Non-corporate taxpayers operating in IFSC to be charged alternate minimum tax at concessional rate of 9% at par with minimum alternate tax applicable for Corporates.
In order to promote trade in stock exchanges located in International Financial Services Centre (IFSC), the Union Finance and Corporate Affairs Minister Arun Jaitley proposed to provide two more concessions for IFSC.
Presenting the General Budget 2018-19 in Parliament Jaitley proposed to exempt transfer of derivatives and certain securities by non-residents from capital gains tax. Further, the Finance Minister added that non-corporate taxpayers operating in IFSC shall be charged Alternate Minimum Tax (AMT) at concessional rate of 9% at par with Minimum Alternate Tax (MAT) applicable for corporates.
The Government had endeavored to develop a world class international financial services centre in India. In recent years, various measures including tax incentives have been provided in order to fulfil this objective.
A monthly collection of around ₹80,000 cr appears sufficient to meet the Centre’s and States’ needs
The Goods and Services Tax (GST) collections for December 2017 show an increase, but despite this there are concerns that the tepid collections since July could pose a problem on the fiscal deficit front.
However, a closer look at the numbers shows that these fears are misplaced. The Centre’s tax collection, as per the CGA (Controller General of Accounts), appears to be on track to achieving the Budget estimates for 2017-18. There are, however, many trouble spots in the new regime.
The complexity of the GST, which combines many of the indirect taxes of the Centre and States, has made it quite difficult to estimate the expected monthly collection target.
At a press conference in August 2017, Finance Minister Arun Jaitley said that the collections in July were better than the target of ₹91,000 crore for that month. This figure has been used since then as a ball-park figure for measuring monthly GST collections.
If we use this figure, GST collections in October (₹83,346 crore), November (₹80,808 crore) and December (₹86,703 crore) are well short of the target. But that may not really be the case.
To estimate the targeted monthly GST collection, we worked backward to see the projected revenue in the Budget estimate for 2017-18 from goods and services that have been put under GST. While service taxes have mostly moved under GST, only about a third of excise duty collections are under GST since the taxes on many petroleum products are still outside the new regime. Under Customs duty, almost 64 per cent of the collections are now under GST.
Using this basis, around ₹43,000 crore of GST need to be collected by the Centre monthly towards its indirect tax collections. A portion of this will devolve to the States as part of their share in the Centre’s revenue.
States totally have to be disbursed ₹43,000 crore every month, assuming 14 per cent annual growth from their 2015-16 revenue. Working with these numbers, a monthly GST collection of around ₹80,000 crore appears sufficient to meet the Centre’s and States’ needs.
Actual numbers
The fact that the Centre has not fallen short in its indirect tax collections is borne out by the numbers from the CGA. Gross tax revenue of the Centre for the period between April to November 2017 was ₹10,87,302 crore, up 16.5 per cent from the amount collected in the same period in 2016-17.
Interestingly, gross indirect tax collection of the Centre in this period was up 18.2 per cent, having risen from ₹5,08,924 crore to ₹6,01,904 crore.
While the devolution to States was 25 per cent higher, the Centre’s net tax revenue has managed to increase 12.59 per cent, showing that the Finance Minister will not have too much difficulty in balancing the fisc.
The catch
While the Centre’s collections are on track, allocations to States can pose a problem. “Due to the fact that IGST revenue is disbursed over a period of time, there is a thinking amongst States that there is a revenue shortfall,” explains Gautam Khattar, Partner, Indirect tax, PwC.
Disputes on input-tax credit claimed by businesses in the provisional GSTR 3B form are another issue that could impede calculations. “Definitely, this is the major concern for the Department because invoice matching is the backbone of GST,” says Vishal Raheja, DGM, Taxmann.
India-focused funds together raised about $3.1 billion in 2017, according to Preqin data.
Multiples Alternate Asset Management, the private equity fund founded by former ICICI Venture CEO Renuka Ramnath, is set to raise as much as $1billion in what could be one of the largest capital-raising plans by a domestic asset manager.
The programme, which is expected to start in February, will target pension funds, sovereign wealth funds and university endowments in North America, Europe, the Middle East and South East Asia, two people with knowledge of the matter said.
The proposed fund will be equivalent to almost one-third of the capital raised by 29 India-focused private equity and venture capital funds in 2017.
The fund is being launched with appetite for long-term capital after a relative lull of almost a decade. Big-ticket asset owners such as pension and sovereign funds have started putting in money since last year, especially after Moody’s Investors Service upgraded India’s sovereign rating outlook, which lifted sentiment towards one of the fastest-growing economies.
Multiples raised its first fund of $400 million in 2011 and its second fund of $750 million in 2016. It has delivered an average internal rate of return (IRR) of 30% to investors, sources said.
The average net IRR of India-focused funds was 14% over the past 10 years, according to London-based data tracker Preqin, compared with the median net IRR of 11.9% across all Asia-based private equity funds of all vintages.
“Yes, we have already started discussions with our existing limited partners and are looking to start marketing roadshows from Febru-ary. We expect the first close by mid of this year and a final close by December,” said one of the two people.
