Impact of GST on SMEs: Mixed reactions from state Finance Ministers

The implementation of Goods and Services Tax (GST), dubbed as the single-most important reform measure in the annals of India's taxation regime, witnessed three State Finance Ministers express their views ranging from "unprecedented in its adverse consequences, especially for the SMEs" to "a deal that gives a virtual tax insurance policy to the States" and "a Herculean task of integration of all taxes into a common and uniform tax code".
The Finance Ministers – Dr. Amit Mitra from West Bengal, Dr. Haseeb Drabu from Jammu & Kashmir and Sushil Kumar Modi from Bihar – spoke in New Delhi on Thursday at the Special Session on GST, on the concluding day of the 90th Annual General Meeting of the Federation of Indian Chambers of Commerce and Industry (FICCI).

Dr. Amit Mitra declared that West Bengal's stated position was that it had agreed, in principle, to bringing in GST. But the hasty manner, in which it was rolled out, had taken a huge toll on the revenue collections. For instance, revenue collections in October 2017 at Rs. 83,346 crore are significantly down from the September figure of Rs. 95,131 crores. He expressed concern at the dip that the November figures would show.
Dr. Mitra cautioned the business chambers to be wary of the provisions of arrest under the GST law and advised them to oppose the provision.  According to him, filing of FIR under the due judicial process was the way to go.

Alluding to the political economy of the GST, he said that it was demonetization that first throttled SMEs and the pre-mature launch of GST has landed them in dire financial straits.

Dr. Haseeb Drabu said these were still early days and it would be unfair to judge the GST system just yet. "Give it another three to four months. If the government and the GST Council are as responsive as they have been, what we have in the making is a robust GST which works for business, the Central Government and the States," he emphasized.

He said that the biggest gain of GST was that it represents India's first truly genuine federal legislation. Revenues may not have increased in the last couple of months, but the regime has given the States a sub-national freedom to legislate. The transition, he said, was not as glamorous as globalization and liberalization, but it marks a certain move towards formalization of the economy.

Dr. Drabu said, "The most import aspect of the legislation was that GST changes the basic ethics of the country and the regime's transparent processes enable us to know exactly what is going where."

The States, he said, have got "a wonderful deal as GST guarantees revenues at 14 percent growth year-on-year and what we have is a virtual tax insurance policy for five years."
Sushil Kumar Modi said that GST was being opposed by fabric and textiles sectors, MSMEs and small traders as they had come under the tax net for the first time. Besides, the consumers were opposing GST as a tax rate of 28 percent seemed too high. However, he noted that in the pre-GST era, the tax rate was more than 28 percent but as excise was included in the commodity price, it was not visible. He hoped this would be resolved by the GST Council and the final visible tax rate brought down to 14 percent.Sushil Modi, who has witnessed the process of implementation of both VAT and GST regimes closely, said that when VAT came into force, the then finance minister had announced compensation for three years for states. But even after two years, no state came forward to claim compensation.

He was, therefore, confident that with the government announcing a compensation period of five years after roll out of GST, there would be enough cushion to satisfy the States.

He said that the aim of the GST Council in the coming months would be to reduce the number of GST slabs and bring electricity, petroleum & real estate under the GST ambit. Speaking about the anti-profiteering clause, he said that it was brought about to ensure the passage of benefits to consumers by the manufacturers.

He said that sorting out 37 different tax jurisdictions and 16 different tax levies and integrating various taxes in GST was a Herculean and unprecedented task. Highlighting some of the challenges in the implementation of GST, Modi said that simplifications of the IT network and processes were the top priorities besides the need to reduce the existing tax slabs.

Harsh Mariwala, Chairman, FICCI Task Force on GST and Past President, FICCI, who moderated the session, said that while the complex GST legislation faces issues in Implementation, it was just a matter of time before these would be resolved.

FICCI's Outgoing President Pankaj R Patel, Incoming President Rashesh Shah and FICCI Secretary General Dr. Sanjaya Baru also shared the dais. Dr. Baru while welcoming the three state finance ministers for the interesting session pointed out that their contribution to the GST implementation had been acknowledged by the Union finance minister.

