Tag: Business news

GST slabs trigger classification woes – Times of India

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NEW DELHI: Multiple GST slabs and interpretations — both by businesses and government authorities — are ensuring that there is never any shortage of classification problems. At least three cases have been dealt with by various authorities, with companies seeking production interpretations, which in many cases were clear.
Take the case of Dabur odomos, which has been used as a mosquito repellent for years. But the company decided to question its classification as a mosquito repellent, which attract 18% GST, and suggested that it should be classified as a medicament and face a 12% levy.
The Uttar Pradesh Authority for Advance Ruling (AAR), however, rejected the contention, which means that it will face 18% tax. It observed that the product’s odour makes the conditions unattractive for mosquitoes, when it is coated on a human body.
Similarly, a Noida-based company sought a ruling on “breaded cheese”, arguing that it was cheese and should attract 12% tax. Again, it was arguing before the UP AAR. The authority, however, did not accept the plea.

Relying on the definition, it observed that the product should retain its character as cheese even after being coated with batter and bread crumbs and should be partially pre-cooked. “…these are not cheese per se but have converted into an article of cheese having the identity and characteristics of snack foods,” it said. It further added that products made from potato or flour are sold as distinct food items and not as the basic ingredient.
Besides, it observed that with 55% content, cheese was a major component but it wasn’t present in a quantity that it pre-dominated or overwhelmed the presence of other ingredients, while rejecting the plea.
In a third case, the bone of contention was whether cycle locks should be treated as parts and accessories of bicycles and are distinct from locks which are used for general purpose.
“More than 400 pages of HSN code book with around 19,000 tariff entries, multiple use of products, dichotomy between usage and key components, technical meaning vs common parlance, specific use vs generic use, etc, are all ingredients for the classification dispute recipe. Around 49 countries use single rate and 28 use dual rates. Having single rate or fewer slabs appears to be the only solution for reducing classification disputes in India,” said Harpreet Singh, partner for indirect taxes at KPMG.
Although the government has ruled out moving to a single rate, fewer slabs is part of the long-term plan. But when exactly will that plan be taken up by the all-powerful GST Council is not quite clear.

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FM Nirmala Sitharaman: Policyholders will be protected | India Business News – Times of India

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NEW DELHI: The Rajya Sabha on Thursday passed the Insurance (Amendment) Bill, 2021 — which seeks to raise the foreign direct investment (FDI) cap in insurance sector to 74% from the current 49% — by voice vote, amid assurance by finance minister Nirmala Sitharaman that sufficient safeguards had been built in to protect the interests of policyholders.
A higher foreign investment cap will pave the way for several international investors to increase their stake in Indian ventures, something that they have been eyeing since the sector was opened to private players over two decades ago.
The bill was passed amid a walkout by the opposition parties. Earlier, Mallikarjun Kharge, leader of the opposition in the Upper House, demanded that the bill be referred to a standing or select committee, arguing that its provisions were against people’s interests. This led to a string of adjournments, amid sloganeering and din in the House.

However, the demand to refer the bill to a Parliamentary panel, endorsed by many opposition parties, was not accepted by the government as it underlined that investment was needed in the immediate future, particularly in view of the hit that the economy had taken due to Covid.
While responding to issues raised by the opposition regarding the impact of the foreign control on people’s money invested in insurance schemes, the finance minister said that the insurers would continue to be barred from investing policyholders’ funds outside India and they will also be required to retain a specified portion of their profits in the general reserve. The reserve will protect the citizens’ claims regardless of the foreign investor’s financial condition, she said.
Stating that foreign control and management was being allowed with enough safeguards, Sitharaman said the majority of directors on the board and key management persons would be resident Indians and subject to the law of the land, with at least half the board comprising independent directors.
Stating that raising FDI limit to 74% was not a compulsion but only a maximum limit for receiving money from a foreign company, the minister said it was for the company and promoters to decide to what extent they would allow the FDI. She added that higher FDI would help supplement domestic long-term resources, with a view to furthering insurance penetration in the country.
While Congress MP Anand Sharma raised the issue of BJP’s opposition to hike in FDI limit in insurance when UPA was in power, Sitharaman chose to recall P Chidambaram’s statement in October 2012 that there was growing capital requirement of insurance companies. Sitharaman said what “was true then, is true today too”.

