Source Business Standard
| States reject Centre's proposal on threshold |
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Stick to stand on petroleum; proposal on central and state rates referred to NIPFP for study; EC ministers reiterate central necessity to meet them halfway BS REPORTER New Delhi, 11 November State governments reiterated to the central government on Tuesday that differences remain over key aspects of the much- proposed national goods and services tax (GST). At a meeting here of the Empowered Committee ( EC) of State Finance Ministers on the issue, they said the new deadline of implementing a GST by 2016- 17 was achievable, if these differences were ironed out. And, the panel rejected a proposal of the Union finance ministry to raise the threshold of annual turnover for the proposed GST from ₹ 10 lakh to ₹ 25 lakh. Another proposal to have a central GST at 12.77 per cent and state GST at 13.91 per cent, made by a subcommittee of the EC, was referred to athink tank on public finance. These are based on average revenue neutral rates. In August, the states had decided the turnover threshold be fixed at ₹ 10 lakh, with ₹ 5 lakh for special category states. In September, the Centre wrote to the EC, suggesting this be reviewed. It suggested ₹ 25 lakh or, at least, an increase in the ₹ 10 lakh threshold. "But, finally, the Committee took adecision that it will go by the decision already taken, ₹ 10 lakh," said EC chairman Abdul Rahim Rather, who is finance minister of Jammu & Kashmir. The decision was conveyed to a Union finance ministry representative, present in the meeting, he disclosed. However, three of four states had favoured raising of the threshold, for smooth implementation of a GST. Sources said some large states such as Uttar Pradesh, Tamil Nadu, Andhra Pradesh and Bihar have the current threshold of ₹ 5 lakh for ValueAdded Tax. At most, theyre willing to double it. Rather said, " If all goes well, the Constitutional Amendment Bill is carried in Parliament by both the Houses, I think the 2016 target rollout date is achievable." He said the Bill could be easily passed in the Lok Sabha, but the ruling coalition will need support of opposition parties in the Rajya Sabha. The ruling National Democratic Alliance has 58 seats in the 242- member Rajya Sabha. The Bill has to be passed with a two- thirds majority, which means at least 161 members would have to vote for it, if there is full attendance. Rather said after a Bill was passed by Parliament and approved by at least half the states, the proposed GST Council would be set up in six months. It would be up to the Council to fix a threshold of annual turnover, he clarified. As for the sub- committee proposals mentioned earlier, these were based on the year 2011- 12. So, the EC decided to refer it to the National Institute of Public Finance and Policy, to update it to 2013- 14. "It is a recommendation of the sub- committee, not approved, not endorsed by the EC. There will be a band for revenue- neutral rates," Rather said. The other issue related to the states persistent stand that petroleum be out of a GST. " States have already said that petroleum, alcohol and tobacco should be excluded from GST," Rather noted. The really contentious issue is petroleum. A revised draft of the Constitution Amendment Bill is learnt to have contained a middle path, to have petroleum in a GST but zero- rated. To a query on the revised draft, Rather said, " We have not received the revised draft Bill. We will discuss and offer our comments (after we receive it)." He said the states had made it clear to the Centre that while preparing the draft GST Bill, the views of the states should be respected. " I have made it abundantly clear to the Government of India, as that will be in the true spirit of cooperative federalism. States should be carried along," he added. Rather said states have also said that the compensation for loss due to GST should be constitutionally provided. However, the Centre does not agree, sources said, adding the compensation could have legal backing even if not contained in the Bill. Rather said the EC would meet as soon as the revised draft was sent to it. GST rollout has missed several deadlines because of lack of consensus among states and between Centre and states over certain crucial issues on the proposed tax regime. |Centre wants to table Constitutional Amendment Bill in winter session of Parliament so that It could be introduced from 2016- 17 |States panel on GST says Constitution Amendment Bill needs to take their views on- board |States do not want petroleum on GST list |Revised draft is understood to include petroleum in GST, but with zero rate of taxation Sub- committee proposes average revenue- neutral rate at 13.91 per cent for SGST and 12.77 per cent for central GST |
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Source Business Line
RBI's new norms likely to 'stifle' NBFCs Satyanarayan Iyer
The central bank is sending us into the battlefield without enough armoury, says Srei Infra's Sunil Kanoria Mumbai, November 11: Non-bank finance companies (NBFCs) may see a sharp rise in bad loans and their bottomlines could be dented as a result of the Reserve Bank of India's revised regulatory framework governing them. The framework put out by the RBI on Monday has left many industry participants dissatisfied, with most calling this as a move that is likely to "stifle" the sector. While all stakeholders (NBFCs, credit rating agencies, and broking firms) are of the view that some provisions in the new framework such as enhanced capital requirements, disclosure norms, etc., will strengthen the sector, a few disagreed, saying that a couple of other provisions will deal a "body blow" to the sector. Credit rating agencies such as ICRA cautioned that the new framework will likely push up the non-performing assets (NPAs) of NBFCs by about two percentage points, when the asset classification norms are fully implemented over the next three-and-a-half years. The framework seeks to bring NBFCs on a par with banks, by mandating NBFCs to classify an account as a non-performing loan if the customer does not service the instalment for more than 90 days. Currently, NBFCs have 180 days to classify an account as NPA. ICRA has estimated that retail NBFCs covering 63 per cent of the sector's total advances of ₹3.7-lakh crore as on June 30, 2014, classify NPAs on the basis of the existing 180-day norm, while NBFCs with 20 per cent advances are already on the 90-day norm. "Thus the change in norm is likely to lead to a rise in the reported gross NPA from 4.5 per cent as on June 30, 2014, to 6-8 per cent once the norms are fully implemented, thereby increasing incremental credit provisioning," ICRA said in a report. While analysts believe that the new framework will be a net-positive for the sector and the financial system in the long run, industry captains almost unanimously flayed the new framework. Big disappointment Sunil Kanoria, Vice-Chairman of Kolkata-based Srei Infrastructure Finance, said, "The new framework is a big disappointment. When, like banks, they want us to recognise NPAs 90 days past due, why don't they give us tools like Sarfaesi to go out and recover our loans?" The RBI is sending us into the battlefield without enough weapons and armoury, he added Lakshmi Narsimhan, CFO of Magma Fincorp, concurs with Kanoria's observations. "The customers that NBFCs serve have to deal with erratic cash flows. It would have been better had the RBI followed the Nachiket Mor committee recommendations to classify NPAs based on underlying risks," Narsimhan added. When an asset is classified as non-performing, banks and NBFCs have to provide for the same. However, banks get some tax concessions on such provisions which have not been extended to NBFCs yet. "Such half-baked framework will kill the sector," SREI's Kanoria added. Profits will be hit According to ratings agency Crisil, the rule change will "slice around 40 basis points" of NBFCs' profitability over the next four years till March 31, 2018, as their provisioning will increase. The RBI has also increased the Tier-I capital requirements for NBFCs from the current 7.5 per cent to 10 per cent. While most NBFCs already comply with this requirement, they have a grouse against the risk-weights for the same assets being different for banks and NBFCs. The risk-weights for the same assets should be aligned for banks and NBFCs, Narsimhan added. According to ICRA, "Increasing the Tier-I capital for NBFCs while not aligning (reducing) the risk weights with what is allowed to banks would reduce the NBFCs' leveraging capacity vis-à-vis banks." |
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