Petcoke imports from US will choke India further: Experts

December 2, 2017: 
US oil refineries that are unable to sell a dirty fuel waste product at home are exporting vast quantities of it to India instead.

Petroleum coke, the bottom-of-the-barrel leftover from refining Canadian tar sands crude and other heavy oils, is cheaper and burns hotter than coal. But it also contains more planet-warming carbon and far more heart- and lung-damaging sulfur -- a key reason few American companies use it.

Refineries instead are sending it around the world, especially to energy-hungry India, which last year got almost a fourth of all the fuel-grade “petcoke” the US shipped out, an Associated Press investigation found.

In 2016, the US had sent more than 8 million tonnes of petcoke to India. That’s about 20 times more than in 2010, and enough to fill the Empire State Building eight times.

The petcoke being burned in countless factories and plants is contributing to dangerously filthy air in India, which already has many of the world’s most polluted cities.

LABORATORY TESTS

Laboratory tests on imported petcoke used near New Delhi found it contained 17 times more sulfur than the limit set for coal, and a staggering 1,380 times more than for diesel, according to India’s court-appointed Environmental Pollution Control Authority. India’s own petcoke, produced domestically, adds to the pollution.

Industry officials say petcoke has been an important and valuable fuel for decades, and its use recycles a waste product. Health and environmental advocates, though, say the US is simply exporting an environmental problem. The US is the world’s largest producer and exporter of petcoke, federal and international data show.

“We should not become the dust bin of the rest of the world,” said Sunita Narain, a member of the pollution authority who also heads the Delhi-based Center for Science and the Environment. “We certainly can’t afford it; we’re choking to death already.”

Petcoke traditionally was used in the U.S. to make aluminum and steel after its impurities were removed. But when those mills closed or moved to other countries, the need for petcoke waned, although some power plants still use it.

The American Fuel and Petrochemical Manufacturers, a petroleum industry trade group, released a statement to the AP saying that cokers “allow the United States to export petroleum coke to more than 30 countries to meet growing market demand.”

But experts say it’s not market forces that are driving US refiners to make this waste product from heavy oil refining. The refineries just need to get rid of it, and are willing to discount it steeply -- or even take a loss -- which helps drive the demand in developing countries, experts said.

OUTDOOR AIR POLLUTION

Petcoke, critics say, is making a bad situation worse across India. About 1.1 million Indians die prematurely as a result of outdoor air pollution every year, according to the Health Effects Institute, a nonprofit funded by the US Environmental Protection Agency and industry.

In New Delhi, pollution has sharply increased over the past decade with more cars, a construction boom, seasonal crop burning and small factories on the outskirts that burn dirty fossil fuels with little oversight.

'AIRPOCALYPSE'

In October and November, for the second year in a row, city air pollution levels were so high they couldn’t be measured by the city’s monitoring equipment. People wore masks to venture out into gray air, and newspaper headlines warned of an “Airpocalypse.”

The country has seen a dramatic increase in sulfur dioxide and nitrogen dioxide emissions in recent years, concentrated in areas where power plants and steel factories are clustered. Those pollutants are converted into microscopic particles that lodge deep in the lungs and enter the bloodstream, causing breathing and heart problems.

It’s impossible to gauge precisely how much is from petcoke versus coal, fuel oil, vehicles and other sources. But experts say it certainly is contributing.

RISING PETCOKE IMPORTS

Indian purchases of US fuel-grade petcoke skyrocketed two years ago after China threatened to ban the import of high-sulfur fuels. Although Indian factories and plants buy some petcoke from Saudi Arabia and other countries, 65 per cent of imports in 2016 were from the US, according to trade data provider Export Genius.

India’s cement companies were first to bring in petcoke, and still import the most, though cement experts say some sulfur is absorbed during manufacturing.

As word spread of the cheap, high-heat fuel, other industries began using it in their furnaces -- producing everything from paper and textiles to brakes, batteries and glass, according to import records compiled by Export Genius.

The government was caught off guard by the shift, and there are scant records of how much petcoke is being burned. Petcoke’s use was further encouraged by low import tariffs and a lack of regulations on its most potent pollutants.

Industries also like that petcoke, which is around 90 per cent carbon, burns hot. So they can use less of it to produce the same heat as coal -- though coal still overshadows petcoke in factory furnaces.

