World Bank projects 7.2% growth rate for India in 2017

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Even as the World Bank has revised India’s growth figures by 0.4 percentage points as compared to its January forecast, India remains the fastest growing major economy in the world, the World Bank officials said.

Noting that India is recovering from the temporary adverse effects of demonetisation, the World Bank has projected a strong 7.2 per cent growth rate for India this year against 6.8 per cent growth in 2016.

Even as the World Bank has revised India’s growth figures by 0.4 percentage points as compared to its January forecast, India remains the fastest growing major economy in the world, the World Bank officials said.

The growth projections for China remains unchanged at 6.5 per cent for 2017 and then 6.3 per cent for the next two years 2018 and 2019. The World Bank in its latest Global Economic Prospects, projects India’s growth to 7.5 per cent in 2018 and 7.7 per cent in 2019.

In both the years, the forecast has been downgraded by 0.3 per cent and 0.1 percentage points as compared to the January 2017 forecast.

“A downgrade to India’s fast pace of expansion,” the World Bank said, is “mainly reflecting a softer-than-expected recovery in private investment.”

In 2016, in India, activity was underpinned by favourable monsoon rains that supported agriculture and rural consumption, an increase in infrastructure spending, and robust government consumption, the report said.

“In India, recent data indicate a rebound this year, with the easing of cash shortages and rising exports. An increase in government spending in India, including on capital formation, has partially offset soft private investment,” it said.

“While manufacturing Purchasing Managers’ Indexes have generally picked up, industrial production has been mixed,” the Bank said in its latest report.

Observing that India’s growth is forecast to increase to 7.2 per cent in Financial Year 2017 and accelerate to 7.7 per cent by 2019, is slightly below previous projections, the Bank said this outlook mainly reflects a more protracted recovery in private investment than previously envisaged.

“Nonetheless, domestic demand is expected to remain strong, supported by ongoing policy reforms, especially the introduction of the nationwide Goods and Services Tax (GST),” it said.

“Significant gains by the ruling party in state elections should support the government’s economic reform agenda, which aims at unlocking supply constraints, and creating a business environment that is more conducive to private investment,” the Bank said.

M Ayhan Kose, Director of the World Bank Group’s Development Prospects Group, in response to a question, underscored the need of reforms in the banking sector.

“The government has especially taken steps to address the banking sector weakness, but that remains on the to-do list,” Kose told PTI.

“Second (to do list) of course is the initiative by the government to remove some of the public investments, exactly the right thing to do to stimulate – to try to reinvigorate -private investment, which has been weak,” the Bank official said in response to a question.

Source: http://indianexpress.com/article/business/banking-and-finance/world-bank-projects-7-2-growth-rate-for-india-in-2017-4689537/

GST: Filing returns will no longer be taxing

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By Prakash Kumar, CEO, GSTN and Upender Gupta, Commissioner (GST Policy), Ministry of Finance

There is an excitement in the country about GST. People want to understand the process of GST. Through this article, we present some points about the process of filing returns.

Every trader will have to file returns once a month and pay tax. The input credits of taxes that have been paid on purchases will be automatic and will be available to every trader. The whole process of filing returns is online. If accounts are kept in the Excel sheet provided by GSTN, then the same account will automatically be converted into returns with the help of an offline tool every month.

If a trader sells all his merchandise only to retail customers, then the returns of such a trader will be very simple – the summary of rate-wise turnover will be shown. If a trader avails of the composition scheme and has a turnover of less than Rs.50 lakh, such a trader will not have to file returns every month, but every three months, showing the total turnover.

Traders selling business-to-business merchandise must give specific details for each sale invoice in their returns. When a trader’s sales details are entered into the form of returns on the GST website by the 10th of the month, the complete details of purchases made by his buyers will be seen in his GSTR-2 (GST Online Account). That means it will auto-populate.

With the purchasing buyer clicking okay, after looking at these details, the merchant’s GSTR-3 return will appear in the computer itself. The GSTN system will auto prepare and show the merchant’s tax liability and the complete details of the input tax credit, along with net tax liability. The trader would be required to deposit the difference between tax liability and input tax credit. Taxes must be deposited online or in the bank.

