ECONOMY, P2 LTCG TAX Chancellor Merkel says talks to be tough, unclear when they'll end FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOLUME XXXXXV NO. 274, 22 PAGES, `6.00 P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E IN THE NEWS DoT may float new draft NTP in a week THE DEPARTMENT OF telecom is likely to float a draft of the National Telecom Policy 2018 within a week for public comments, a source said, reports PTI. The NTP 2018 is expected to present a growth road map of the telecom sector, which is reeling under a severe financial stress, for a period of next five years. 2017-18 70,382 ■ MoRTH may find (RE) the new arrangement hitting its EPC and hybrid projects 2016-17 51,854 finance minister will decide which project should get how much.The CRF — the flows to which are estimated to be over `83,000 crore in 2018-19 — hasbeenthemainstayofpublic funding of highway projects in the country since it was set up by the Vajpayee government, withtheobjectiveoffindingthe resourcesfortheNationalHighwayDevelopmentProgramme. MoRTH has invariably laid hands on bulk of the fund and enjoyed the discretion to allo- E-WAY BILL FOR GST Special Features Budget 2018: Stage set for new direction for Indian IT The Budget was refreshingly different for the IT industry as it acknowledged the importance of new-age technologies such as AI and blockchain and will augur well for the sector in the long run System to be ready for rollout in 2 weeks Bihar may have lost `10,000 crore in first three months due to absence of a system to check cargo movements ■ EFE, P8 Self-employed can withdraw 40% of NPS corpus tax-free The new proposal in Budget 2018 allowing self-employed subscribers tax-free withdrawals of 40% of their NPS corpus on maturity will bring non-salaried individuals at par with salaried individuals ■ Personal Finance, P9 QuickPick JSW bids for Bhushan Steel JSW STEEL said on Sunday that it has submitted resolution plans for Bhushan Steel, which is undergoing insolvency proceedings, reports PTI. Sources said Tata Steel has also submitted a bid for the debt-ridden company. ATata Steel spokesperson, however, declined to comment. Luxembourg-based ArcelorMittal said in a statement that it has not submitted a resolution plan for Bhushan Steel; February 3 was the last day for submitting bids for the maker of auto grade steel. PAGE 5 GST of merchandise movements across the country,a non-synchronous launch of the system could cost the industry dear. Officials sources, however, told FE that the dates announced by the two states are provisional and only meant to indicate to the businesses about a likelytime-line. The dates could be changed once the Centre announces the final date. The National Informatics Centeris learnt to have asked for two weeks for fixing the system. “Traders, manufacturers, businesses and transporters would have lost millions of dollarsintheexercise(hadtheCentre not postponed the date promptly,” said Rajat Mohan, partner,AMRG & associates. SUMIT JHA New Delhi, February 4 EVENAS GST Network (GSTN) is busy addressing the technical glitches that thwarted implementation of the e-way bill mechanism — was to be rolled out from February 1 but was postponed till a date to be announced—andbelievesthat it might take a couple ofweeks to fix the problem, revenuehungrystatesareputtingpressure on the Centre to avoid any further delay in the use of the key anti-evasion tool. Gujarat has come out with a plan to implement the system from February 20 while Uttarakhand says it will have it rolled out on February 10 itself. Analysts said given that the crash of the e-way bill portal on February 1 led to stoppage Continued on Page 2 LTCGT VS STT Tax transactions, not gains: Market pundits SUNDAR SETHURAMAN Mumbai, February 4 ■ LTCGT leads to high WHY STT not LTCGT? ■ Mopping up desired `20,000 cr via STT is far more efficient ■ Small increase in STT on delivery trades can help achieve this compliance costs for foreign investors ■ Spread of just 5% between short and long-term capital gains sends a wrong message ■ Move encourages tax avoidance by investing through multiple accounts— to keep gains below `1 lakh ■ Levy encourages tax arbitrage by foreign investors — can lead to shift of business from existing exchanges ILLUSTRATION: ROHNIT PHORE MARKET MEN ARE finding it difficult to come to terms with thereintroductionoflong-term capital gains (LTCG) tax,which finance minister Arun Jaitley announced would be imposed onallgainsofover`1lakhafter January 1 on equities and units of equity-oriented funds. It is evident from comments of the finance ministry officialsthattheprimarydriver of this move seems to have been the need to garner additionalresources,inayearwhen several factors could derail the budgetary math — from overestimatingcollectionsthrough GST and even securities transaction tax (STT). The government has also estimated for a sharp increase in STT to `11,000 crore from under `8,000 crore in FY18 revised estimates (RE), without anyrevision in rates.Given that 2017 was an excellent year for the markets, expecting 2018 to see an even