Finance Minister Arun Jaitley rejected demands for deferring the Goods and Services Tax (GST) rollout saying the Constitution does not give luxury to delay the nation’s biggest economic reform by six months. Not ruling out a few initial glitches when more than a dozen state and central taxes are abolished and barriers between 29 states done away with, Jaitley said the system is fully geared up and will eventually smoothen itself out. While there have been sporadic protests in some cities against implementing the GST without giving businesses more time to prepare, Trinamool Congress has decided not to attend the gala event planned in Central Hall of Parliament on June 30 midnight to usher in the mega tax reform. West Bengal Chief Minister Mamata Banerjee termed the “hurried” roll out of the GST as “epic blunder” by the Centre and demanded deferring it by six months to help small businesses. Jaitley, however, said the date of GST implementation, rules and tax rates had been decided through a consensus by the GST Council — a body that is made up of representatives from each state as also the central government. “Those who are talking in terms of deferring (GST) by 6 months and so on, that’s a constitutionally impossible thing,” the finance minister said. The Constitutional amendment approved by Parliament in September last year gives time only till mid-September to replace the existing indirect tax structure by the GST. In absence of the GST, there will be a constitutional crisis as no tax can be levied on goods and services. “More importantly there is a constitutional mandate, and the mandate is on September 15 you will lose your right to collect existing taxes. So, therefore, the alternate system has to come in place and hopefully, by that date the (GST) system will come into place in a more smooth manner,” he said. The GST Constitutional Amendment Bill provides for roll out of the Goods and Services Tax by September 15, failing which the government will lose its legal entitlement to collect taxes.
China’s economy continued to improve in the second quarter, with corporate profits rising and hiring up, a private survey showed, but it suggested the Asian giant may have to brace for tougher times ahead even though firms have been able to weather a tighter financing environment. The quarterly survey of thousands of Chinese firms by China Beige Book International (CBB) showed that while the property sector slowed, manufacturing improved further and the retail and services industries bounced back after a difficult first quarter. That reinforced a flurry of recent data and policy makers’ comments that indicated authorities were working to curb financial risks and keep the economy on an even keel heading into a key political meeting this year. The survey showed surprisingly strong performance in the commodities sector despite some price weakness in the second quarter, with the aluminium sector particularly strong. The improving economy, especially the healthy labour market, is no doubt welcome news ahead of a leadership revamp at an autumn congress of the ruling Communist Party of China. Yet signs of stress in the corporate sector pointed to a bumpy ride for businesses. CBB said cash flow was negative for many companies and inventory levels in the second quarter was at the highest in the history of the survey. That is in line with official data showing growth in industrial inventories picked up to over 10 percent in April, sparking worries of weak demand. CBB said there are signs tougher times could be ahead for Chinese companies during a period of deleveraging and rising interest rates. “It remains true that either rates have to come plunging back down, as the (state planner) recently called for, or the present level of corporate activity is headed for a cliff,” CBB said in its report. As the government stepped up its campaign to curb debt risks and stabilise the financial sector, growth of China’s broad money supply came in at the slowest in at least two decades in May, though bank lending remained solid.
Loan growth in the country is expected to pick up to 15 per cent in 2017-18, from 9.1 per cent in the previous fiscal, as demonetisation shock fades, says a report. According to a Bank of America Merrill Lynch report, loan growth in the country is now at a historic low and is expected to bottom out. “Our BofAML liquidity model forecasts that loan growth will pick up to 15 per cent from 9.1 per cent in 2016-17 as the demonetisation shock works itself out,” BofAML said in a note. The report further said RBI open market operation (OMO) is also expected to push up loan supply and pull down bank lending rates, which in turn will spur loan demand. BofAML sought to illustrate the point. It said, “Re 1 of RBI OMO generates Rs 4 of loan supply. Besides, demonetisation has added temporary liquidity of around Rs 4,000 billion to banks, which would also boost loan growth.” “Our liquidity model estimates that the Centre should be able to grant USD 27 billion to recapitalise PSU banks, fund haircuts in restructuring distressed assets and/or capitalise a quasi-public asset restructurer like the National Asset Management Company (NAMC) by 2019,” the report said.