After this, the trader will have to submit the final return made by computer by clicking on GSTR-3 and submitting it by the 20th of the month. There is an arrangement in business-to-business transactions which we call the input tax credit reversal, which is to return the input tax credit taken. A lot of people have expressed concern about this, but if you understand the whole process, then you would fully support it.

If the trader from whom you buy goods has shown that transaction in his return by the 10th of the month, you will get input tax credit. Suppose the person selling the goods does not put that invoice in his returns, even then you will get an opportunity to show it in your GSTR-2 return by the 15th of the month, and by doing so, you will get full input tax credit.

After that, you have to contact the businessman (the supplier) and explain that he must show that transaction in his return so that there is no reversal of the input tax credit received in the next month. You will get 30 days for this and if even then the merchant who sells the merchandise does not accept this transaction and does not show it in his return, then the input tax credit tax that you got would be reversed in your returns next month.

It is the duty of every businessman to deal with such traders who have deposited the tax with the government after collecting the tax from you.On the basis of the default of each merchant, they will be given a compliance rating, which will be visible to all other traders so that you do not do business with frequent defaulters.

Source: http://blogs.economictimes.indiatimes.com/et-commentary/gst-filing-returns-will-no-longer-be-taxing/

As Narendra Modi government gets set to crack GST whip on tax evaders, India Inc voices concern

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According to Section 132 of the Central GST Bill cleared by the Lok Sabha recently, the taxman can also proceed against anyone for wrongly availing input tax credits.

Many functionaries from corporate India and tax experts have voiced concerns over the government’s plan to give unprecedented teeth to the country’s indirect tax administrators by making tax evasion above `5 crore a “cognizable and non-bailable offence” in the upcoming Goods and Services Tax (GST) regime. According to Section 132 of the Central GST Bill cleared by the Lok Sabha recently, the taxman can also proceed against anyone for wrongly availing input tax credits or refunds above the same threshold, treating it as a cognizable and non-bailable offence, where the police have the authority to arrest the person concerned without warrant.

While non-remittance of tax deducted at source could lead to non-bailable warrant under the Income-Tax Act, this has been sparingly used – one recent instance was that of the Bengaluru High Court denying a request of the I-T department to issue a non-bailable warrant against the beleaguered businessman Vijay Mallya.  The punitive provisions under indirect tax laws have, however, been less biting.

The service tax department had invited the Delhi high court’s ire last September for arresting a senior executive of travel portal MakeMyTrip for failing to deposit tax after collecting it from those who booked hotel room nights via the portal. Disturbed over the fact that the arrest took place without even issuing a show cause notice to the firm and giving it an opportunity to defend itself, the court awarded costs to the travel portal and asked the taxman to refund the service tax collected after the arrest. The tax department went in appeal against the court’s decision and the matter is now before the Supreme Court.

“It may be reasonable to make “collection of tax but non-payment to government’ a non-bailable offence, as there is very little room here for interpretation in such case. But availing tax credits through wrong invoices or obtaining higher-than-admissible refunds are subject to technical interpretations in the early days of GST and it would be extremely stringent to make these non-bailable offences,” Bipin Sapra, Indirect Tax partner at EY said. Echoing the view, Anita Rastogi, partner-indirect tax, PwC India said the country’s indirect laws have never had such tough provisions against tax evasion.

Section 132 of the CGST Bill also spells out the punishment for tax evasions above Rs.1 crore: if the amount evaded exceeds Rs. 5 crore, imprisonment up to five years is possible along with fine, Rs. 2-5 crore evasion could lead to imprisonment extending to three years and fine, Rs.1-2 crore evasion could invite up to 1-year jail term and fine.

Source: http://www.financialexpress.com/economy/as-narendra-modi-government-gets-set-to-crack-gst-whip-on-tax-evaders-india-inc-voices-concern/613908/

India’s consumer confidence highest among emerging markets: Credit Suisse

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India’s buoyant consumer sentiment was supported by consumers’ greater confidence in their current and future finances, as well as relatively lower inflation expectations.

India’s consumer confidence is highest compared to other emerging market peers despite the near-term sentiment being adversely impacted by the Centre’s demonetisation move, says a survey.

According to the Credit Suisse Emerging Consumer Scorecard, India has the highest consumer confidence score among the eight emerging markets surveyed — Brazil, China, India, Indonesia, Mexico, Russia, South Africa and Turkey — while China slipped to third place.

