KYC threshold expected to be cut for jewellery buying in Budget

Jewellers, however, say no black money in system post demonetisation; move will only dampen demand

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In a major blow to the already struggling jewellery sector in India, the government might cut the threshold limit for the requirement of the permanent account number (PAN) or Unique Identity Code (Adhaar Number) in urban, and Kisan Credit Card number in rural areas for jewellery or bullion purchases between Rs 50,000-100,000, post Union Budget 2017 Date . The Budget, which will be announced on Wednesday, is likely to further tighten the noose around black money after the demonetisation of Rs 500 and Rs 1000 notes, announced on November 8, 2016.

“The government has already proved that it would go all out against black money. Since jewellery trade has been on the government’s watch list, we may see a cut in the minimum threshold in know your customer (KYC) requirement to Rs 50,000-100,000,” said an industry veteran on condition of anonymity.

Rajesh Khosla, Managing Director, MMTC Pamp, the only LBMA (London Bullion Markets Association)-accredited bullion refinery in India, said in an interview on Tuesday that the government might come down hard on black money and the KYC threshold might be reduced to Rs 100,000 or even Rs 50,000 in Union Budget 2017.

Till three years ago, the minimum threshold on KYCrequirement in jewellery trade stood at Rs 500,000 which was brought down to Rs 200,000 by the Bharatiya Janata Party (BJP)-led National Democratic Government (NDA) government in an attempt to curb black money from the system.

Further reduction, however, would hit the trade badly, said Kumar Jain, Director, Umedmal Tilokchand Zaveri, a bullion dealer and jewellery retailer in Zaveri Bazaar.

Post excise duty in the last year’s budget, jewellery trade was hampered badly with gold import in India slumping to 580 tonnes (an estimate by GFMS), the lowest in 13 years, from around 850 tonnes in 2015.

Many jewellers, however, do not anticipate such move by the government. They feel government’s demonetisation of high value bills in November is enough to act on black money. “Now, time has come to incentivise the trade,” said a senior industry official.

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Budget 2017: PM Narendra Modi looks forward to ‘fruitful’ session

Ahead of the budget session he urged all political parties will work together for people’s benefit

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Prime Minister Narendra Modi on Tuesday ahead of the Budget 2017 session hoped that the current session will be “fruitful” and all political parties will work together for people’s benefit.

“We had discussions with every political party individually and collectively. There should be productive and detailed discussion of the budget during the session,” Modi said while addressing the media here.

“I urge all parties to help in smooth functioning of the session. I hope for fruitful discussions. We aim at positive and meaningful debates for public interest.

“I am hopeful all political parties will work together to move forward,” he said.

Modi also said: “This is the first time the budget is being presented on February 1.”

“Everyone would remember that earlier budget used to take place at 5 pm. This practice was changed during former Prime Minister Atal Bihari Vajpayee’s time,” Modi said.

“Today (Tuesday) a new tradition will begin. The budget will incorporate the rail budget as well,” he added. Click here

Six expectations of banking sector from Budget 2017

Since the low 2,0148 hit on December 26, the Bankex has risen 12% to settle at 22,566 last week

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With the Union Budget 2017 just a sniffing distance away, banking stocks are on a roll.

The BSE Bankex, the barometer of banking stocks, has shot up 12% since its December lows in the anticipation of budgetary stimulus to keep demons of demonetisation at bay.

Since the low 2,0148 hit on December 26, the Bankex has risen 12% to settle at 22,566 last week. This is against an 8% rise in Sensex during the same period.

Bank stocks such as YES Bank (up 27%), Federal Bank (up 26%), Punjab National Bank (up 20%), IndusInd Bank (up 18%) and Bank of Baroda (up 14%) have seen a phenomenal rally in the period mentioned. Others such as Kotak Mahindra Bank, HDFC Bank, ICICI Bank, AXIS Bank and SBI too gained anywhere between 9% and 11%.

Below are six concerns that market participants hope FM Arun Jaitley will address in Budget 2017: Click Here

Investors brace for transaction tax hike, less friendly Budget

Govt can offset any negative impact by lowering corporate tax rates, mitigating note ban impact

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Investors in India are bracing for higher taxes and fewer incentives from the government’s annual Budget 2017 on February 1, as the focus shifts to wringing out revenues to finance giveaways and higher public investment.

