GST IMPACT ON SERVICES AND PRODUCTS
SRINAGAR: Telephone bills, insurance and banking services, business-class air travel and sale of newspaper space for advertisements will become costlier in the upcoming GST regime but education and healthcare will continue to be exempt from tax.
The all-powerful GST Council today finalised tax rates for services under the new regime set to kick in from July 1, earmarking an 18 per cent rate for telecom and financial services, which include banking and insurance, up from current 15 per cent. Though the government insisted that tax incidence will be same as the current if telecom companies claim input tax credit, industry associations said adding that tax as a principal is billed in actuals to consumers and any increase in incidence will result in rise in cost to them.
Briefing reporters after the two-day meeting, Finance Minister Arun Jaitley said transport services will be taxed at 5 per cent leading to a small drop in the economy class air travel which currently attracts 6 per cent service tax. Non-AC train travel, including on local trains and metro, as well as religious travel, including Haj yatra, will remain exempted from GST. Five per cent rate will also apply on rides from cab aggregators like Ola and Uber, which currently pay 6 per cent tax. AC train travel will attract 5 per cent service tax, same as freight levy.
The GST Council finalised four tax rates of 5, 12, 18 and 28 per cent for services, including telecom, insurance, hotels and restaurants, under the biggest tax reform since the Independence. The rates are inline with those finalised for goods. With this, rates of all items except a handful, including gold, have been decided ahead of the roll out of the Goods and Services Tax (GST) regime from July 1.
Space selling for advertisement in newspapers will attract 5 per cent levy under the GST. It is exempted from tax currently. Jaitley said telecom and financial services will be taxed at a standard rate of 18 per cent. Revenue Secretary Hashmukh Adhia insisted that the tax incidence on telecom services will be unchanged at 15 per cent after the input credit is taken on equipment.
But Cellular Operators Association of India (COAI) Rajan Mathews said: “You have to differentiate between impact of GST on companies and consumers. Companies may or may not structure their tariff as per provision of refund but customers will have to pay 18 per cent tax everytime bill is generated so consumers will be hit under the GST.”
UPTO 40 PERCENT IT STAFF NEEDS RESKILLING
NEW DELHI: IT body Nasscom has said up to 40% professionals of the estimated four-million workforce need re-skilling over the next five years if they need to keep pace with the changing face and automation of the industry.
Nasscom, which tried to allay fears of large-scale job losses in the $154 billion industry, said upgrading skillset of the workforce is a must to ensure job losses are contained and remain at low levels.
“There needs to be continued re-skilling, or either be prepared to perish. This is the new mantra,” Nasscom president R Chandrashekhar said.
Raman Roy, chairman of the body, said skill upgradation should be taken up on a massive scale. He said there is a need for Indian IT professionals to get up-to-date with new-age technologies such as virtual reality, augmented reality and artificial intelligence to remain relevant in the coming years.
“We need to re-skill faster than ever before,” CP Gurnani, CEO of Tech Mahindra said, while agreeing with the need for skill upgradation. Nasscom, however, said that despite challenges from automation and new technologies, the Indian IT industry continues to remain strong and has been adding new jobs.
It said there is no panic situation in the IT industry and claimed fears around largescale job losses are not true. Around 6 lakh new jobs have been added over the last three years, which including 1.7 lakh in 2016-17. “Reports of mass layoffs by IT companies in India are incorrect. In fact, the industry continues to be a net hirer with talent acquisition continuing across sectors… The sector remains one of the largest employers of the nation,” the IT body said.
STATES COMPLICATE WITH GST REGISTRATION
When the GST registration window opens on June 1, Molu Ram, a Mother Dairy milk vend operator, may be among those who seek registration. Like the ex-serviceman, there will be a few thousand other Safal and Mother Dairy booth operators who need to register.
“Most of our products such as fruits, vegetables and milk will beexempted from GST but all our booths will have to be fully compliant since some products like ice cream and edible oil will be in the net,” said Mother Dairy CFO Meghnad Mitra.
Clearly, most booth operators, a large part being ex-servicemen, are not in a position to comply with the electronic registration and filing requirements that will come with GST. So, Mother Dairy is creating a panel of 5-6 consultants to help them. But GST compliance will come at a cost – between Rs 1,500 and Rs 2,000 each – with the company yet to decide who will foot the bill.
Luckily for Mother Dairy, a bulk of the registration requirement will be limited to Delhi, Haryana and Uttar Pradesh since its booths operate in the National Capital Region. For the railways, the registration requirement will be in every state since its stations sell tickets to passengers and transport goods.
Individual railway zones will also have to register in each state through which their trains pass. If Northern Railways runs a train from, say, Delhi to Mumbai, it will need registration in Ma harashtra, Gujarat, Rajasthan, Madhya Pradesh, Haryana, Uttar Pradesh as well as Delhi since it will sell tickets in each state, explained tax lawyer RS Sharma.
The same will apply to a bus that runs from Delhi to Jammu, boarding passengers in Delhi, Karnal and Chandigarh, and also from Jammu on the return journey. “If there is centralised ticketing there is no need for separate registration in each state,” explained an officer. For the bus operator there is the additional complication of getting a tax credit from the Jammu & Kashmir government, which is yet to enact a GST law.
LOSSES BY OVERSEAS BANK
Chennai: State-owned Indian Overseas Bank saw its fourth-quarter net loss widen to Rs 647 crore, when compared to Rs 936.19 crore reported in the same quarter last year. Sequentially, however, fourth-quarter losses widened when compared to Rs 554.44 crore reported in the third-quarter of 2016-17.
