November 21 to 30

Laura ALEJANDRA Ruiz-Gaona

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Industry

India Inc:

Although India is moving further in the ease of doing business ranking, land is still an obstacle as it is not easy to acquire without having help from the government, according to top Indian corporates. Sanjiv Goenka, Chairman of Sanjiv Goenka Group, while speaking at the India Today Conclave East 2017 stated that for large projects it is difficult for the industry to procure land, for example if they are looking for 100, 500 or 1000 hectares. The businessman also recognized the government efforts to incentivize investment and affirmed that confidence shown by international agencies demonstrate the progress, but also noted that there is an 18 to 24 months lag between investment and investment transformed into job creation. Mr. Goenka as well as the ITC chief executive officer Sanjiv Puri who also participated in the discussion agreed that the GST is a good policy that removes existing boundaries.

 Other News

Income Tax Returns:

On Friday November 24, the government asked all tax offices to verify the income tax returns made after demonetization, and only to accept those revised tax returns that involved a “bona fide inadvertent error” or “a mistake” on part of the assessed. One year after the government implemented its plan to fight corruption with demonetization, it decided to target black money. The target is to detect the money that was hidden by people who deposited it in the bank, filled a revised income tax return and saved about 30% tax for the extra money deposited. Nevertheless, experts such as senior chartered accountant Dilip Lakhani affirmed that legally there are other reasons to fill a return that must be accepted, so the success of demonetization rests in the ability of the I-T department to detect untaxed cash usually deposited into bank accounts. The punishment for those whose returns were manipulated are higher taxes under the anti-abuse provisions of the law. 

S&P:

Standard and Poor rating agency (S&P) re-iterated its BBB- rating on India due to the low per capita income, high fiscal deficit and high government debt. Despite the government efforts to boost the economy with demonetization and the GST unifying tax, S&P preferred to maintain its rating unchanged, although it predicted a robust economy growth from 2018 to 2020 with exchange reserves rising. Even though Moody’s Investors Service decided to improve India’s rating, Ranen Banerjee, partner (public finance and economics) at PwC India indicated that S&P’s policy was conservative and wait and watch the impact of government efforts, while Moody’s was based on reforms already initiated.

GST:

The total GST collections for October 2017 resulted in a reduction of almost 10%, from over Rs 92,000 crore in September to Rs 83,346 crore in the current month. A Finance Ministry statement affirmed that the drop in the collections was caused by the reduction in several products’ taxes, as well as the electronic transit permit system, e-way bill, and deadline changes for returns. The revenues collected from the GST are split between the Centre and states, where the states are compensated for loses due to the implementation of the GST instead of the previous taxing system. The ministry explained that extra GST was collected in the previous months due to additional tax inflow on inter-state movement of goods, as initially GST was paid on transfer of goods from one state to another, but this Interstate GST was used to pay the states, reducing the influx of new taxes. Now, the credit is utilized only when final sale transaction is taking place.

Government

Economy Forecast:

According to a survey developed by FICCI research company, the dissatisfactory effects of demonetization and the GST are slowly coming to an end and economic growth is expected to rebound. Some of the results include a GDP growth of 6.2 percent in Q2 of 2017-18, and 6.7 percent in Q3 of 2017-18 due to the stabilization of the GST regime and demonetization adjustment. Inflation measured by the wholesale price index for year 2017-18 is predicted to be about 2.8 percent and consumer price index about 3.4 percent. Additionally, a study made by Nomura Group presents Gross Value-Added growth in the third quarter of the financial year, taking place after October, from 5.6 percent in Q2 to 6.3 percent in Q3.

 

 

November 14 to 20

Laura ALEJANDRA Ruiz-Gaona

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Industry

Costal Economic Zones:

The government approved the first Costal Economic Zone (CEZ) in India at the Jawaharlal Nehru Port in Maharashtra. This initiative is part of a plan to create jobs and boost the manufacturing sector, and includes the creation of fourteen CEZs. About 45 companies are expected to set up manufacturing units in 200 hectares of land in the zone. According to a government official, an investment of about Rs 15,000 crore is expected in the first phase and more than 1.5 lakh jobs would be created in the first phase of the project. This is one of the plans by the government to improve the ease of doing business and ease of importing and exporting to attract investment to the country.

