Tag: Finance Minister Nirmala Sitharaman

Government considers giving more powers for RBI to regulate shadow banks

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Indian government is considering giving more powers to the central bank to regulate the struggling shadow banking sector, Finance Minister Nirmala Sitharaman informed Parliament on Monday.

The government does not have any plans to infuse funds in privately-held shadow banks, she said in a written reply.

“Government has received a proposal from RBI to strengthen RBI’s regulatory and supervisory powers under the Reserve Bank of India Act, 1934, and the same is under consideration,” Sitharaman said.

The outlook on the shadow banking sector has been bleak ever since the state-run Infrastructure Leasing & Financial Services defaulted on a series of debt obligation triggering New Delhi to take over the control of the company.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

FM Nirmala Sitharaman’s first GST Council meet to decide on NAA extension, single point refund system

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Finance Minister Nirmala Sitharaman will chair her first meeting of the GST Council on Friday which, among other things, would consider extending the tenure of the anti-profiteering authority by a year, setting up a single point refund system and a mechanism for businesses to issue e-invoices.

Sitharaman, who took over the reins of Finance Ministry from Arun Jaitley last month, will preside over the 35th meeting of the GST Council, which is a federal decision-making body comprising of state finance ministers.

The agenda of the meeting will also include integration of GST e-way bill system with NHAI’s FASTag mechanism from April 1, 2020, to help track movement of goods and check GST evasion.

Besides, the Council would also deliberate on setting up a national bench of the Appellate Authority for Advance Ruling (AAAR) to reconcile the contradictory orders on similar issues passed by Authority for Advance Ruling (AARs) in different states, a move aimed at providing certainty to taxpayers.

The Council is also likely to approve a draft amendment bill to bring changes in GST law to allow businesses to rectify mistakes during payment of GST and applicability of interest only on cash component in case of delayed payment of GST.

With regard to extension of the National Anti-Profiteering Authority (NAA), the Council would consider extending its tenure by one year till November 30, 2020.

Soon after the GST was rolled out from July 1, 2017, the government had approved setting up NAA for two years to deal with complaints by consumers against companies for not passing on GST rate cut benefits.

The NAA came into existence on November 30, 2017, after its Chairman BN Sharma assumed charge. So far, the NAA has passed 67 orders in various cases and complaints still keep coming in.

Also, the Council is likely to discuss a mechanism for single point sanctioning and processing GST refunds.

The current mechanism entails twin refund sanctioning authority of the central and state tax officers, but that could well change by August when the proposed new structure involving a single authority comes in place.

As per the single point system being worked out by the Revenue Department, the taxpayer will get full refund from jurisdictional officer once the claim is sanctioned, while at the back-end the Centre and states will apportion the amount to be paid to each other.

In a move to check evasion, the Council would also discuss on the proposal of integration of e-way bill with NHAI’s FASTag mechanism from April 1, 2020.
Such an integration would help find the location of the vehicle and when and how many times it has crossed NHAI’s toll plazas and restrict transporters from doing multiple trips by generating a single e-way bill.

Transporters of goods worth over Rs 50,000 would be required to present an e-way bill during transit to a GST inspector, if asked.

However, lack of harmonisation under the ‘track and trace’ mechanism in terms of sharing information among different agencies is leading to misuse of e-way bill.

The Council would also consider another anti-evasion proposal of issuance of e-invoices on a centralised government portal by businesses with turnover of Rs 50 crore and above for business-to-business (B2B) sales.

Analysis of return filing shows that as many as 68,041 businesses have reported a turnover of over Rs 50 crore and accounted for 66.6 per cent of total GST paid in 2017-18.

Further, while these businesses account for just 1.02 per cent of GST payers, they make up almost 30 per cent of the B2B invoices generated in the system.

The Council would also consider a proposal for setting up a national bench of AAAR to reconcile the contradictory orders on similar issues passed by AARs in different states.

The AARs in different states have passed about 470 orders, of which in as many as 10 cases contradictory orders were passed, a couple of which were later clarified by the Central Board of Indirect Taxes and Customs (CBIC).

The GST law would have to be amended for setting up a National bench for AAAR since the Act in its present form does not provide for a centralised authority.

Setting up of a national bench of AAAR would help bring certainty in the GST era as divergent rulings by AARs leave the industry flummoxed about the tax implication of a particular business decision.