IOB’s fourth quarter total income dropped 8% year-over-year to Rs 5,661.70 crore from Rs 6,157.72 crore. Sequentially, however there was a marginal increase of 1.1% from Rs 5,600 crore for the quarter ended December 31, 2016. Total business stood at Rs 3,68,119 crore on March-end. IOB’s CASA marginally reduced to 36.09% in March from 36.19% in December last year. However, it has improved from 28.72% as of March 31, 2016. Most banks saw their current and savings’ accounts deposits increase substantially during demonetisation from forced deposits.
IOB’s gross non-performing assets (NPAs) as a percentage of advances was at 22.39%, down from 22.42% in the third-quarter of 2016-17. Recovery in NPA accounts in full-year 2016-17 stood at Rs 8,710 crore as against Rs 5,872 crore in the year-ago period. Total deposits increased to Rs 2.11 lakh crore as on March 31, 2017 as against 2.10 lakh crore on December 31, 2016. Gross advances stood at Rs 1.56 lakh crore as of March 31, 2017 as against 1.53 lakh crore.
GENERAL MOTORS DECIDES TO CLOSE INDIA OPERATIONS
NEW DELHI: American carmaker General Motors has decided to close its India operations by the end of this year due to mounting losses, near-negligible sales and poor business management. GM India, which has already shut down its Halol plant in Gujarat last month, said production will continue at its Talegaon factory in Maharashtra as some of the export markets will be fed from India.
But the company will stop selling cars in one of the world’s mosthigh-potential automobile markets over the next couple of months, bringing an end to a painful existence that included crisis such as the emission scandal of 2013 where it was accused of committing a “corporate fraud” by a government panel. GM India started its India operations in 1996 and has so far invested over a billion dollar.
It would also not help us achieve a leadership position or compelling, long-term profitability in the domestic market. Difficult as it has been to reach this decision, it is the right outcome to support our global strategy and deliver appropriate returns for our shareholders,” Jacoby added. GM India has around 6,000 employees and management said around 400 of these, or about 8%, will be laid off gradually. Around 2,500 employees are posted at its global R&D centre at Bangalore and an equal number is employed in Talegaon plant.
Ironically, GM’s exit from India comes at a time when some of the other global car companies such as Korea’s Kia, China’s SAIC and France’s Peugeot are rushing in on expectations of healthy sales potential. India is the world’s fifth largest passenger vehicle market and is forecasted to be the third biggest by 2020, behind China and the US. The exit from India comes months after GM moving out of Europe by selling its car operations to France’s Peugeot. Sources said Peugeot may also take control of GM’s Talegaon plant and the US carmaker may source vehicles for exports through a contract manufacturing arrangement. The company is already in negotiations with its Chinese partner SAIC for sale of Halol facility, though a deal is not reached due to nagging labour issues and pending clearances from the Gujarat government.
FOOD GRAINS EXEMPTED FROM GST
SRINAGAR: The Centre and the states on Thursday agreed on goods and services tax rates+ for a majority of products and opted to lower the incidence of tax on mass-use items to ensure that prices come down in the new regime.
As a result, food grains and gur have been completely exempted from the levy, while products such as mithai, edible oil, sugar, tea, coffee and coal will attract 5% GST. Similarly, hair oil, tooth paste and soaps are in the 18% bracket along with capital goods and industrial intermediaries.
Small cars will face 28% GST, along with a small cess, while luxury cars will attract 15% cess in addition of the tax. Consumer durables such as AC and fridge too are in the 28% bracket, although officers said given the current incidence of 30-31%, there should be a reduction in prices.
“There is no increase on any commodity. On many of them there is are duction and tax on will also go away. Overall, there will be a reduction… One criteria in mind is that overall impact should not be inflationary,” finance minister Arun Jaitley told reporters.
Revenue secretary Hasmukh Adhia told reporters that of the 1,211 items, 7% will be exempted, 14% will be in the 5% slab, 17% in the 12% bracket, 43% in the 18% segment, while 19% will go into the top bracket of 28%.
IT INDUSTRY IN PANIC
NEW YORK: The Indian IT industry “rightly” should be in “panic” mode as it has not kept pace with the fast-changing innovation, India-born former McKinsey head Rajat Guptahas said.
He said industries today “have to constantly move with innovation” asbasic IT work gets automated and advanced innovations such as artificial intelligence, virtual reality and cloud computing overtake the technological world. “Code writing and testing is the most inefficient industry that existed,” he said at a panel discussion here yesterday organised by the New York Tri-State chapter of Pratham USA, one of the largest non-governmental organisations. “The Indian IT industry is in panic and rightly should be because technology is overtaking them and they haven’t invested in it,” Gupta said.
Gupta, who was a former director at Goldman Sachs, was sentenced to two years in prison after being convicted of insider trading charges. A free man now, Gupta has been gradually re-entering the social and philanthropic world. Last year, he assumed the role of Chairman of WHEELS Global Foundation, a US-based non-profit started by IIT alumni that focuses on applying technology to uplift rural communities and provide technological solutions to global challenges.
Experts are warning of prolonged layoffs in the Indian IT sector asdigitisation and automation become the new normal and a wave of protectionism in major markets like the US, Singapore, Australia and New Zealand closes the door for IT engineers from India.
Gupta said there is urgent need for “revolution in education” where imparting knowledge has to move from being in lecture mode to being more interactive, digital and participatory. “A fundamental revolution in education needs to be taking place,” he said.
He also voiced concern at the huge youth unemployment in India and other major countries. “India needs to create 20 million jobs a year and it is no way near that. Most of our skilling efforts in India are failures because certain elements are not built into it. It becomes a government scheme. Are (the youth) really skilled when they come out. No,” he said.
On the recent increase in hate crimes targeting Indian- Americans, Gupta said there has to be heightened awareness among the community through educational programs about their rights. The Indian-American community, unlike other minority communities, also does not have a legal defence fund that can be used to bring cases and prosecute those responsible for such crimes.