhi is about Rs 80.5 per liter. In April/May, petrol was selling at Rs 71 per liter whereas diesel price was Rs 69 per litre. The prices of petrol and diesel are deregulated [petrol since June 2010 and diesel since October 2014]. The oil...
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Category: Economic outlook
Telecom mess – onus is on the regulator
Addressing the company’s annual general meeting on August 12, 2019, Chairman, Reliance Industries Limited (RIL), Mukesh Ambani had announced a road-map for Reliance to become a net debt-free company before March 31, 2021. That was the time when, the telecom industry was passing through an unprecedented crisis with most of the companies having huge debt in their books and not generating adequate cash flows for servicing the loans (Reliance Jio – the telecommunication unit of the conglomerate – was the lone exception). The crisis was aggravated by an order of the Supreme Court (SC) on October 24, 2019 directing telecom companies to pay ‘unpaid’ dues towards license fee and spectrum usage charges [SUC]. The order was the culmination of a...
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A highly unreasonable request
Granting interest waiver, in addition to deferment, will amount to discrimination among borrowers who decide to avail the RBI’s loan moratorium and others who don’t The Supreme Court was against burdening customers with a loan trap while hearing a Public Interest Litigation (PIL) filed by one Gajendra Sharma, demanding a “waiver on interest charged” by a bank citing the relief given by the Reserve Bank of India (RBI) on the payment of equated monthly installments (EMIs) during March and August 31 due to the pandemic. A three-Judge Bench of the Supreme Court observed: “There is no merit in burdening customers, who have opted for the RBI-approved loan moratorium, with additional interest. Once you fix a moratorium it should serve the purpose...
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GST – the compensation riddle
In view of the dwindling tax revenue (courtesy, reduction in their own collection as well as their share in taxes collected by the Centre as per the Finance Commission devolution formula), even as the states are demanding full compensation for the shortfall from the union government, the latter has not only been making short payment but the amount is released after considerable time lag. For instance, the compensation for October/November, 2019 about Rs 34,000 crore was released in February/April, 2020. The economic devastation triggered by a prolonged lockdown has only made matters worse. With states revenue virtually drying up during the first two months of current financial year (the trend is expected to continue through most of the year), while...
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Remodel Google tax
Tech giants are getting away by not paying tax in the source country but the fact remains that their profits are coming from users located within the Indian territory. This anomaly needs to be addressed soon On June 2, the Trump administration announced a probe into digital services taxes that have been either adopted or are under consideration by its trading partners viz, Austria, Brazil, the Czech Republic, the European Union (EU), India, Indonesia, Italy, Spain, Turkey and the UK. This refers to the so-called “Section 301 investigation” by the United States Trade Representative (USTR) to determine whether levies on electronic commerce discriminate against US technological giants like Apple, Google, Amazon and so on. The probe could lead to the...
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Corporate India – tax all @15%
A major factor affecting the competitiveness of Indian industries and India’s ability to attract foreign investment for long has been the high rate of corporate tax. In 2018-19, the rate of tax on domestic companies was 30%; including surcharge and cess, the effective incidence worked out to 34.9%. Given that the corporate tax rate in other countries viz. US (21%), OECD average (21.4%), China (25%), Vietnam (20%), Thailand (20%), Singapore (17%) etc, was much lower, this made India a sort of outlier when seen from the perspective of a potential investor looking for investment opportunities. Though, the Income Tax (IT) law provides for a spate of exemptions and incentives which facilitates reduction in the tax liability, the effective incidence continues...
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Remodel Google Tax
On June 2, 2020, Trump administration announced probe into digital services taxes that have been either adopted or are under consideration by its trading partners viz. Austria, Brazil, the Czech Republic, the European Union [EU], India, Indonesia, Italy, Spain, Turkey, and U.K. This is the so-called Section 301 investigation by the United States Trade Representative [USTR] to determine whether levies on electronic commerce [or ‘Google tax’ in short] discriminate against American tech giants like Apple, Google, Amazon etc. This could lead to the US imposing tariffs on exports from these countries. Earlier, USTR had launched and completed section 301 probe into France’s digital services tax regime [France levies Google tax @ 3% on digital transactions of firms that have annual local...
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Moratorium – no guarantee for interest waiver
On March 27, 2020, the Reserve Bank of India [RBI] governor, Shaktikanta Das announced a comprehensive action plan to resuscitate the economy devastated by the Corona virus. Apart from measures to inject liquidity in the financial system, increase in availability of credit and reduce the cost of capital, the plan sought to ease the stress of loan repayments on businesses and individuals. Amongst others, this includes 3-month moratorium on payment of installments in respect of all term loans outstanding on March 31, 2020. Even as the lockdown continued much longer than it was initially envisaged [there were three extensions after the first phase announced by Prime Minister, Modi on March 24, 2020] on May 22, 2020, the governor announced extension...
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Much ado about nothing
Faced with a steep decline in its revenue and increase in expenditure commitment, the Modi Government has opted for a package which is dependent on loans After a long wait of about seven weeks, since the nationwide lockdown began on March 25, Prime Minister Narendra Modi announced the ‘Atmanirbhar Bharat Abhiyan’, a special package of Rs 20,00,000 crore, about 10 per cent of the Gross Domestic Product (GDP), to revive the economy. Finance Minister Nirmala Sitharaman unveiled the details in five tranches during press conferences held between May 13 and 17. The package aims at giving relief to all strata of society impacted by the sudden stoppage of economic activities viz. farmers, workers, migrant labourers, micro, small and medium enterprises (MSMEs), vendors,...
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Stimulus package – much ado about nothing
After a long wait of about 7 weeks since the nation-wide lockdown on March 24, 2020, Prime Minister, Narendra Modi announced on May 12, 2020 ‘Atmanirbhar Bharat Abhiyan’, a special economic and comprehensive package of Rs 2000,000 crore, about 10% of gross domestic product [GDP], to revive the economy. The finance minister, Nirmala Sitharaman unveiled the details in 5 tranches during press conferences held on May 13 – 17, 2020. The package aims at giving relief to all strata of the society impacted by sudden stoppage of economic activities viz. farmers, workers, migrant labor, micro, small and medium enterprises [MSMEs], vendors, small merchants, self-employed, middle class etc. Given its mega size, an immediate question that comes to mind is whether...
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