New Delhi : The shortfall in goods and services tax (GST) collection would severely affect the spending ability of the government this fiscal, a report by State Bank of India’s research wing has said. The cut in federal spending could be a massive Rs 700 billion, which is about a fourth of the capital expenditure for 2018-19.
This cut would be twice the Rs 363 billion reduction in capital spending the government did in 2017-18 in order to restrict fiscal deficit at 3.5 per cent of the gross domestic product (GDP).
Coupled with an “inevitable” slowdown in global growth, this would have a substantial impact on India’s GDP growth, said Soumya Kanti Ghosh, group chief economic advisor at SBI, and the author of the report. “The growth in the fourth quarter of 2018-19 (Q4) could well go below 7 per cent,” he said.
He said growth would reduce along the financial year, from 7.5 per cent in Q2, to near 7 per cent in Q3, to below 7 per cent in Q3, FY19. However, if oil stabilises at near $65/bbl, India’s current account deficit (CAD) would come down to 2.6 per cent of the GDP, from the earlier estimate of 2.8 per cent, it said.
The report estimates the shortfall in indirect tax collections at Rs 900 billion, of which the major chunk would be due to GST, to the tune of Rs 700 billion. This includes a reduction of Rs 105 billion due to excise duty cuts on petrol and diesel. In addition, a low performing stock market would make the collection of Rs 200 billion as long-term capital gains tax difficult.
Finance ministry officials maintain that the shortfall from GST would be nearly Rs 500 billion. While analysts from research departments of Kotak and YES Bank have their estimate of GST shortfall in line with the government, leading global brokerage CLSA has not ruled out a deficit of more than Rs 1 trillion under GST.
To balance this, direct taxes, customs duties and anti-evasion measures would help the government restrict the expenditure cut. While direct tax collection could exceed the budgeted target by Rs 200 billion, higher realisation from customs duties could add Rs 140 billion over and above the expectation. The excess from recoveries from evaded taxes is put at the higher end of Rs 200 billion.
An additional subsidy burden close to Rs 120 billion would be another pressure point, the report said.
The reduction in capex would hurt the road and infrastructure sector, as the National Highways Authority of India could resort to extra budgetary resources for its spend plan, said Ghosh.
The report indicated that to boost rural sector in times of revenue shortfall, fiscal expansion could possibly be resorted to. “We should not be obfuscated solely with a rigid fiscal policy stance as we must support our rural sector in terms of aggressive policy measures to boost farm income given declining prices,” it said.
RBI asks banks to grout ATMs to wall, floor for security by September-end
Mumbai: The Reserve Bank asked banks to ensure their ATMs are grouted to a wall, pillar, or floor by September-end, except those installed in high secured premises such as airports, to enhance security of the cash vending machines.
In 2016, the RBI had st up a Committee on Currency Movement (CCM) to review the entire gamut of security of treasure in transit.
Based on the recommendations of the panel, the central bank has now issued instructions aimed at mitigating risks in ATM operations and enhancing security.
As part of the security measures, all “ATMs shall be operated for cash replenishment only with digital One Time Combination (OTC) locks”.
Also, “All ATMs shall be grouted to a structure (wall, pillar, floor, etc.) by September 30, 2019, except for ATMs installed in highly secured premises such as airports, etc. which have adequate CCTV coverage and are guarded by state/central security personnel”.
Further, banks may also consider rolling out a comprehensive e-surveillance mechanism at the ATMs to ensure timely alerts and quick response, it said.
The new measures to be adopted by banks are in addition to the existing instructions, practices and guidance issued by the RBI and law enforcement agencies.
The RBI also warned the banks that non-adherence of timelines or non-observance of the instructions would attract regulatory action including levy of penalty.
SBI refuses to disclose communication from RBI, govt on electoral bonds
New Delhi: The State Bank of India has refused to disclose any communication it received from the government or the Reserve Bank of India on electoral bonds, terming it “personal information” and held in “fiduciary capacity”.
Responding to an RTI filed by Pune-based activist Vihar Durve who had demanded copies of all letters, correspondence, directions, notifications or e-mails received from the RBI or any government department between 2017 and 2019, the SBI said it cannot be provided by it.
The bank cited two exemption clauses under the RTI Act to deny information — Section 8(1)(e) which pertains to information held in fiduciary capacity and Section 8(1)(J) which pertains to personal information of a person which has no link to any public activity.
“Information sought by the applicant cannot be disclosed as it is in fiduciary capacity, disclosure of which is exempted under Section 8(1)(e) and 8(1)(j) of the RTI Act, 2005,” the Central Public Information Officer of the bank said in his reply.
The bank also refused to give any details of action taken by it on such communications from the RBI and the government.
The electoral bonds, for giving donations to political parties, are being sold through SBI only. The sale opens in SBI branches when the Finance Ministry issues a notification of their sale for a given period.
The scheme of electoral bonds notified by the Centre in 2018 has been challenged in the Supreme Court.
Only the political parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the bonds.
The bonds may be purchased by a person who is a citizen of India “or incorporated or established in India,” the government had said in a statement last year.
The bonds remain valid for 15 days and can be encashed by an eligible political party only through an account with the authorised bank within that period only.
A voluntary group working in the field of electoral reforms, Association for Democratic Reforms (ADR), has demanded a stay on the sale while the CPI(M) has challenged it before the Supreme Court in separate petitions.
ADR recently filed an application in the Supreme Court seeking a stay on the Electoral Bond Scheme, 2018 which was notified by the Centre in January last year.
Walmart’s Flipkart, Indian startup GOQii settle dispute over sharp discounting
New Delhi: Walmart unit Flipkart has settled a legal dispute with an Indian startup that alleged it suffered losses because its products were sharply discounted on the global retailer’s website.
GOQii, a seller of smartwatch-type health devices, sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70 per cent to the retail price, much more than the two sides had agreed. The court had, as an interim measure, ordered device sales to be halted on Flipkart.
In a joint statement , the companies said the dispute had been resolved and GOQii health devices would again be available on Flipkart. They didn’t say how the settlement was reached.
Vishal Gondal, CEO of GOQii, told Reuters the company would withdraw the case against Flipkart. The e-commerce retailer’s “team worked on a resolution benefitting the brand and the customers”, Gondal said in the statement.
The legal spat was seen as a test case of the giant retailer’s operating strategy in the country.
Small traders and a right-wing group close to Prime Minister Narendra Modi’s ruling party have raised concerns about large e-commerce companies, saying they burn billions of dollars deeply discounting some products to lure customers onto their sites, in the expectation that they will also buy other goods.
GOQii said it signed an agreement last year with a Flipkart unit to sell two of its devices at a price not below 1,999 rupees (USD 28.63) and 1,499 rupees. It later found the devices were being sold for 999 rupees and 699 rupees, calling it “unauthorized” discounting.
In response, Flipkart said it reserved “the right to institute actions for defamation, both civil and criminal”, arguing it wasn’t responsible for any discounts which are determined by third-party firms which sell via its website.
The two companies struck a friendlier tone in their joint-statement on Friday as they brought the legal battle to an end.
“We have ensured constant engagement with GOQii to resolve any differences,” Flipkart said in the statement.
With a 19 per cent market share, GOQii was the second-biggest player in India’s so-called wearables market last year, data from industry tracker IDC showed. The market is dominated by China’s Xiaomi, with Samsung a small player.