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| May 19, 2017 |
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Impact 
While the divide among the left, right, and centre is widening across the globe with politicians securing their goalposts, Indian politicians seem to be showing a lot of maturity—perhaps, out of compulsion. Nonetheless, one India-one tax rate is soon going to become the reality.
Now it’s certain, the Goods and Services Tax (GST) will be implemented from July 01, 2017. Finally, the members of GST Council have unanimously agreed on the tax slabs for most of the goods falling under the purview of GST.
Briefing the media about tax rates, Revenue Secretary, Mr Hasmukh Adhia said, “About 7% of the items fall under the exempt list while 14% have been put in the lowest tax bracket of 5%. Another 17% items are in the 12% tax bracket, 43% in 18% slab and only 19% goods fall in the top tax bracket of 28%.”
The finance minister expressed that the tax rates won’t have an inflationary impact as most goods which are presently taxed at 31% or higher will now be taxed at 28%.
He also remained hopeful about improvement in tax collection under the GST regime.
For more on the rates, click here.
PersonalFN is of the view that, right from the formation of GST Council, the tax rate on goods wasn’t expected to be inflationary. Rather the prognosis was, goods would become cheaper, and services would become dearer under GST.
However, what we have seen until now is just one side of the story and how services will be taxed is still ambiguous. If the incentive of lower tax in goods is taken away by the hike in the rates for services, then GST may not result in household savings, at least in the urban areas where people utilise services more.
Here’s your step-by-step guide on analysing the impact of GST rates on your household budget and investments:
The finance minister has offered a general direction of retail inflation based on the composition of the Consumer Price Index (CPI). But you need to create your own basket. Try to analyse how much you spend on goods and services and depending on the rate differential, determine how much more or less you will have to pay to enjoy the same lifestyle after the GST is implemented.
If your assessment suggests that you are going to save some money, don’t forget to invest that as per your personalised asset allocation plan.
Impact on Markets
Many market experts and policy analysts believe that the GST will help India accelerate its GDP by 2.0% to 2.5% in the long run. The unorganised sector is set to lose its cost advantages, which it enjoyed mainly on account of tax evasion and lack of compliance until now. Transportation cost is also expected to drop after the GST is in effect, and may eventually boost the profits of many companies.
Typically, (and predictably too) news channels and newspapers are busy publishing stories on companies that might be possible beneficiaries of the GST.PersonalFN believes, unless you can analyse available opportunities, avoid investing in stocks directly hoping to profit from them.
Instead, you should invest in mutual funds that are managed by professional money managers. They are well-equipped and more competent to analyse the impact of macroeconomic developments on stock markets and your investments.
The full benefits of the GST will be realised over the next few years. If you have a time horizon of 7 years or above and can take calculated risks, strategically align your portfolio to ride the market waves by subscribing to PersonalFN’s Strategic Funds Portfolio for 2025 now. |
Impact
Sometimes, confusion can result in misery. Over the last two days, the Maharashtra Government made the prime news for its decision to amend the Maharashtra Stamp Duty Act. The media widely reported that the Government had decided to hike the stamp duty on the registration of gift transactions of immovable property among blood relatives. From the current Rs 500, this duty was reported to be hiked to 3% of the prevailing Ready Reckoner (RR) rate.
It was also believed the Government increased the stamp duty on the conveyance of immovable property to 5% in urban areas and 4% in rural areas.
Oddly, the cabinet wasn’t aware of this decision it had apparently made and learned about it from the media busy reporting the “exclusive news” without verifying the authenticity of the report or source.
The opposition and allies too reacted to media reports without confirming with the Government about this new decision.
It seemed as though the Government had dozed off and has, finally, woken up.
According to the revenue minister of Maharashtra, “miscommunication” led to the media misreporting it. He went on to say that, "There is no change in that decision, we are in fact making losses of Rs 500 crore because of the decision, but yet we are not increasing the duty."