Other News

 Wholesale Inflation:

The Wholesale Price Index (WPI) inflation registered an increase from 2.60 percent in September to 3.59 percent in October, driven by the fast rise in the price of food and fuel. The increase in the food price climbed from 2.04 percent in September to 4.3 percent October, while the contraction in fuel prices was just 2.1 percent in October while it was 11.55 percent in September. The increase of 36.6 percent in vegetables prices is responsible for the food inflation. Economic affairs secretary Subhash Chandra Garg affirms that this increase is seasonal as it can be explained by the adverse weather conditions. The GST Council decision to cut the tax rate on 177 items from 28 to 18 percent is expected to ease the inflationary pressure.

GST:

The GST Council decided to reduce the tax on 178 items from 28 to 18 percent, starting on November 15 2017. This decision was one of the many modifications the council has applied to the GST. The deadlines for the GST-1 returns were also modified for those companies with an annual turnover of less than 1.5 lakh crore: For those filling their July-September form the deadline is December 31; for the October-December forms the new deadline is February 15 2018; and for the January-March ones the deadline is April 30 2018.

India’s Investment Rating:

The international rating agency Moody’s Investors Services, decided for the first time in thirteen years to raise India’s sovereign rating from Baa3 to Baa2, as growth prospects have improved due to the government economic and institutional reforms. According to Moodys lower taxes and higher public expenditure could expand public deficit in 2017-18, but the commitment to fiscal consolidation and spending efficiency would narrow the deficit in the following years.

Government

Goods and Services:

According to a recent study by the State Bank of India, rural India is demanding better quality and more quantity goods and services, as the living standards improve. One of the reasons is the decline in prices caused by the increasing number of companies, especially manufacturing and fast-moving consumer goods (FMCG) companies, which have opened up distribution channels that allow the entry of products into those areas. Ecowrap, a study made by the State Bank of India, reported that since July 2016, there has been a decline in non-discretionary items consumption in rural areas, leading them to conclude that consumers preferences are changing.

 

 

November 07 to 13

Laura ALEJANDRA Ruiz-Gaona

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Industry

Start-ups:

The Global Entrepreneurship Summit (GES) that will take place on November 28 to 30 in India will be a platform for India and the U.S. to discuss problems affecting start-ups, according to Erik Azulay, director of The Nexus Incubator, a company specialized on the promotion of start-ups and entrepreneurship in India. Mr. Azulay stated that some start-up policies need to be improved not only in the idea but in the practice, and there is where India has had problems. In his opinion, the U.S. can help as a complementary agent by introducing better practices to India, which will not be undermining the national existing programs.  The GES will be an opportunity to discuss current practices, how to improve them and common potential areas of growth. The Summit will take place in Hyderabad, India.

Trade Unions’ protests:

Ten central trade unions protested against the government inaction toward workers’ interests, demanding better wages, more jobs and pension. The Unions called the three days protest on Thursday November 9th, threatening to escalate the protest to as national level if the government did not listen to their demands. The unions affirm that the government follows a pro-corporate agenda, ignoring workers’ needs. In 2015, the government had already set up a team to look into a 12-point charter of demands that the Centre of Indian Trade Unions had earlier come out with, although the unions are not pleased with the way their proposals have been addressed.

Other News: Demonetization and GST

Demonetization:

One year after demonetization, cash is still the preferred payment method in India, contrary to the common belief that the initial scarcity was leading to a cashless economy. The first months after demonetization, digital payments increased and ATMs withdrawals decreased, presumably because of cash shortage. Nevertheless, after the economy started to recover, digital payments have decreased to the previous levels, while ATM withdrawals rose back to the original level. Digital infrastructure is still lagging compared to other countries.

Additionally, the Prime Minister’s Office affirmed that without demonetization the value of high denomination currency would have been 50 percent more than it was as the end of September this year. This value implies Rs. 18 lakh crore without demonetization, while the actual value with demonetization is approximately Rs 12 lakh crore. Therefore, high denomination notes (HDN) have been brought down by Rs 6 lakh crore, a value that represents 50 percent of the value of HDN in circulation.