While Prime Minister Narendra Modi’s administration is widely seen as being friendly to businesses and investors, it is not expected to announce any dramatic moves at a time when the economy is under pressure from a cash squeeze.

Among expected measures are a hike in a transaction tax on stock derivatives trading and a less beneficial approach to long-term capital gains tax exemptions, according to analysts.

India is also set to provide guidelines for new rules in April that will crack down on tax havens, while foreign portfolio investors are seeking clarity behind ‘indirect transfer’ rules that could increase tax liabilities for overseas funds.

But any negative impact from such measures could easily be offset, should the government also lower corporate tax rates or provide incentives to sectors hit by the government’s surprise decision in November to abolish high-value banknotes, analysts said.

“We can certainly see a sensitivity for investor concerns, and the government wants to do things like ease the cost and complexities of doing business, improve India’s competitiveness rankings and attract foreign investors,” said Rajesh H Gandhi, a tax partner at Deloitte Haskins & Sells, adding, “However, at the same time, the government has revenue pressures as it seeks the meet its fiscal targets.”

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Expectations for higher taxes for investors have increased since Modi said in December that market participants needed to make a “fair contribution” to nation-building, without providing any details.

Among the potential measures could be a second consecutive annual hike in the Securities Transaction Tax for futures and options markets, currently set at around 0.05 per cent for every 10 million trades. India could also lower the time threshold for long-term capital gains.

Currently, investments sold after at least a 12-month holding period are exempt from taxes, while anything below that is taxed at up to 20 per cent of the gains.

For foreign investors, the Budget is expected to provide guidelines behind the general anti-avoidance rule, or GAAR, that will start in April, especially on whether it will take precedence over individual tax treaties such as those with Singapore or Mauritius.

Overseas portfolio investors will also seek more details, after India’s tax department said in December that foreign companies with more than 50 per cent of their assets in India could be liable to pay indirect transfer taxes when exiting from their investments.

The comment was seen as potentially ensnaring foreign funds that have more than half of their portfolios invested in India. Read More

Budget 2017: FMCG companies pin hopes on growth oriented Budget

FMCG firms have admitted that their sales were impacted due to “adverse liquidity conditions

After taking a demonetisation hit, FMCG companies are pinning hopes on a growth oriented Budget  2017 to see a revival in consumer confidence and create demand both in urban and rural markets.

“We are expecting a growth-oriented Budget with various stimuli to revive consumer confidence… Proactive reforms to stimulate demand by increasing the money in the hands of the emerging middle class and rural India, this will help bring FMCG growth back on track,” Godrej Consumer Products Ltd Managing Director Vivek Gambhir told PTI.

Kolkata-based Emami too is expecting a growth oriented budget “to boost consumption, increase public investment, promote digitisation, broaden tax base and lead higher growth” and improvement of business sentiments.

“It (Budget) should aim at clarifying policies particularly with respect to GAAR, POEM, GST etc. As with every other Budget, restraining deficits and delivering higher growth is going to be a great challenge,” said Emami CFO & CEO Finance Strategy & Business Development N. H Bhansali.

He further said: “While tax rates are expected to reduce with increased basic exemption limits, but taxpayers base is expected to broaden. Ease of doing business would be another focus area in currently subdued business environment. Agriculture, infrastructure and service sectors are also expected to get due attention and support.”

Marico too is looking for a Budget in which the government would focus on boosting the rural sector and agricultural productivity besides providing benefits to the salaried taxpayers in order to increase disposable income in the urban markets, which would drive consumption.

“We are expecting an all-inclusive, progressive Budget to assist the sustainable economic growth of our country. In order to do so, it is essential for the government to focus on three crucial factors — boosting the rural sector and agricultural productivity, providing benefits to the salaried taxpayers in order to increase disposable income in the urban markets,” said Marico MD & CEO Saugata Gupta.

He added that this was important to encourage private investment and leverage demographic dividend as job creation is very critical.