The fact is Indian states are in a race of competitive populism, and hence, policymaking is subject to the whims and fancies of politicians. So no wonder, we see many “U-turns” in the policies of all state governments.Create loopholes, allow beneficiaries to milk them, and later plug the gaps—this has been the modus operandi of many state governments in the past, cutting across all party lines.
But before pointing crooked fingers at politicians, we must also recognise that there’s a severe lack of honesty among taxpayers (and non-tax payers) as well.
Hopefully, Indians will soon transform such malpractices and the Government will wise up. |
Impact
Winning a marathon race is not a child’s play. The mental attitude most long distance runners swear by is patience. If you run too fast, exhaustion meets you sooner; run too slow, and you might finish the race last.
For professional fund managers, managing equity oriented mutual fund schemes is just like running a marathon race. They always have to strike a perfect balance between risk and reward. If they are inclined to be conservative, schemes under their management may underperform. On the other hand, if their approach is overly aggressive, they might risk losing the investors’ hard-earned money.
Tricky market conditions, like those that presently prevail, makes the fund manager’s job even more challenging.
To read more about this story and Personal FN’s views over it, please click here.
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Impact
While institutional investors are going gung-ho on financial stocks, not all’s well in the sector. Banks, especially, are grappling with high NPA and the needed provisioning, which is impacting their bottom-line.
And if the situation does not improve, it looks like their bottom-line could be affected furthermore, beginning in the next fiscal year, i.e. from April 1, 2018,
Why?
The Indian Accounting Standard (Ind AS) 109 comes into force from the next financial year to battle the menace of high NPAs vide additional provisioning that will impact the profitability of banks.
What is noteworthy is Ind AS 109 will work in congruence with the International Financial Reporting Standard (IFRS).
In an interview with the Press Trust of India (PTI), the President of The Institute of Chartered Accountants of India (ICAI), Mr Nilesh Shivji Vikamsey said, “It (Ind AS 109) is an accounting policy that has to be followed and that will have huge ramifications on the numbers. The provisioning will be more and P&L (Profit & Loss) will be impacted.”
He also expects that the implementation of this new accounting standard will affect the capital adequacy provisioning. He opinioned that banks may find it difficult to implement Ind AS 109 for numbers in the years prior.
To read more about this story and Personal FN’s views over it, please click here. |
Impact
Have you noticed how “limited period only” offers create a sense of urgency? They make you believe, if you miss an opportunity to buy this product or subscribe to that service in a specified time, you’re probably losing out on a very attractive deal forever.
So far, we have seen consumer-goods companies and retail focused service providers launching such offers to attract customers.
But now, the trend is catching on fast even among bankers.
A huge pile of surplus cash and relatively soft demand for industrial loans has compelled banks to concentrate on retail banking operations. Going a step ahead, banks are busy launching offers with limited time periods for borrowers.
Without many exceptions, bankers will tell you they are concentrating on growing their retail banking at present.
To read more about this story and Personal FN’s views over it, please click here. |
Can simplicity to invest in mutual fund induce more people to invest in mutual funds? The Securities and Exchange Board Of India (SEBI) and a slew of fund houses think so.
What’s brewing is SEBI may request the finance ministry to consider the request of mutual fund houses to allow investors to invest in mutual funds using Bank KYC and Aadhaar as valid proofs. Some mutual fund houses are of the view that, Aadhaar is issued only after in-person verification (IVP), and if the Aadhaar and bank accounts are linked, additional compliance requirement makes the process of investing cumbersome.
Time will tell how much faith the finance ministry shows in this argument.
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10 Reasons Why You Should File Your Income Tax Return On Time
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Forward Price To Earnings - Forward P/E Forward price to earnings (forward P/E) is a measure of the price-to-earnings (P/E) ratio using forecasted earnings for the P/E calculation. While the earnings used are just an estimate and are not as reliable as current earnings data, there is still benefit in estimated P/E analysis. The forecasted earnings used in the formula can either be for the next 12 months or for the next full-year fiscal period. |
Quote: In the short run, the market is a voting machine, but in the long run it is a weighing machine.”- Benjamin Graham
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