GST:

The GST council decided on Friday November 10 to reduce the tax on over 200 items, to reduce the levy on restaurants to 5 percent, and to leave only 50 products under the highest 28 per cent slab. These decisions will help consumers as it reduces the price of several products, and producers who have had problems filling the required forms to get returns and pay their taxes. The changes aim to make the scheme simpler and to have a better compliance.  The discussion about imposing a single GST tariff was led by the Congress vice president Rahul Gandhi, who proposed a fixed 18 percent rate. Finance Minister Arun Jaitley opposed the idea saying that the tax structure does not allow a single tax as items need to be taxed by the type of good, making the luxury goods more taxable than the necessary goods.

Government

Direct Tax Collection:

The Finance Ministry affirmed that the direct tax collection for the April-October period was Rs 4.39 lakh crore, 15.2 percent higher than last year’s collection for the same period.  According to the statement up to October 2017, 44.8 percent of the annual budget target of Rs 9.8 lakh crore for direct taxes was achieved. Additionally, gross collections (before adjusting for refunds) increased by 10.7 percent for the mentioned period.

 

November 01 to 06

Laura ALEJANDRA Ruiz-Gaona

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Industry

Textile:

According to the Federation of Indian Export Organizations (FIEO) Indian textile and apparel sectors have huge business opportunities in the United Arab Emirates . A delegation of 112 members from the sector participated in the 'International Apparel & Textile Fair' that took place in Dubai from November 1st to 3rd. They exhibited their products in the Indian Pavilion, to promote them and show India’s high fashion and quality products. According to FIEO, India is UAE’s largest trading partner, and 27 percent of India’s earnings from foreign exchange come from textiles. 

Suzuki:

Suzuki Motors chief executive Toshihiro Suzuki is concerned about the possibility of a downside risk to the company’s Indian unit if India moves to rapidly towards   electric vehicles . Mr. Suzuki stated that a sudden shift towards electrification can be a risk for the company, as it is not prepared for the large volumes of production that would be need. India’s initiative to create environment-friendly policies such as the 2030 target to move to an all-electric fleet would be responsible for the massive and fast demand of electric vehicles. The chairman of the Indian local unit, Mr. R.C. Bhargava, confirmed that Suzuki is working to produce this kind of vehicles, and he mentioned an alliance with the automobile company Toyota Motor Corp. to generate state of the art technology that will support electric vehicles.

Other News: GST and Income Tax Department

 GST:

The GST Council (GoM) keeps extending the GSTR returns filling dates, necessary to claim input tax credit, after facing problems with the GST implementation. The GSTR 2 deadline (for purchases) will be November 30 instead of the previous October 31 deadline. The GSTR 1 date was also modified previously from September 10 to October 10, causing the need to modify the GSTR 2 and GSTR 3 deadlines. The GSTR 3 deadline was also modified from November 10 to December 11 according to the Finance Ministry. Last week the Ministry decided to waive the late fee on filing returns for August and September, in order to ease the transition to the new tax system, and now the GSTR 2 deadline extension will help 30.81 lakh (hundred thousand) taxpayers to fill the returns for the month of July 2017.

 Income Tax:

20,572 tax returns will be scrutinized after the Income Tax Department found discrepancies in incomes before and after demonetization. The I-T department will use a volume of records and testimonials to make sure that the tax return is filled correctly and there is no tax evasion. This operation is part of a government’s campaign to identify black money, which included demonetization first phase 'Operation Clean Money' on January 31 this year, after which 17.73 lakh suspicious cases were detected in several bank accounts.

The Income Tax Department and Securities and Exchange Board of India (Sebi) also stated that they will scrutinize the Paradise Papers to examine if some Indian companies were involved in the global scandal. The Paradise Papers, produced by the International Consortium of Investigative Journalists (ICIJ), are a compilation of private documents describing companies and wealthy individuals who invested in offshore tax havens.  The Central Board of Direct Taxes (CBDT) chairman Sushil Chandra affirmed that when there are names available the Board will check those companies’ income tax returns to verify if there is any underreporting of income.

Government

Ease of Doing Business Rank:

After jumping 30 places in the World Bank's ease of doing business ranking in 2017, New Delhi is aiming for the top 50 by promising  about 90 more reforms. The government’s plan is to implement the reforms before May 2018, reducing several processes and moving them to an online platform. Other improvements include construction permits and registration property. Next year’s ranking will also take into account the GST reforms. Several ministries are working together to complete the task as the World Bank takes into account not only policies to be implemented but those already on the ground.