In view of the confusion created by contradictory rulings, the revenue department had also last year mooted a proposal to set up a centralised appellate authority for advance ruling to bring uniformity in such cases.

The GST Council, chaired by Union Finance Minister and comprising state counterparts, was scheduled to discuss it in its meeting in July 2018. However, the council did not arrive at a decision on the agenda item.

Under the GST law, each state is required to set up an Authority for Advance Ruling (AAR) comprising one member from the central tax department, and another from the respective state.

The New Delhi bench of the AAR had in March last year held that duty-free shops at airports are liable to deduct GST from passengers. However, these shops were exempt from service tax and central sales tax in the earlier regime. This had created a flutter in the industry.

Similarly, the solar industry too was left in a vexed situation when the Maharashtra AAR said that 18 percent GST rate would be levied for installation works, but the Karnataka bench of AAR passed an order levying 5 percent GST on the same.

Also, the AARs in Tamil Nadu and Gujarat had passed divergent orders on applicability of GST on catering services in an industrial/office unit, which was later clarified by the CBIC through a circular.

Besides, there were contradictory orders passed by AARs in different states on levy of GST on payment made by breweries to brand owner, availability of input tax credit (ITC) on cess paid and also whether ITC is admissible when the recipient settles the payment through a book adjustment.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

An open letter to finance minister Nirmala Sitharaman

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Dear Madam Finance Minister,

Welcome to the exciting world of finance that you have just taken charge of. I have covered this space as a beat reporter for 25 years and so I am taking the liberty to give a glimpse of this sector as I see it.

First, my biases: I have a gender bias and I am truly happy that India has her first woman finance minister (the only previous instance was more a part-timer). Not just me, but even men say women bring more sincerity, honesty,  integrity and courage of conviction.

My second bias is the Reserve Bank. Here as well, my bias is shared by respected experts. The RBI has seen our country through several serious challenges. It has a squeaky clean record even though it often has to take sides. It is always on India’s side. It is above party lines. Governors chosen by one party have always served a rival party too with distinction. Dr Bimal Jalan was selected by the coalition Deve Gowda government, and he served Atal Bihari Vajpayee’s government as its trusted advisor. Venugopal Reddy was appointed by the NDA government and he served admirably under the next UPA government. Raghuram Rajan was chosen by the UPA and completed his term under the NDA. With 85 years of experience in managing the value of the rupee, guarding the external sector and supervising the domestic financial sector, the RBI has become an institution of deep intellect and proven integrity. Even when you find yourself in disagreement with their prescription, do spare some time to ponder over their diagnosis.

A word on the financial sector. In any country, it attracts the most intelligent brains. A curious lesson of history is that both fraud and finance require a lot of intelligence and ever so often the two overlap.

Coming to the here and now, the most pressing problem, you would have realised is that of the housing finance companies. Your ministry and RBI will have by now figured out if it is an entity level problem, some entities’ problem or a systemic problem. Those impacted will scream apocalypse and demand (in the name of the public good) that RBI or government be the lender of the last resort by printing notes or using taxpayer money. Wise governors and governments have traditionally supported markets, not entities. Markets punish reckless entities. Ideally one mustn’t stand in their way. In extreme instances, if markets themselves are threatened, governments and regulators step in. But I need to hardly emphasise to you that good parents are those who encourage their children to stand up on their own when they fall.

A less apparent problem is the external sector. Problems always hit suddenly and with intensity. For a while, nations and markets have taken in their stride the tit for tat tariff war between the US and China as you know from your commerce ministry days. But the latest retaliatory threats from China are getting menacing. The yuan is getting perilously close to 7 per dollar. I pray this space doesn’t become your baptism by fire.

You will be wondering why I haven’t mentioned the word ‘budget’ yet.  I didn’t because this won’t be just your own problem but the entire government’s. Tax collections last year were a full 11 percent less than the revised budget estimates making this year’s budgeted tax target (of 17 lakh crore) a daunting task. This shortfall comes at a time when the global and Indian economy are slowing down considerably. The ministry, the media and the markets will scream for rate cuts. But these are at best steroids. As the PM well knows, the big task of this government will be to improve the nation’s productivity which means better education, health and infrastructure. You, your party and the government know all these issues much better. So I will skip the economy and budget in this letter and stick to the financial sector.