Within a decade, India’s petcoke appetite grew so voracious that it began producing and selling its own, and Indian refineries today are making about as much as the country is importing. One of the biggest refiners -- Mumbai-based Reliance Industries Ltd., owned by India’s wealthiest businessman, Mukesh Ambani -- has ramped up petcoke production.

Judges of India’s National Green Tribunal had demanded in May that the government investigate the environmental and health impacts of petcoke. The government’s environment ministry has dismissed the idea that petcoke threatens public health in the nation’s capital.

SUPREME COURT BANS PETCOKE

But the Supreme Court, which has consistently demanded or enacted tougher pollution control measures, has recently banned petcoke use by some industries as of November 1 in the three states surrounding pollution-choked New Delhi.

It also demanded tighter pollution standards that -- if enforced -- could further limit its use nationwide.

“This is a completely disgusting state of affairs,” the judges said in their (October 24) ruling, “and this is hardly the way in which the Ministry ought to function if it is expected to perform its duties sincerely, honestly and with dedication.”

The court had last month also urged all states across India to pass similar bans.

“The petcoke markets grew so fast across the country that a ban around New Delhi isn’t going to put a huge dent in the overall demand for petcoke,” said Jeffrey McDonald, an analyst at S&P Global Platts.

India, Armenia review bilateral trade, ties

India and Armenia on Friday reviewed bilateral ties across multiple sectors in a bilateral meeting between Prime Minister Narendra Modi and Armenian President Serzh Sargsyan.

The two leaders discussed bilateral as well as regional and multilateral issues during the course of the meeting.

"The two sides reviewed present status of bilateral relations and discussed ways to further strengthen future cooperation in diverse areas including political, defence, space, trade and investment, science and technology, education, culture and people to people contacts," an External Affairs Ministry statement said.

"Specific areas with potential to propel bilateral trade and economic relations were discussed including in the sectors of food processing, renewable energy, pharmaceuticals and healthcare, information technology, mining and jewellery," it said.

Data made available by the External Affairs citing Statistical Service of Armenia, the bilateral trade stood at $32.3 million only.

India's imports from Armenia were at $0.4 million and exports to Armenia stood at $31.9 mn again favouring India.

Indian exports to Armenia consist of bovine meat, agricultural products, electrical equipment, cut and polished diamonds, optical equipment, plastics, pharmaceuticals, cosmetics, garments and other chemical goods and cars, while Armenia's exports include non-ferrous metals and rawrubber.

In Friday's meeting, both sides agreed that early conclusion of an India-Eurasian Economic Union free trade agreement would unleash huge opportunities in increasing bilateral trade.

Earlier on Friday, Sargsyan attended the Worl Food India 207 which was inaugurated by Modi.

He also called on President Ram Nath Kovind and met Vice President Venkaiah Naidu.

The Armenian President arrived here on Thursday on a four-day visit to India.