India’s buoyant consumer sentiment was supported by consumers’ greater confidence in their current and future finances, as well as relatively lower inflation expectations.

India saw strong improvement in personal finances expectations; a net 47 per cent of the respondents expect the state of their personal finances to improve over the next six months, up from 27 per cent in last year’s survey.

However, only 57 per cent of respondents thought it was a good time to make a major purchase, a sharp drop compared to 80 per cent last year.

“A further 10 per cent of surveyed households have succeeded in entering middle income territory in last three years. This creates a consumer base of 1.25 billion people across eight countries covered, confirming the significance of emerging consumer story and growth opportunity for investors,” said Richard Kersley Head of Global Equity Research Product and Thematic Research at Credit Suisse.

The report said combined effect of demonetisation and GST will help to drive the adoption of non-cash payment modes by consumers and will likely lead to acceleration in the switch to consumption of branded goods.

The government in November last year had announced the demonetisation of Rs 500 and 1,000 currency notes to crack down against black money and terror financing.

The survey also said, as the emerging market consumer has developed, local brands are increasingly  gaining leading market share in lucrative consumer segments previously the preserve of large global brands owned by Western multinational companies.

Source: http://economictimes.indiatimes.com/articleshow/57920862.cms

Indian economy to pick up once impact of note ban fades: IMF

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IMF in its note titled ‘Global Prospects and Policy Challenges’ said, “Further subsidy reduction and tax reforms, including a robust design and full implementation of the Goods and Services Tax (GST), are necessary to attain medium-term fiscal consolidation plans.”

India’s economic growth is expected to pick up once the effects of cash shortages linked to the currency exchange initiative fade, the International Monetary Fund (IMF) has said. Prime Minister Narendra Modi on November 8 had announced scrapping of old Rs 500 and Rs 1000 notes, pulling out 86 per cent of the total currency in circulation.

 

Noting that India’s fiscal deficit is expected to continue narrowing in the near-term, the IMF in its note titled ‘Global Prospects and Policy Challenges’ said, “Further subsidy reduction and tax reforms, including a robust design and full implementation of the Goods and Services Tax (GST), are necessary to attain medium-term fiscal consolidation plans.”

 

It further observed that in some emerging economies like China and India reducing excessive corporate leverage and improving bank’s balance sheets or adopting more prudent risk-management practices, including to reduce currency and maturity balance sheet mismatches, will help reduce vulnerabilities to global financial conditions, possible capital outflows, and sharp currency movements.

 

The government last month pegged GDP growth at 7.1 per cent for 2016-17 despite the note ban. The Central Statistics Office (CSO) had put the figure for October-December at 7 per cent, compared to 7.4 per cent in the second quarter and 7.2 per cent in the first.

 

India’s growth was higher than China’s 6.8 per cent for October-December of 2016. The growth numbers were better than those projected by RBI (6.9 per cent) and international agencies like IMF (6.6 per cent) and OECD (7 per cent) in view of the cash recall. The Organisation for Economic Cooperation and Development (OECD) in February last year had projected the country’s growth at 7.4 per cent for 2016-17. Buoyed by higher-than-expected growth, Finance Minister Arun Jaitley has also said a 7 per cent expansion in the third quarter belies the exaggerated claims of note ban impact on the rural economy.

 

Source: http://www.financialexpress.com/economy/indian-economy-to-pick-up-once-impact-of-note-ban-fades-imf/589248/

World Bank CEO lauds demonetisation, says economy will see positive impact

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World Bank CEO Kristalina Georgieva pegs India’s GDP growth rate at 7% for 2016-17, says ongoing reforms, GST implementation augur well for the economy

The government’s decision to ban high-value banknotes as part of efforts to stamp out corruption will have a profound and positive impact on India’s economy, World Bank chief executive Kristalina Georgieva said.

Demonetisation may have caused some hardship to people living in the cash economy but in the long run the move will help foster a clean and digitized economy, Georgieva said.

“What India has done will be studied (by other countries). There hasn’t been such demonetisation in a country so big,” Georgieva told Hindustan Times in an interview late on Wednesday.