FMCG firms like HUL and Jyothy Laboratories, which have come up with their October-December results, have admitted that their sales were impacted due to “adverse liquidity conditions” due to demonetisation. Click Here

Budget wish list: IT, ITes & e-commerce

Recent developments in the US and UK could impact growth for the Indian IT sector

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Industry size

Approx: $143 bn (IT – ITeS) plus $17 bn (e-commerce)

Employment figure: Approx 3.9 million

Contribution to GDP: About 9.3%

Key issues or areas of concern for the sector

Global political uncertainty due to the recent developments in the US and UK could impact growth for the Indian IT sector as these are one of the largest markets for the Indian IT-ITeS companies. Given that emphasis could be to create jobs in the US could have negative influence on outsourcing of jobs from outside the US, which in turn could have implications on mobility of IT specialists.

The new GST law poses multiple challenges for e-commerce firms, especially around compliance and related formalities, with e-commerce platform being liable to collect TCS (tax collected at source) on supply of goods and services by supplier.

Due to significant automation and changes in technology, employees are being re-skilled, and work culture is witnessing a major shift with enhanced focus on digital skills and just-in-time training.

Budget 2017 : Industry demands

Defer applicability of Place of Effective Management and clarify provisions around claim of foreign tax credit

Definition of Equalisation Levy is ambiguous and clarity is required. There is absence of clarity on availability of credit. Notification has to be issued to clarify that the levy is in nature of tax and eligible for credit.

PwC POINT OF VIEW

Sandeep Ladda, Partner and Leader, Technology & eCommerce

Sandeep LaddaSandeep Ladda, Partner and Leader, Technology & eCommerce

The government should provide tax concessions and rebates to consumers and businesses to promote digital payments in-line with recent efforts of making India a cashless economy.

There should be clarity on indirect tax laws affecting e-commerce players, especially around tax collected at source, service tax on aggregators, and levy of service tax and VAT on delivery charges.

Shashank ND, Founder of Practo Technologies, a health technology company

From the health care point of view, it will be good to see if the government will increase the 60-million base private health insurance. Health insurance should become a basic necessity. Many people go bankrupt because they can’t afford health care. From a start-up point of view, the government had done a pretty big event last year — Startup India, Standup India. I would love to know what has been the outcome of that and the ~10,000-crore fund of funds that was allocated. All of us in the start-up ecosystem will be looking forward to seeing India as a destination for IPOs. How the govt plans to make it happen will be very interesting because it will further innovation. The government should do whatever it can to help companies with Indian management. However, they should know where to draw a line.

Modi govt plans expansive budget despite growth, revenue worries

Jaitley is looking at how to fund giveaways to taxpayers and higher public investment

India’s finance minister is likely to borrow more than originally planned when he presents the

Budget 2017 Date on Feb. 1, senior aides and officials said, despite counting on revenues from a national sales tax whose launch date is still unknown.

Arun Jaitley is looking at how to fund giveaways to taxpayers and higher public investment to help nurse Asia’s third-largest economy back to health after the government’s shock decision in November to abolish high-value banknotes.

That is raising concern among some economists and investors that the government will take too many fiscal risks.

Yet officials say that, given the choice, they would choose growth sustained by state investment over a fiscal straitjacket.

“Some degree of flexibility on fiscal discipline should not be seen as irresponsible fiscal management,” one senior government official told Reuters, requesting anonymity due to the sensitivity of the matter.

A fiscal advisory panel, which includes central bank head Urjit Patel, has advocated widening the budget deficit to “slightly over” 3 percent of gross domestic product to free up funds for road, railway and irrigation projects.

“It is not possible to keep up the pace of capital expenditure without increasing the fiscal deficit beyond 3 percent of GDP,” another official, briefed on the committee’s findings, added.

New Delhi earlier aimed to cut the federal deficit to 3 percent of GDP over the next two fiscal years, compared with 3.5 percent in the year now drawing to a close.

Independent economists are also pencilling in a higher federal deficit in the coming fiscal year, at 3.3-3.4 percent of GDP, creating room for the government to invest an extra $6 billion. Read more