Digital transformation to add $154 billion to India’s GDP by 2021, says Microsoft
Digital transformation in the country is expected to contribute about USD 154 billion to India’s GDP by 2021, tech giant Microsoft said. The study by Microsoft and IDC, titled “Unlocking the economic impact of digital transformation in Asia Pacific”, said there has been a dramatic acceleration in the pace of digital transformation across India and Asia-Pacific economies. “In 2017, about 4 per cent of India’s GDP was derived from digital products and services created directly through the use of digital technologies like mobility, cloud, internet of things (IoT), and artificial intelligence (AI),” Microsoft India President Anant Maheshwari told reporters here.
He added that within the next four years, it is estimated that nearly 60 per cent of India’s GDP will have a strong connection to the digital transformation trends. “India is clearly on the digital transformation fast track. Organisations are increasingly deploying emerging technologies such as AI, and that will accelerate digital transformation-led growth even further,” he said. The study conducted with 1,560 respondents from mid and large-sized organisations across 15 economies.
The report found that digital transformation efforts for organisations range between 11 per cent and 14 per cent. “Business leaders expect to see more than 40 per cent improvements in key areas by 2020, with the biggest jump expected in productivity, customer advocacy as well as profit margin,” Maheshwari said.
Big boost for Modi government! economy to grow 7.3 per cent in fy 18-19, says Asian Development Bank
India’s economic growth is expected to rebound to 7.3 per cent this fiscal and further to 7.6 per cent in 2019-20 with increased productivity post GST and investment revival due to banking reform, the Asian Development Bank (ADB) said. The economy grew 6.6 per cent in the last fiscal as it battled the lingering effects of demonetisation in 2016, businesses adjusting to Goods and Services Tax (GST) in 2017, and a subdued agriculture. The ADB’s growth projection of 7.3 per cent this fiscal is in line with that of rating agency Fitch, but a tad lower than RBI’s forecast of 7.4 per cent.
In its Asian Development Outlook, 2018, Manila-based ADB said the growth will pick up as the new tax regime improves productivity and as banking reform and corporate deleveraging take hold to reverse a downtrend in investment. “In sum, growth is forecast to pick up to 7.3 per cent in FY2018 on improved rural consumption, a modest uptick in private investment, and less drag from net exports. Urban consumption growth will remain stable, and impetus from public investment modest,” it said.
Growth is expected to pick up further to 7.6 per cent in FY2019 as efforts to strengthen the banking system and continued corporate deleveraging are likely to bolster private investment. “Also set to catalyse growth are benefits from the GST as it mitigates geographic fragmentation and adds revenue to the exchequer, as well as further progress on fiscal consolidation and reform to promote FDI,” it said.
The Asian Development Outlook (ADO) said the prospects for policy stimulus remain limited and there is risk of tight interest rate regime. “The deferment of fiscal consolidation, upside risks to inflation, and expected hikes in US interest rates in 2018 squeeze maneuvering room for policy rate cuts to stimulate growth. At the same time, the odds of a rate hike are low with the central bank indicating tolerance for slightly higher inflation and recognition of the need to nurture recovery. Consequently, the status quo is likely to hold in FY2018, albeit with some risk of monetary tightening,” it said.
It projected inflation to average 4.6 per cent in FY2018 (2018-19), rising to 5.0 per cent in FY2019 with further firming of global commodity prices and strengthening of domestic demand.
Urban India not impressed with Modi’s work, RBI survey shows; will the picture change before 2019 polls?
Urban India’s confidence in the economic situation of the country has dwindled again in March after little improvement in December while it has remained in “pessimistic zone since March 2017”, a recent survey by the Reserve Bank of India has shown. Urban consumers have expressed negative sentiments and a further deterioration on fronts such as the general economic situation and the employment scenario. And while the situation is expected to improve in next one year — just ahead of 2019 Lok Sabha polls — it would still not be as optimistic as it was in the first couple of years after Narendra Modi came to power.
It can be recalled that one of the first disruptive economic moves by the Prime Minister came in form of demonetisation in November 2016, whose impact began surfacing in the next year 2017. And while the country’s GDP slumped from 8.2% in FY16 to 7.1% in FY17, another disruptive move, the implementation of the Goods and Services Tax scarred the economy further. Even as economists and analysts are optimistic about the GST regime, the urban consumers still have their doubts, the March 2018 round of RBI’s Consumer Confidence Survey conducted in six metro cities showed.
“Respondents continued to express concern about the current employment situation, and the outlook for the year ahead was less positive than in the previous round,” the RBI said in the survey report.
Urban consumers’ sentiments were negative and deteriorating about the economic situation, income, employment, and price levels, while sentiments were positive with signs of deterioration only for spending. The future expectations show a better consumer sentiment but followed a “similar trajectory”.
“Households’ current perceptions on the general economic situation dived sharply from the neutral level polled in the last round (in December 2017),” the RBI said.
The quarterly consumer confidence survey data since December 2012 show that sentiments of urban India remained in the optimistic zone after Narendra Modi became the Prime Minister in May 2014 until March 2017. The last time it was in the optimistic zone was June 2013, after which it dived until the new NDA government was formed.
The survey was conducted in six metropolitan cities – Bengaluru; Chennai; Hyderabad; Kolkata; Mumbai; and New Delhi – and obtained 5,297 responses on households’ perceptions and expectations on the general economic situation, the employment scenario, the overall price situation and their own income and spending.