The World Bank CEO’s appreciation for the 8 November move which banned Rs500 and Rs1,000 bills, comes after the International Monetary Fund said in November that it supported India’s efforts to fight corruption through currency control measures.

Georgieva compared the move to that of the European Union, which is also phasing out high denomination bills but over a longer period of time.

“While demonetisation has, in the short term, created some impact on businesses dependent on cash, in the long term the impact will be positive… The reforms India is targeting are profound,” she said.

She also said the government’s financial inclusion programme along with the move towards digital payments and direct transfer of subsidies will help the poor.

Georgieva, who was in India for two days, travelled on a local train in Mumbai and visited the world’s biggest slum in Dharavi. She said she found that people were eager to get a better life and were willing to pay more for improved services. Georgieva also appreciated the competition among states to improve ease of doing business. “India is the bright spot in today’s global economy and it is visible in the country’s performance and more so in the aspirations of the people here,” she said.

“Our growth projection for India for this year is 7%. The signs are positive with the reform process underway and GST (goods and services tax) expected to be implemented soon.”

 

Source: http://www.livemint.com/Politics/dwHIa9twClc2ZNrHFgYBoL/World-Bank-CEO-lauds-demonetisation-says-economy-will-see-p.html

OECD backs demonetisation, projects FY17 GDP growth at 7%

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The Organisation of Economic Cooperation and Development (OECD) has supported India’s demonetisation drive, asserting that immediate impact of the move on Indian economy will be transient.

The Organisation of Economic Cooperation and Development (OECD) has supported India’s demonetisation drive, asserting that immediate impact of the move on Indian economy will be transient.

“Implementing the demonetisation has had transitory and short- term costs but should have long-term benefits,” OECD said on Tuesday in its report, Economic Survey of India. OECD Secretary-General Angel Gurria said the impact of demonetisation on consumption pattern may just have been limited to the quarter ended December 31, 2016.

The Paris-based global policy forum projected a GDP growth rate of 7 percent in the current financial year, while estimating it to grow to 7.3 percent in FY18 and 7.7 percent in FY19.

The OECD comments come a few hours before the Central Statistics Office (CSO) releases Gross Domestic Product (GDP) growth estimates for Q3FY17 and the second full year advance estimates for 2016-17. The GDP estimates released in January projected that India would grow 7.1 percent in 2016-17 from 7.9 percent in the previous year.

Amid signs of slide in consumer goods sales and muted investment activity because of the cash crunch, it is highly likely that the CSO will sharply revise downwards India’s GDP growth in its second advance estimates. Economic Affairs Secretary Shaktikanta Das, who was also present at the launch of the report, said that the benefits and outcomes of demonetisation would be positive from next quarter. “The process of remonetisation is nearly complete. Any adverse impact of consumption in that quarter is not likely to spill over next year. So that is over and behind us,” Das said.

“The shift towards a less cash economy and formalisation should, however, improve the financing of the economy and availability of loans (as a result of the shift from cash to bank deposits) and should promote tax compliance,” the report said.

On November 8, Prime Minister Narendra Modi announced that existing 500 and 1000 rupee notes would cease to be legal tender, thereby sucking out 86 percent of the currency in circulation from the economy. The survey, however, said that the temporary cash shortage and wealth destruction, as fake currency and illegal cash will not be redeemed. T

he report further said that the implementation of the goods and services tax (GST) reform will contribute to making India more integrated market. “By reducing tax cascading, it will boost competitiveness, investment and job creation.

The GST reform — designed to be initially revenue-central — should be complemented by a reform of income and property taxes,” the OECD survey said.

The survey pointed out that investment is still held back by relatively high corporate income tax rates, slow land acquisition process, weak corporate balance sheets and high non-performing loans which weigh on banks’ lending and infrastructure bottlenecks.

Key recommendations of OECD included raising revenue, especially from property and personal income taxes, ensuring that government debt to GDP ratio returns to a declining path, as well as strengthening of public bank balance sheets by recapitalising them and promoting bank consolidation.

It also suggested simpler and flexible labour laws and a gradual reduction in corporate income tax from 30% to 25%, while broadening the tax base.

Source: http://www.moneycontrol.com/news/economy/oecd-backs-demonetisation-projects-fy17-gdp-growth-at-7_8569641.html