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Irdai sees demand for new covers in wake of pandemic – Times of India

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MUMBAI: The Insurance Regulatory and Development Authority of India (Irdai) is expecting demand for new covers like those for business interruption and cyber risks to rise in the wake of the pandemic and the corresponding shift to work-from-home arrangements.
The regulator is also considering the proposals of its panel which has recommended a business interruption cover. This will provide small businesses with up to 10 employees a minimum salary of Rs 6,500 for up to three months of a lockdown.
Speaking at a CII virtual seminar on learnings from the pandemic, Irdai executive director Suresh Mathur said that the regulator is considering the formation of an Indian pandemic risk pool with contributions from the country’s insurers and reinsurers. A pandemic pool is required to cover such risks because international reinsurers do not provide pandemic cover.
“As remote working becomes a norm, insurers can expect changes in the workmen and employee compensation products to include features like workspaces ergonomics and work-life balance for employees. The effect of Covid on general liability will vary industry-wise,” said Mathur. He added that this would also increase the demand for cyber insurance and further the evolution of cyber insurance products.
Mathur pointed out that the lockdown had resulted in business interruption covers taking centre stage. He added that while there will be pressure on insurers to settle claims arising out of business interruption, the impact on companies will depend on policy wordings.
Irdai had last year constituted a working group to explore the formation of an Indian pandemic risk pool. This was supposed to focus on risk to business continuity, reduction of stress on individuals and address the issue of migrant labourers. The working group had suggested that the pandemic pool should be through public-private partnership and the capacity (capital) would be through premium collections from insurers, Indian reinsurers and foreign reinsurance branches.
“The product initially will cater to the micro and small to medium enterprises. We want a product where salary protection would be covered up to three months or an actual lockdown period, whichever is less. It is envisaged that Rs 6,500 per month for a maximum of three months can be covered for a maximum of 10 employees per MSME,” said Mathur.
In the second phase, it could provide health insurance and enhancement of employees’ salary, and the third phase would include life insurance cover and higher salary cover.

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IPO of Kalyan Jewellers subscribed 2.6x – Times of India

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MUMBAI: The Rs 1,175-crore initial public offering (IPO) by Kalyan Jewellers, one of the largest companies in the organised jewellery segment in India, closed with a subscription of 2.6 times. The issue had a price band of Rs 86-87 a share.
According to data on the BSE, the institutional portion of the offer was subscribed 2.8 times while the non-institutional or high net worth investors’ part was subscribed 1.9 times, the retail part 2.8 times and the employee part by 3.7 times.
The IPO comprises issuance of fresh equity aggregating up to Rs 800 crore and an offer for sale (OFS) worth Rs 375 crore. Kalyan Jewellers promoter T S Kalyanaraman is offloading shares worth up to Rs 125 crore, while Highdell Investment, an affiliate of Warburg Pincus, is selling up to Rs 250 crore worth of shares through the OFS route.
The proceeds from the fresh issue of shares would be utilised for working capital requirements and general corporate purpose.
Axis Capital, Citigroup Global Markets India, ICICI Securities and SBI Capital Markets are the managers to the offer.

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Federal Bank plans to buy microfinance company to expand business – Times of India

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MUMBAI: Federal Bank MD & CEO Shyam Srinivasan has said that the private bank sees an opportunity to grow both organically and through acquisition. The bank is interested in acquiring a microfinance business as part of its focus on growing the retail high-margin category.
Speaking to TOI, Srinivasan said that Federal Bank is now on a par with any new-generation bank in terms of digital capability and operations and had sound asset quality due to its focus on retail. “Financially we have done very well. There are some metrics around return on asset (RoA) expansion that we are targeting. This essentially means a change in margin profile,” said Srinivasan.
Federal Bank had said that its RoA would grow from 0.76 to 1.25 in five years and were on course to achieve it, but Covid has delayed it by one year to FY23. The bank will also be launching its credit cards shortly and expanding personal loans.
According to Srinivasan, in the banking sector, half the market is concentrated among the top 7-8 lenders. The remaining 50% is highly fragmented with 17-18 banks having a 1% to 3% market share, which throws up consolidation opportunities. “In Kerala, we have a 17% share, but the state is only 3% of the market. Outside Kerala, we are 1%. In the long term, I see a huge opportunity for growth and consolidation,” he said.
Srinivasan said that Federal Bank has invested a lot in its platform and people, and now it was time to leverage the investment and capability. He said that to explore acquisition opportunities in microfinance, the bank would wait for a quarter as the current stand-still on the classification of loans as non-performing assets (NPAs) did not give a clear picture of asset quality.
Srinivasan, who was hired from StanChart Bank in 2010, adopted a strategy of ‘digital at the fore, human at the core’, which meant upscaling technology, going slow on branch expansion but expanding their footprint by having more customer-facing employees. Federal Bank has also many fintech partnerships. It is about to launch two neobank partnerships that will enable it to get access to a new segment of customers for its personal loans and credit card products.
In the last decade, the bank has raised capital only once through a Rs 2,500-crore qualified institutional placement in 2017. “We have been meeting our capital adequacy largely through internal accruals. This has led to a level of trust in the bank and, if Federal Bank comes to the market, there is good reason to believe that we will be able to raise the money,” said Srinivasan.