The heart of India’s financial sector, ma’am, are her banks, especially public sector banks. For all the cleaning up of the last four years, they are not in good shape. Many will scream that private banks too have NPAs and conflicts. But all told, public sector banks compare poorly with private ones on almost all parameters. Many well-meaning experts and former governors have given sensible advice (that has been disregarded for decades now): that PSU banks be brought under the Companies Act ( from the current Banking Regulations Act), that government stake in them be brought down to 49 percent from 51 percent, so they can compete fairly with private banks. Indeed it may be a great idea to sell just one of the PSU banks, just one, to a private entity or entities. I wont be surprised if PSU bank stocks go through the roof and solve your problem of having to capitalise them. No large economy except the former communist countries have 70 percent of their banking in the public sector. The Indian banking sector is at this sorry state because of the cardinal sin of nationalisation ordered by the previous part-time woman FM I referred to. May it be your achievement to release the Indian economy from that original sin.

There are other longer term goals too for the Indian financial sector: building up a deep and wide bond market that finances infrastructure and private capex, converting more cash transactions into non-cash or digital transactions, fool-proofing the rapidly digitising financial sector from cyber attacks. Indeed, ma’am, yours is the ministry with the maximum challenges and opportunities. But your ministry is also blessed with professionals. The best civil servants gravitate to finance. And you have at your service deeply professional regulators in RBI, SEBI and IRDA.

I began by admitting my gender bias but history will be gender blind when it judges your legacy: Have you left the economy stronger? Have you regulated markets better? Are PSU banks more competitive? Is the financial sector safer and serving the real economy well? Are more Indians saving more? Are their savings and investment giving them a better return while financing the nation’s growth?

Your meteoric rise in the last decade is a testimony to your capability. I am sure you will be more than equal to the challenge. Let me end with a quote from the poet Subramania Bharati: “Seivathai thuniththu sei” (Be brave in whatever you do). I wish you all the best.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Twitterati pour advises for Sitharaman to rekindle economic growth

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

India’s new Finance Minister Nirmala Sitharaman might not have spilled the beans on her plans to accelerate the economic growth rate, but the avid twitterati has been getting notes and advises regarding her next moves on the social media platform.

Inundated with congratulatory messages, the Twitter handle of the new Minister of Finance and Corporate Affairs also contains in-depth advise on the next level of economic reforms and growth-oriented moves that she should undertake.

As per Sitharaman’s Twitter handle, messages with themes such as the upcoming budget 2019, disinvestment, new economic reforms such as GST 2.0 have been gaining traction.

Shivam Mehra tweeted: “We need a great investment in agriculture and property industry as they are the backbone of every business there. Today businesses are running but not at the expected level. Markets need some investment to shoot up. (sic).”

On the Budget wishlist, Prasenjit Ghosh tweeted: “We need jobs! Reduce taxesIncentivize investments & exports Disinvest PSUs and give infra push Labour reforms to support SMEs (sic).”

Similarly, J.V. Naidu tweeted: “Spare some miney for middle class , increase NIL tax to 10L PA , so that people have money to spend and money rotation is there and economy increases.

“Give 1% rebate in GST for general public in retail sector who uses digital form of payment (sic).”

These advises are understandable, as in the last 48-hours, macro data points have painted a gloomy picture of the economy, showcasing a slowdown in GDP growth rate and contraction in core industries’ production.

Additionally, farm distress, unemployment and subdued consumer sentiment have aroused fears of a short-to-mid term slowdown.

Furthermore, the slowdown has become evident in sectors such as automobile, FMCG and aviation.

On the other hand, the relief came from another set of data which showed that India met its revised fiscal deficit target for the last fiscal year.

Even the various employee associations of the many departments under her Ministry assured Sitharaman of support, which she will require to boost revenues and control expenditure.

However, on whether any advise was adhered to or not will only be known once the hustle-and-bustle of the appointment subsides, and work begins on the full Union Budget for 2019-20.

The budget will be presented on July 5, in which the new government’s priorities and programmes will be known.

Besides the budget, the Economic Survey, which gives the status of the country’s economy, will be presented in Parliament on July 4.

On Friday, Sitharaman after being the second woman Defence Minister, the first being Indira Gandhi, became the second woman to head the Finance Ministry, after the former Prime Minister.

Sitharaman was among the three women who became part of the Union Cabinet in the 17th Lok Sabha.

Before Sitharaman, Indira Gandhi was the only female Finance Minister who served for a short period.

Prior to the Defence Ministry, Sitharaman held the Commerce and Industry portfolio.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow