Millions of firms not ready to file returns under GST: Kumar

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Millions of companies are still not ready to file their first returns under the new GST ahead of an 20 August deadline, says Navin Kumar. Photo: Bloomberg

Millions of companies in India are still not ready to file their first returns under the new goods and services tax (GST) ahead of an 20 August deadline, a top official told Reuters, urging them not to leave things to the eleventh hour.

Navin Kumar, chairman of the GST Network, also said barely half of the 34 service providers accredited to help firms bulk-file invoices online had received approval to go live.

Yet he gave an assurance that the huge IT back end that is designed to crunch up to 3 billion invoices a month and calculate companies’ taxes would be stable, even if there is a last-minute rush to file.

“It will not crash,” he told Reuters in an interview. “We are working on the assumption that 50% of the people will come on the last day.”

Billed as India’s biggest-ever tax reform, the GST has replaced a slew of federal and state levies. It has also cleared barriers between India’s 29 states, uniting its 1.3 billion people into a common market for the first time.

Yet the complexity of the tax — which has main rates of 5, 12, 18 and 28% and multiple exceptions — has raised concerns that companies will struggle to comply and file their monthly returns on time.

Even before the GST filings kick in, business surveys showed both the services and manufacturing sectors contracting at their fastest rate in years, heralding a likely dip in indirect tax revenues.

The government has allowed firms to file simplified, self-assessed GST returns by 20 August for the month of July, when the tax was launched.

They will have to file complete returns in early September that itemise and reconcile every single sales invoice under a regime that, by comparison with other countries, is labour- and data-intensive.

More than 7 million existing taxpayers have activated accounts on the GST’s portal — although around a third have yet to complete the form-filling required to file a full tax return, Kumar said.

Another 1.3 million new firms have registered to pay GST.

He waved away concerns that companies would not be able to cope, saying that those used to paying value-added tax —now abolished — were used to online filing.

Although companies can upload invoices directly into the GST portal, big businesses will rely on a new breed of service provider whose applications can format, reconcile and upload invoices in bulk.

Of a first batch of 34 services providers that have been accredited, only 18 have received permission to go live. “I have been urging them to speed up their work,” Kumar said.

Source: http://www.livemint.com

IMF sees growth cooling to 6% in second half of FY17

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India’s economic growth would slow to about six per cent in the second half of this financial year (October-March) due to demonetisation, against 7.2 per cent in the first half, the International Monetary Fund (IMF) said on Wednesday.

India’s representative in IMF Subir Gokarn said the growth projections came at a time when hard data was unavailable. He described the assessment as “unduly pessimistic”. In the medium term, however, the IMF is hopeful that implementation of the Goods and Services Tax could raise India’s growth rate to more than eight per cent.

The Fund said the cost of recapitalising public sector banks would be affordable even under a negative scenario. In a report on India, the IMF said growth would gradually rebound in 2017-18.

In January, it had cut India’s growth estimate to 6.6 per cent for 2016-17 due to the note ban, against 7.6 per cent estimated earlier. Growth was estimated to be 6.2 per cent in the fourth quarter of the financial year.

Taking both the estimates into consideration, the IMF said, third quarter growth might fall below six per cent.

The Central Statistics Office will come out with the third quarter gross domestic product (GDP) data and the revised advance estimates on the coming Tuesday. Its first advance estimates had shown economic growth at 7.1 per cent in 2016-17, against 7.6 per cent the previous year. The office had not taken into account the effect of demonetisation.

Commenting on IMF’s revision of growth rates, Gokarn said, “While we do not question the methodologies used to revise the estimates, the fact is that there isn’t very much hard data to base the revisions.” He said different assumptions about the impact would obviously lead to different conclusions. While virtually all forecasters have revised their projections for 2016-17 downwards, the range was relatively wide, he added.

To buttress his points, Gokarn said the World Bank and the Asian Development Bank have pegged growth at seven per cent, after accounting for change in the currency policy. The authorities’ estimate was 7.1 per cent. IMF directors supported India’s efforts to tackle illicit financial flows, but noted the strains that have emerged from the currency exchange initiative. They called for action to quickly restore the availability of cash to avoid further payment disruptions, and encouraged prudent monitoring of the potential side-effects of the initiative on financial stability and growth.
On tackling India’s $130 billion in stressed loans, the IMF said “recapitalisation costs should be manageable” at between 1.5 and 2.4 per cent of the GDP forecast, according to Reuters.

Of that, the government’s share would be between 1.0 and 1.6 per cent of GDP over the four years to March 2019, assuming 40 per cent of the loans have to be provided against. “It’s very positive that both the Reserve Bank of India (RBI) and the government are putting a shared focus on addressing the balance-sheet problem,” IMF Resident Representative Andreas Bauer told a conference call.

The chief economic advisor, Arvind Subramanian, on Wednesday backed a call by the RBI to set up an institution similar to “bad bank”, saying urgency was needed to address troubled loans weighing on the banking sector.

In a special report on corporate and banking sector risks in India, the IMF said recapitalisation costs would be “significantly higher if there is a policy shift to more conservative provisioning requirements”.

In case of a rise in the provisioning ratio to 70 per cent, cumulative recapitalisation needs would increase to 3.3-4.2 per cent of forecast GDP in the financial year to March 2019, with a government share of 2.2-2.8 per cent, the IMF said.

The IMF said with temporary demand disruptions and increased monsoon-driven food supplies, inflation was expected at about 4.75 per cent by early 2017— in line with the Reserve Bank of India’s inflation target of 5 per cent by March 2017.

The Fund said domestic risks flow from a potential further deterioration of corporate and public bank balance sheets, as well as setbacks in the reform process, including in GST design and implementation, which could weigh on domestic demand-driven growth and undermine investor and consumer sentiment.

On the upside, IMF said larger than expected gains from GST and further structural reforms could lead to significantly stronger growth; while a sustained period of continued-low global energy prices would also be very beneficial to India.

Source: http://www.business-standard.com/article/economy-policy/imf-sees-growth-cooling-to-6-in-second-half-of-fy17-117022300100_1.html

Japan’s NTT Data, Dell seal $3-bn deal

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NTT Data Corp, a unit of Japans former telephone monopoly, agreed to buy technology services businesses from Dell for $3.055 billion.

The acquisition was announced by the unit of Nippon Telegraph & Telephone Corp in a statement to the Tokyo Stock Exchange Monday. The company didn’t give a date for when it will acquire the Dell units.

NTT Data will acquire the divisions to strengthen its footprint in North America, and enhance cloud service and business-process outsourcing, or BPO service, according to its filing. The company will hire the 28,000 employees located mainly in North America and India from Dell, according to the statement.

The acquisition would be NTT Data’s largest, helping increase its sales outside Japan, where a shrinking and aging population has stymied economic growth. Dell, which paid $3.9 billion for what was formerly known as Perot Services in 2009, is selling some assets before completing a record deal – the $67-billion takeover of software and storage systems provider EMC Corp.

Dell plans to sell the division as part of a wider effort to raise as much as $10 billion from the disposal of assets that aren’t core to its business, Re/code reported earlier.

NTT Data has spent more than 72 billion yen ($634 million) buying companies since 2011, about 62 billion yen of it outside Japan, according to data compiled by Bloomberg. Overseas sales had risen to 450 billion yen by the year ended March 31, 2015, compared with more than 208 billion yen in the 12 months to March 2012.

Global rivals of NTT Data including Cognizant Technology Solutions Corp, Tata Consultancy Services Ltd and Atos SE had also previously participated in an auction for Perot Systems that failed to generate a deal, according to the Nikkei, Reuters and the website Re/code, which all cited people familiar with the matter.

The NTT unit has spent more than 72 billion yen on buying companies since 2011, about 62 billion yen of it outside Japan, according to data compiled by Bloomberg. By the year ending March 31, 2015, overseas sales had risen to 450 billion yen, compared with more than 208 billion yen in the 12 months to March 2012.

“Perot Systems has a large base of US clients in medical and other markets, so it fits NTT Data’s strategy to increase its presence there,” Hideaki Tanaka, an analyst at Mitsubishi UFJ Morgan Stanley, said before the deal was announced. “NTT Data can win big contracts in Japan, but in the US, it is less well-known.”

The systems unit of Japan’s former telephone monopoly has more than doubled in market value since 2011 on rising sales to financial and health care businesses using the company’s data centres and software. Profit will probably surge 85 per cent to a record 59.6 billion yen for the year ending March 31, according to average analyst estimate.

NTT Data services are used at hundreds of hospitals and thousands of health care facilities in the US, according to the company’s website.

The Tokyo-based company provides software and systems for functions including electronic medical records, surgery management, billing, insurance claims.

NTT Data cash, near cash and short-term investments stood at 183.1 billion yen as of Dec. 31, according to data compiled by Bloomberg.

Dell acquired Perot with plans to expand in the fast-growing market for data services. Perot was built H. Ross Perot, the billionaire who ran for US president in 1992 and 1996, and sold his first major company Electronic Data Systems to General Motors for $2.5 billion in 1984.

Dell’s Perot unit has won government contracts for health care IT services and work for the Defense Department, NASA, Homeland Security and Education departments.

Source: http://www.business-standard.com/article/international/japan-s-ntt-data-dell-seal-3-bn-deal-116032900020_1.html

ECB easing, US jobs data in focus

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European Central Bank (ECB) President Mario Draghi adddresses the European Banking Congress at the Old Opera house in Frankfurt, Germany November 20, 2015.

The world’s two biggest central banks will move decisively in opposing directions next week, with the European Central Bank (ECB) almost certain to ease policy on Thursday and a US jobs report likely to seal the case for a Fed rate hike in December.

Building a solid case for more easing on fears of anemic inflation, the ECB has all but committed itself to action, with the markets now guessing only about what exact steps it will take to kick-start price growth.

Still, there is plenty of room for surprises. The ECB will contemplate a wide range of measures, from a fairly uncontroversial deposit rate cut to more extreme – but highly unlikely – moves such as buying rebundled non-performing loans to resurrect bank lending.

“With expectations high, the risk of disappointment is also high but as concerns are correctly focused on the structural headwinds to the inflation outlook, there is really no point in holding back or saving ammunition at this stage,” Societe Generale said in a note to clients.

ECB President Mario Draghi has done his share to raise expectations. He has warned about increased risks to growth and inflation, and said “we will do what we must” to raise inflation as quickly as possible.

A Reuters poll of more than 50 economists predicted that the ECB would opt for a deposit rate cut to -0.3 per cent from -0.2 per cent, an expansion of its asset buying program to euro 75 billion per month from euro 60 billion, and an extension of that buying beyond September 2016.

There are a range of variations on this pattern, though. The ECB could opt for a deeper deposit rate cut, or it could add assets like corporate or municipal debt to those that it buys. It could even set a staggered deposit rate, punishing those who park large amounts of cash in its vaults.

The biggest complication to all this is the small but significant group of opponents to such action, led by Bundesbank chief Jens Weidmann and board member Sabine Lautenschlaeger, who broke ranks with their Governing Board peers recently to openly oppose further easing.

Overwhelm
Arguing that loose monetary policy poses risks and merely buys time to fix structural problems, Lautenschlaeger has taken a stance against any more steps, especially an expansion of the asset-buying program.

Draghi may have his work cut out bridging the gap between their views, as the ECB rarely votes at meetings and instead decides on policy with the broadest possible consensus.

His opponents could also make it tough for Draghi to continue his practice of promising big things, then exceeding the already heightened expectations.

“Expectations have increased further ahead of next week’s ECB meeting and ECB speakers have not done much to rein in expectations.

Draghi has overdelivered in the recent past but it could be harder this time given how much has been promised,” Deutsche Bank analysts wrote in a note to investors.

Citigroup said that to surprise the markets, the ECB would need to cut the deposit rate, increase its monthly bond-buying and adjust its forward guidance by extending the program or removing its reference to ending it next September.

While the euro area struggles with weak growth and high unemployment, the US is continuing to create jobs quickly. Data on Friday is expected to show that US non-farm payrolls increased by 200,000 in November, keeping the jobless rate at a 7-1/2 year low of 5.0 per cent.

But even if the figures disappointed somewhat, the Fed is still expected to hike at its meeting on December 15-16 given near full employment, with the debate likely shifting to future rate hikes rather than near term moves.

The biggest headwind for the Fed could be the dollar’s rapid firming against major currencies in recent months, which has already effectively tightened monetary conditions. But U.S. trade is less exposed to currency moves than elsewhere, such as in Europe, so the impact on policy is smaller.

Fed Chair Janet Yellen’s testimony to the Joint Economic Committee of the Senate on the economic outlook, due at the same time as Draghi’s press conference, will likely give more clues about the Fed’s next moves.

Among other top central banks, the Reserve Bank of Australia and the Bank of Canada are both expected to keep rates on hold with their respective economic outlooks in line or slightly better than their previous forecasts.