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Petrol price: Oil companies lose Rs 4 on petrol, Rs 2 on diesel due to price freeze – Times of India

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NEW DELHI: But for a 20-day pause in fuel price revision, petrol would have cost more than Rs 103 per litre in Mumbai by now and sold for about Rs 100 in many other cities.
However, the reprieve for consumers have come at a cost to the state-run fuel retailers, who are suffering under-recovery of Rs 4 on a litre of petrol and Rs 2 on diesel, people involved in pricing said.
The retailers stopped revising prices since February 27, a day after assembly polls in five states were announced. Since then, however, India’s crude cost has risen from $64.68 per barrel on February 26 to $66.82 on Wednesday, hitting $68.42 in between. The rupee too has lost strength during this period to rule at 72.57 against the Greenback on Wednesday.

“Oil companies consider a 15-day rolling average for pricing crude. The average is still high for refiners. Benchmark Brent has been ruling high and has shown signs of marginal cooling in the last few days.

The Indian Basket follows Brent and has softened a bit since Wednesday. But as of now, retailers are losing Rs 4 and Rs 2 on petrol and diesel, respectively. There is under-recovery in LPG also,” a senior official said.
The price of regular petrol shot past Rs 100 a litre for the first time in the country in Sri Ganganagar and some other towns of Rajasthan on February 17.

Subsequently, several other cities in states with high VAT too saw the price hit a century. Prices in other states are ruling well above Rs 90 a litre. Household cooking gas has gone up cumulatively by Rs 175 since December.

The sharp rise in fuel prices has prompted widespread clamour for a tax cut by the Centre, which had raised excise duty sharply last year. The opposition parties, especially in poll-bound states, too are using the issue to attack the Centre.

The current freeze on price revision is reminiscent of 2018 when state-run fuel retailers were informally ‘nudged’ by the Centre to hold prices steady for 19 days from April 24 to May 13 ahead of the Karnataka assembly election.
Officially, the has government blamed output cuts by producing countries for high fuel prices and described it as a “temporary” phase. According to ICRA vice-president Prashant Vasisht, the freeze will adversely impact “profitability and cash accruals” of oil companies, leading to “higher reliance on debt, which might strain their credit metrics.”

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Emerging cities to lead next retail growth wave: Report – Times of India

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NEW DELHI: Big cities are contributing less to the growth of India’s retail industry, as consumption patterns have changed over the last decade, showed a report.
A large group of smaller cities, including Surat, Jabalpur, Raipur, Mangalore and Faridabad have emerged as the growth centers with their own consumer preferences.
“Over the years, most of the organized retailers have established strong presence in metros and tier 1 cities. The next wave of growth in retail will be led by emerging cities beyond tier 1 and emerging hotspots within metros and tier 1,” said Siddharth Jain, partner at Kearney, which released the report.

This is especially evident in the share of luxury retail spending, which grew from around 9% in 2013 to 55 to 60% in 2018 in non-metro cities, especially Jaipur, Udaipur, and Chandigarh.
Leading e-commerce players, too, have already realized the potential of expanding beyond metros and tier 1 cities. Around 65% of the leading apparel e-commerce platforms’ revenue, for instance, currently comes from tier 2 and smaller cities.
“Our index uncovered a number of “hidden gems”, with significantly high retail potential and brand demand but limited presence of organized brands to address the demand. One such example is Surat which is ranked in top 10, ahead of cities like Gurugram, Kochi, Lucknow, Nagpur,” said Manoj Muthu Kumar, principal at Kearney.
Several tier 2 and tier 3 cities boast favorable conditions such as unaddressed demand for organized brands, lower rentals and manpower (30 to 40% lower than top cities), increasingly dense populations and growing disposable incomes.
To put things into perspective, Kearney compared two cities, Ghaziabad and Faridabad in the NCR region that are typically thought of as fairly similar. In 2019, Faridabad’s per-capita consumption of footwear, clothing, and other goods was about 1.5 times higher than Ghaziabad but across the top 50 brands, Ghaziabad boasts 170 retail stores while Faridabad only has around 50.
Between 2006 and 2017, tier 2 and smaller cities received five times more investments, too, in retail infrastructure than tier 1 and metro cities, the report said.