Is GST applicable on food, drinks supplied to students by schools? here is answer from finance ministry
The Union Finance Ministry on Wednesday said GST is not applicable on food and drinks supplied by schools directly to the students, while it is 5 per cent without input tax credit for mess and canteens in educational institutions.
“If schools up to higher secondary level supply food directly to students, then the same is exempt from GST,” the ministry said in an official statement, clarifying about Goods and Services Tax (GST) on supply of food and drinks in educational institutions.
It said: “Supply of food and drinks in a mess or canteens in educational institutions attracts GST at five per cent without input tax credit (ITC).”
ITC is a facility that sets off tax paid on inputs against the final tax to be paid by consumers.
The GST Council, in November 2017, had cut tax rates for all restaurants, except those located in hotels with per day room tariffs of Rs 7,500 and above, to five per cent from 18 per cent without the ITC facility.
India ranks 130 in index of economic freedom; up by 13 spots
India has jumped 13 places in the last one year to be earn 130th spot in the latest annual Index of Economic Freedom released by a top American think-tank. In 2017, India with a score of 52.6 points was ranked at 143 among 180 countries, two spots below neighbour Pakistan, according to the Index of Economic Freedom.
China with 57.4 points was ranked 111 in the 2017 index of The Heritage Foundation, an American conservative public policy think-tank based in Washington.
As per the latest Index of Economic Freedom, China has jumped one spot and Pakistan is now at 131 position.
India’s economic freedom score is 54.5, making its economy the 130th freest in the 2018 Index, the Heritage Foundation said.
“Its overall score has increased by 1.9 points, led by improvements in judicial effectiveness, business freedom, government integrity, and fiscal health. India is ranked 30th among 43 countries in the Asia–Pacific region, and its overall score is below the regional and world averages,” it added.
Noting that India is developing into an open-market economy, the Index said traces of its past autarkic policies still remain.
Economic liberalisation measures, including industrial deregulation, privatisation of state-owned enterprises and reduced controls on foreign trade and investment, that began in the early 1990s, accelerated growth, the report said.
More recently, the government reformed one of its more opaque operational practices to make the auctioning of rights to exploit state-owned resources more transparent.
“Corruption, underdeveloped infrastructure, a restrictive and burdensome regulatory environment, and poor financial and budget management continue to undermine overall development,” the report said.
While Prime Minister Narendra Modi promised sweeping economic reforms, the report said the reforms thus far have been modest.
“India’s diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services,” it said.
Although land titles in some urban and nearly all rural areas remain unclear, real property rights in large metropolitan areas are generally well enforced.
“The judiciary is independent, but the Indian courts are understaffed and lack the technology necessary to clear an enormous backlog. Although officials are often caught accepting bribes, a great deal of corruption goes unnoticed and unpunished,” according to the Heritage Foundation.
Observing that non-tariff barriers significantly impede trade, the Heritage Foundation said the government’s openness to foreign investment is below average.
“State-owned institutions dominate the financial sector, and foreign participation is limited. In public-sector banks, troubled assets account for about 10 percent of total assets,” it said
CBDT proposes changes in norms for advance ruling
The Central Board of Direct Taxes (CBDT) has proposed changes in the application process for obtaining advance ruling to bring it in line with Base Erosion and Profit Shifting (BEPS) Action 5 objectives, which mandate spontaneous exchange of information on ruling with countries of immediate as well as ultimate parents of taxpayers.
The proposed modified forms seek details including names, address, the country of the residence and taxpayer identification number issued by the country of residence. The draft notification proposes these changes under rule 44E, which relates to application to the Authority of Advance Ruling (AAR).
A taxpayer typically moves the AAR to procure an opinion or authoritative decision by the authority regarding tax consequences of a transaction, proposed transaction or an assessment.
“Under BEPS Action 5, exchange of permanent establishment (PE) rulings (by Authority for Advance Rulings) are required to be done not only with the countries of residence of all related parties with whom taxpayer enters into transaction, but also with the country of residence of the immediate parent company and the ultimate parent company,” the board said.
Merchant trade transaction not liable to GST: Kerala AAR
The Authority for Advance Ruling (AAR) under the GST in Kerala held that merchant trade transactions, in which traded commodities never enter the country’s tax jurisdiction, are not liable to the GST as goods are never imported to India.
In merchant trade transactions, a supplier is India procures goods from an overseas supplier and supplies directly to its overseas customer. In such transactions, goods do not come to the country.
Goods are liable to integrated GST (IGST) when they are imported to India and the IGST is payable at the time of import of goods into India, the authority said in its ruling.
“The applicant is neither liable to GST on the sale of goods procured from China and directly supplied to the US, nor on sale of goods stored in the warehouse in the Netherlands, after being procured from China, to customers, in and around the Netherlands, as the goods are not imported into India at any point,” the order said.
According to the GST Act, an advance ruling pronounced by AAR is binding only on applicant who has sought the advance ruling and on the officer concerned or the jurisdictional officer in respect of the applicant. This means that an advance ruling is not applicable to similarly placed other taxable persons in the state. It is only limited to the person who has applied for an advance ruling.
“While earlier, such transactions were not subject to VAT or service tax, there was an ambiguity under GST laws. Therefore, this AAR provides relief to industry, particularly in commodity trading where such transactions are quite common,” Pratik Jain, leader – indirect tax at PwC, said.
Jain said while it has been held that the GST is not required to be paid on such transactions, another important question which has not been asked in the application filed for this ruling is as to whether there is requirement for reversal of input credit of taxes paid on expenses attributable to such non-taxable income.