Export Summary-U.S. sells soy to Mexico; South Korea buys corn

Sept 13 (Reuters) - Snapshot of the global export markets for grains, oilseeds and edible oils as reported by government and private sources as of the end of business on Wednesday:
SOYBEAN SALE: The U.S. Department of Agriculture said private exporters sold 167,370 tonnes of U.S. soybeans to Mexico for delivery during the 2017/18 corn marketing year that began Sept. 1.
CORN PURCHASE: South Korea's largest feedmaker Nonghyup Feed Inc. (NOFI) bought 138,000 tonnes of corn in an international tender which closed on Wednesday, European traders said. NOFI had also sought 65,000 tonnes of feed wheat, but rejected all offers and made no purchase.
CORN PURCHASE: A group of Israeli private buyers bought at least 30,000 tonnes of corn in a tender which closed on Wednesday, European traders said. The corn was expected to be sourced from the Black Sea region. It was purchased at around $172.80 a tonne c&f for November/December shipment. The group also purchased about 13,000 tonnes of feed wheat at around $182 a tonne c&f. No purchase was believed to have been made of 20,000 tonnes of feed barley also tendered for.
WHEAT TENDER PASSED: Jordan's state grain buyer made no purchase in an international tender to buy 100,000 tonnes of milling wheat which closed on Wednesday, European traders said. A new tender is expected to be issued in coming days, closing on Sept. 20, they said.
FEED WHEAT AND BARLEY PURCHASE: Japan's Ministry of Agriculture said it would import 100 tonnes of feed-quality wheat, and 6,000 tonnes of barley for livestock use, via a simultaneous buy and sell (SBS) auction that closed late on Wednesday.
PENDING TENDERS:
RICE TENDER UPDATE: The lowest offer in a tender from Bangladesh's state grains buyer to buy 50,000 tonnes of rice which closed on Tuesday was $438.00 a tonne CIF liner out, sources in the country's grains buying agency and European traders said. The offer was submitted by Thailand-based trading company Siam Rice trading. Offers were still being considered and no purchase had yet been made, they said.
BARLEY TENDER: Algeria's state grains agency issued an international tender to purchase a nominal 35,000 tonnes of feed barley, European traders said. Origin was optional and tender deadline is Sept. 13, they said. Shipment was sought between Nov. 1-15 in at least two consignments.
WHEAT TENDER: Japan's Ministry of Agriculture is seeking to buy a total of 139,382 tonnes of food-quality wheat from the United States, Canada and Australia in a regular tender that will close late on Sept. 14.
FEED BARLEY TENDER: Jordan's state grain buyer issued another international tender to purchase 100,000 tonnes of animal feed barley to be sourced from optional origins, European traders said. Tender deadline is Sept. 14. Traders had been anticipating a new tender after Jordan made no purchase in its previous tender for 100,000 tonnes of barley on Sept. 7.
SOYBEAN TENDER: South Korea's state-backed Agro-Fisheries & Food Trade Corp issued international tenders to purchase around 10,000 tonnes of soybeans free of genetically modified organisms. The registration deadline to participate in both tenders is Sept. 14 with offers to be submitted on Sept. 15, they said.
SOYMEAL TENDER: Iranian state-owned animal feed importer SLAL issued an international tender to purchase about 200,000 tonnes of soymeal, European traders said. Offers in the tender must be submitted on Oct. 2. The soymeal can be sourced from Argentina or Brazil only and prices must be submitted in euros.

Exporters expect further rise in rupee, cover positions

Indian exporters are rushing to buy effective hedges for their dollar receivables, anticipating that the Mint Street's policy stance on credit costs and robust economic growth prospects would enhance overseas fund flows and help strengthen the rupee .

The forward premium -a measure of the expected movement for the local currency in its pairing against the dollar -declined about 14 paise in the past two days to Rs 2.81 for the one-year maturity contract after the central bank reduced the benchmark policy rate by a quarter-percentage point Wednesday.

Forward premium is the spread or gap between the prevailing exchange rate and the higher level used in forward currency exchange deals.
"Exporters are selling in a big way after the RBI's interest rate cut," said Anindya Banerjee, analyst at Kotak Securities. "With the latest rupee rise, their gains from the forwards premium are now capped as they realise lesser value on their existing contracts." "Many exporters are rushing to book fresh forwards contracts to cover their future receivables," he said.

The rupee Thursday hit a fresh two-year high, closing at 63.68 a dollar, a tad stronger than a day earlier. During the day, it reached as high as 63.56. A stronger rupee coupled with falling forwards premium yield lower value realisation for exporters who book forwards contracts.

Similarly, a weaker rupee coupled with rising premium is good news for companies with offshore re ceivables.For instance, an exporter who booked one-year contract two days ago would have taken the exchange rate at about 67.06 (spot exchange rate plus premium) compared with 66.50 now. This means, an ex porter locking in forwards now have to fork out more dollars.

"Looking at the huge overseas inflows, exporters need to cover at least three-fourths of their confirmed receivables," said KN Dey, managing partner, United Financial Consultants, a Mumbai-based forex firm. "The rupee looks to be on a rising path. A further appreciation may hur t India's export competitiveness.

Whenever the interest rate differential between the US and India narrows, the (rupee-dollar) forwards pre mium dips."

Forward transactions in the forex market are either at a premium or a discount to the rupee's spot rate. Typically, the maturity dates of forward transactions are in the range of one month to a year.