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Delhi HC restrains Future Retail-Reliance deal on Amazon’s plea – Times of India

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NEW DELHI: In a major setback to Future Group, the Delhi high court on Thursday restrained the company from going ahead with Rs 24,713 crore deal with Reliance Industries.
The court has directed Future Retail not to take any further action the deal. It also held that the company willfully violated Singapore arbitrator’s order.
Future Group and its directors have also been asked to deposit Rs 20 lakh in PM relief fund for providing Covid-19 vaccine to senior citizens of BPL category.
Further, the HC has directed to attach properties of CEO Kishore Biyani and others related to Future Group.
Biyani, along with others, has been asked to appear in court on April 28.
The high court also asked them to show cause as to why they be not detained for 3 months under civil prison for violating emergency arbitrator’s order.
The high court’s order came on Amazon‘s plea seeking direction to order enforcement of the award by Singapore’s EA on October 25, 2020, restraining FRL from going ahead with its Rs 24,713 crore deal with Reliance Retail.
The decision is a setback for Future, the country’s second-largest retailer with over 1,700 stores, which agreed to sell its retail businesses to market leader Reliance last year.
However, e-commerce giant Amazon, which had its sights set on ultimately owning part of the retail assets itself, argued a 2019 deal it had with a unit of Future contained clauses prohibiting Future Retail from selling them to anyone on a “restricted persons” list including Reliance.
Amazon had moved the Delhi HC in January to enforce the emergency award (EA) by the Singapore International Arbitration Centre (SIAC), which had asked Future Group not to proceed with the RIL deal till it pronounces a final order.
Previously, Future too had approached the HC to stop Amazon from writing to regulators citing the SIAC order, but the court did not grant the injunction and said Amazon was free to write to regulators.
(With inputs from agencies)

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Mallya, Nirav Modi & Mehul Choksi all coming back to face law: FM Sitharaman – Times of India

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NEW DELHI: Finance minister Nirmala Sitharaman on Thursday said that fugitive businessmen Vijaya Mallya, Nirav Modi and Mehul Choksi are “coming back” to India” to face the law.
The government is pursuing the extradition of Mallya and Modi from the UK while Choksi is believed to be in Antigua.
Vijay Mallya, Nirav Modi, Mehul Choksi are all coming back to face law of the land, Sitharaman said in the Rajya Sabha while replying to a debate on the insurance amendment bill.
Mallya, an accused in bank loan default case of over Rs 9,000 crore involving his defunct Kingfisher Airlines, is in the UK since March 2016.
Nirav Modi and his maternal uncle Choksi fled the country allegedly after committing fraud in the public sector lender Punjab National Bank. Modi is accused of committing a fraud of USD 2 billion (around Rs 14,500 crore) in the PNB.

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RBI may have to delay liquidity normalisation amid rising virus cases – Times of India

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MUMBAI: The Reserve Bank of India (RBI) may have to delay the start of monetary policy normalisation by three months amid rising Covid-19 cases, but barring the return of stringent lockdowns there is no significant threat to the economy’s recovery, analysts say.
Having seen a peak of daily cases of nearly 100,000 in late September, infections had been on a steady decline but have now started rising again over the last month.
“Even as the increase in the current caseload points to the risk of a second wave, more localised and less stringent restrictions (on activity) will help contain the economic impact versus the initial wave,” said Radhika Rao, an economist with DBS Bank.
DBS has retained its assumptions for a stronger pick-up in March quarter growth versus the December 2020 quarter, and expects a double-digit rebound in fiscal year 2021-22.
India reported 35,871 new coronavirus cases on Thursday, the highest in more than three months, with the worst-affected state of Maharashtra, which houses the country’s financial capital Mumbai, alone accounting for 65% of that.
The government needs to take quick and decisive steps soon to stop an emerging second “peak” of Covid-19 infections, Prime Minister Narendra Modi said on Wednesday.
Though analysts are unlikely to rush to review their long-term growth forecasts, several believe policy normalisation on interest rates and liquidity, may now take a backseat.
“Monetary policy normalisation might be pushed back by a quarter as authorities monitor developments closely, with status quo on the cards on the repo as well as liquidity management plans for H121,” Rao said.
The RBI has repeatedly assured bond markets of ample liquidity being maintained to support the recovery, but in early January said it wanted to start restoring normal liquidity operations in a phased manner.
“Growth concerns due to rising pandemic cases amid a negative output gap could push back market expectations on the timing of policy normalisation in the near term,” Nomura economists Sonal Varma and Aurodeep Nandi wrote in a note.
Though surplus liquidity is a positive from the perspective of ensuring credit flows to productive sectors, economists fear it may add to inflationary pressures if it remains in the system for too long.
“Although inflation has moderated from the high level, the surge in global crude oil price has added to the upside risk,” said Arun Singh, global chief economist at Dun and Bradstreet. “The central bank thus, has a difficult task of managing the inflation target while preventing a rise in borrowing cost to the government.”

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