Founded in 2009 by Ramnath, former managing director and CEO of ICICI Venture, the private equity arm of the country’s biggest private lender, ICICI Bank, Multiples manages close to $1billion assets, its website showed. It counts Canada Pension Plan Investment Board and other North American pension money managers and university endowments as its largest limited partners or investors.
These investors have already committed to the fresh fundraising. Some of the investments by Multiples include Arvind, Cholamandalam Investment & Finance, Indian Energy Exchange and RBL. Last January, the firm sold its 14% stake in India’s largest movie hall chain PVR to rival private equity fund Warburg Pincus for Rs 820 crore, making a return on more than three times on its four-year-old investment, in constant currency terms.
India-focused funds together raised about $3.1 billion in 2017, according to Preqin data. This is more than double the money raised by 18 asset managers in 2016. Last year, former Temasek India head Manish Kejriwal’s Kedaara Capital raised about $750 million for its second fund, while IDFC Alternatives raised $350 million.
PE fundraising slowed soon after the Lehman crisis with asset managers struggling to get out of their investments as valuations were rearranged, said the head of a large US fund in India. “The Moody’s upgrade and related strength seen in the economy and continued strong sentiment are expected to keep the India story intact,” he added.
Foreign portfolio investors (FPIs) have invested a phenomenal $3 billion (close to Rs 18,000 crore) in India’s capital markets this month on expectations of high yields as corporate earnings are expected to pick up with the economy gathering momentum after the slowdown due to the chaotic implementation of GST.
The sharp increase in inflows comes after an outflow of over Rs 3,500 crore by foreign portfolio investors (FPIs) from the capital markets in December, data compiled by depositories shows. According to market analysts money pumped in by FPIs has played a key role in fuelling the bull run in the stock markets that saw both the Sensex and Nifty on a record breaking spree in recent weeks.
FPIs infused a net amount to the tune of Rs 11,759 crore in stocks and Rs 6,127 crore in debt during January 1-25 — translating into net inflows of Rs 17,866 crore. For the entire 2017, FPIs invested a collective amount of Rs 2 lakh crore in the country’s equity and debt markets.
The inflow in the current month can be attributed to anticipation of earnings recovery and attractive yields which is expected to further strengthen inflow from foreign investors in the current financial year, said Dinesh Rohira, CEO of 5nance, an online platform providing financial planning services.
However, Quantum MF Fund Manager-Fixed Income Pankaj Pathak believes that FPIs may not be able to repeat this showing in 2018 as withdrawal of liquidity and rate hikes in developed economies pick up. This would provide them with alternative avenues of investment.
The FPI investments have also helped to bolster the country’s foreign exchange reserves which touched an all-time high of USD 414.784 billion in the week to January 19, Reserve Bank data showed. The RBI data showed that the forex reserves rose by USD 959.1 million to touch a record high during the reporting week. In the previous week, the reserves had touched USD 413.825 billion after it rose by USD 2.7 billion.
The reserves had crossed the USD 400-billion mark for the first time in the week to September 8, 2017 but have since been fluctuating. But for the past four weeks the figure has shown a continuous rise. Higher foreign exchange reserves lead to a stronger rupee which in turn reduces the cost of imports as fewer rupees have to be paid to buy the same amount of dollars to pay for items such as crude oil.
A higher foreign exchange kitty also provides a comfortable cushion to finance imports especially at a time when crude prices are shooting up in the international market and the country’s trade deficit has been growing. However, while FPI inflows add to the forex reserves they are considered “hot money” as they can leave Indian shores at short notice and this could send the rupee into a tailspin.
A senior finance ministry official said that foreign direct investment (FDI) is a more stable source of funding for the economy and since it also creates jobs and incomes the government is keen to see an increase in such investments. The Prime Minister’s trip to Davos was aimed at achieving this goal, he pointed out. He said that the government has been working on the ease of doing business which has seen a sharp increase in FDI inflows and this policy will continue in the forthcoming budget. At the same time the government is keen FPI inflows are not disrupted due to tax levies on stocks that create uncertainties, he added.
Foreign portfolio investors (FPIs) have invested a phenomenal $3 billion (close to Rs 18,000 crore) in India’s capital markets this month on expectations of high yields as corporate earnings are expected to pick up with the economy gathering momentum after the slowdown due to the chaotic implementation of GST.
The sharp increase in inflows comes after an outflow of over Rs 3,500 crore by foreign portfolio investors (FPIs) from the capital markets in December, data compiled by depositories shows. According to market analysts money pumped in by FPIs has played a key role in fuelling the bull run in the stock markets that saw both the Sensex and Nifty on a record breaking spree in recent weeks.
FPIs infused a net amount to the tune of Rs 11,759 crore in stocks and Rs 6,127 crore in debt during January 1-25 — translating into net inflows of Rs 17,866 crore. For the entire 2017, FPIs invested a collective amount of Rs 2 lakh crore in the country’s equity and debt markets.
The inflow in the current month can be attributed to anticipation of earnings recovery and attractive yields which is expected to further strengthen inflow from foreign investors in the current financial year, said Dinesh Rohira, CEO of 5nance, an online platform providing financial planning services.
However, Quantum MF Fund Manager-Fixed Income Pankaj Pathak believes that FPIs may not be able to repeat this showing in 2018 as withdrawal of liquidity and rate hikes in developed economies pick up. This would provide them with alternative avenues of investment.
The FPI investments have also helped to bolster the country’s foreign exchange reserves which touched an all-time high of USD 414.784 billion in the week to January 19, Reserve Bank data showed. The RBI data showed that the forex reserves rose by USD 959.1 million to touch a record high during the reporting week. In the previous week, the reserves had touched USD 413.825 billion after it rose by USD 2.7 billion.
The reserves had crossed the USD 400-billion mark for the first time in the week to September 8, 2017 but have since been fluctuating. But for the past four weeks the figure has shown a continuous rise. Higher foreign exchange reserves lead to a stronger rupee which in turn reduces the cost of imports as fewer rupees have to be paid to buy the same amount of dollars to pay for items such as crude oil.
A higher foreign exchange kitty also provides a comfortable cushion to finance imports especially at a time when crude prices are shooting up in the international market and the country’s trade deficit has been growing. However, while FPI inflows add to the forex reserves they are considered “hot money” as they can leave Indian shores at short notice and this could send the rupee into a tailspin.
A senior finance ministry official said that foreign direct investment (FDI) is a more stable source of funding for the economy and since it also creates jobs and incomes the government is keen to see an increase in such investments. The Prime Minister’s trip to Davos was aimed at achieving this goal, he pointed out. He said that the government has been working on the ease of doing business which has seen a sharp increase in FDI inflows and this policy will continue in the forthcoming budget. At the same time the government is keen FPI inflows are not disrupted due to tax levies on stocks that create uncertainties, he added.
Flipkart received India’s largest ever PE investment of $2.5 billion in a single round from Softbank
Private equity firms invested $23.8 billion across 591 deals in 2017, making it the biggest year for PE investments in India, says a report.
According to deal tracker Venture Intelligence, the investment value is 39 per cent higher than the previous high of $17.1 billion (recorded in 2015) and 55 per cent higher than $15.4 billion invested during 2016. In terms of number of deals the year 2017 saw 21 per cent less activity as compared to 2016 (731 deals), indicating large number of big-ticket transactions.
“The year witnessed 31 investment deals with size greater than USD 200 million, aggregating to $15.4 billion or 65 per cent of the total investments,” the report said. These figures include venture capital investments, but exclude PE investments in real estate.
In terms of industries, IT/ ITeS companies accounted for 45 per cent of the value pie attracting $10.7 billion worth investments across 325 transactions.
Flipkart received India’s largest ever PE investment of $2.5 billion in a single round from Softbank and another $1.4 billion from strategic investors Tencent, eBay and Microsoft. Softbank also invested $1.4 billion in mobile wallet and payments firm One97 Communications, which owns the Paytm brand. BFSI (Banking, Financial Services and Insurance) companies continued to enjoy the second spot attracting $4.40 billion across 61 transactions.
The sector was led by Bain Capital’s $1.04 billion investment in Axis Bank — the largest ever single investment in the sector — and Warburg Pincus’ $384 million pre-IPO investment in ICICI Lombard General Insurance.
On the back of its two mega bets (Flipkart and Paytm), Softbank emerged as the largest investor during the year with investments totaling over $4 billion (including a $250 million investment in Oyo Rooms).
Other top investors include Canadian pension fund CPPIB with $2 billion investments across five companies; while Warburg Pincus invested $1.6 billion across nine companies, and KKR invested about $680 million.
China’s Tencent emerged as a significant strategic investor in the Indian Internet and mobile sector with investment of $1.1 billion across home grown leaders like Flipkart, Ola, Byjus Classes and Practo.
Direct tax collections during the first nine-and-a-half months of the current fiscal have risen by 18.7% to Rs 6.89 lakh crore, the tax department said on Wednesday.
The collections till January 15, 2018 represent over 70% of the Rs 9.8-lakh-crore revenue target from direct taxes, the Central Board of Direct Taxes (CBDT) said in a statement.
Gross collections (before adjusting for refunds) have increased by 13.5% to Rs 8.11 lakh crore during April, 2017 to January 15, 2018. Refunds amounting to Rs 1.22 lakh crore have been issued during this period.
Stating that there has been “consistent and significant” improvement in the position of direct tax collections during the current fiscal, the CBDT said the growth rate of total gross collections has improved from 10% in Q1, to 10.3% in Q2, to 12.6% in Q3 and to 13.5% as on January 15, 2018.
Similarly, the growth rate of total net direct tax collections has climbed up from 14.8% in Q1, to 15.8% in Q2, to 18.2% in Q3 and to 18.7% as on January 15, 2018.
The growth in corporate tax collections has risen from 4.8% in the first quarter of current fiscal to 10.1% in Q3 and 11.4% as on January 15, 2018.
Similarly, the growth rate of net corporate tax collections increased from 10.8% in Q2 to 17.4% in Q3 and to 18.2% as on January 15, 2018.