higher turnover might seem a tad optimistic. But that aside, there is a near consensus in the market that an increase in STT to garner the required resources is a for more efficient means than reintroducing LTCGT. Most market players and tax experts agreed to express theirmisgivings on the subject only off the record. Continued on Page 2 DESPITE SOME INSTANCES of disappointment, the October-December earning season hasmostlybeenontracksofar. Results declared by major companies, so far, show some signs of a moderate economic recovery. Some improvement is also because of the base effect as the same period last year witnessed demonetisation. A key challenge is rise in inputprices,thoughconsumer demand is on an uptick. Themanagementcommentary from the country’s largest engineering and construction firm, Larsen & Toubro, which beat estimates on almost all fronts,was most encouraging. The company said the quarter wasasatisfactoryoneandfresh orders won by it were up 38%, whichwasawelcomerelieffrom theprevioustwoquarterswhere the outcome was not proportionatetotheeffortputinbythe firmtowintheorders.However, the companyhas not revised its guidance for the year. It had in Q4 Q1 Q2 Q3 FY17 FY18 RM to sales (bps, chg y-o-y) 190.78 (% chg y-o-y) 160.08 19.22 -162.69 FE BUREAU New Delhi, February 4 Net profit 315.53 (bps, chg y-o-y) 284.97 OPM 403.53 Continued on Page 2 ■ It can now be used to fund educational institutions, hospitals and all infra sectors (BE) Net sales (% chg y-o-y) -155.61 Continued on Page 2 proposed to revamp the way the Fund is used, administered 83,374 *Created out of the proceeds of cess imposed on petroleum products THE BUDGET'S ACCEPTANCE of certain key suggestions by NK Singh-led FRBM panel on debt and deficit to “impart unquestionable credibility” to the Centre’s fiscal discipline has left out an independent institutional mechanism the committee had proposed to monitor the government’s performance. Also,whiletheCentreaccepted the panel’s recommendation to lower the its debt burden to 40% of GDP, it relaxed the FY23 deadline suggested by the panel. Instead, it will endeavour to meet this target only by FY25.Even the 3% fiscal deficit target — which was supposed to be achieved in FY19 — will be met only in FY21, although government officials have hinted that the target could be attained as early as FY20. The amendments to the FRBM Act 2003 in the finance Bill eludes reference to a fiscal council or an equivalent body to “provide an independent assessment of the central government’s fiscal performance and compliance with targets set under this Act”, as recommended by the panel. ■ Key amendments 2018-19 SURYA SARATHI RAY New Delhi, February 4 FINANCEMINISTERARUNJaitleyhasquietlydivestedtheministryofroadtransportandhighways (MoRTH) of its 17-year near-monopoly on the Central Road Fund (CRF) — created out of the proceeds from the socalled road cess on petrol and diesel—andacquiredthepower to disburse these funds to a wholerangeofotherinfrastructure sectors,including electricity, gas pipelines, agricultural coldchains,affordablehousing, communication and water & sanitation. When the amendmentstotheCentralRoadFund Act, 2000, proposed in last week’sUnionBudgettakeeffect, the (now-renamed) Central Road and Infrastructure Fund (CRIF) could be used to finance evenhospitals,medicalcolleges and education institutions. A committee headed by the catethemoniestovarioushighway projects implemented by itself and the NHAI. The ministry also allocates the funds to states and UnionTerritories for roads and for inter-state connectivityprojects. Ofcourse,relativelysmaller amountsfromtheCRFarenow being transferred to the ministry of rural development (for ruralroads)andtherailways(to build over-bridges). Flows to the Central Road Fund* (` crore) Base effect (Q3FY17 had seen note ban) helped; rise in input costs poses risk 13.66 SNATCHED AWAY BANIKINKAR PATTANAYAK New Delhi, February 4 Corporate earnings point to moderate recovery 9.70 All infra sectors to be eligible for road cess proceeds; FM-led panel will decide which project gets how much No place for fiscal council, yet Q3 RESULTS 9.73 Highway ministry loses control over road fund ● FINANCE BILL 2018 13.72 BUDGET PROPOSAL 20.86 MUMBAI, MONDAY, FEBRUARY 5, 2018 -11.64 For health scheme to work, users must pay, select coverage carefully, keep insurance out 65.8 Govt has to bridge trust deficit with the bond markets GERMAN COALITION Finance secy Adhia says kitty to double to `40,000 cr in FY20 EDITORIAL INTERNATIONAL, P4 1.62 OPINION, P6 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY17 FY18 FY17 FY18 Q4 Q1 Q2 Q3 FY17 FY18 Sample of 533 companies (excluding banks,financials & OMCs ) Source: Capitaline November 2017 cut its order inflowguidanceforthefullyear ending March 2018 and expects to close the fiscal with onlyanominalincreaseoverlast year’s numbers. L&T posted a decent 11% year-on-year (y-oy) growth in its infrastructure revenues,with domestic infrastructure growth scaling a sixquarter high of 20%. Private capex continues to be sluggish andorderinflowcontinuestobe mostlyfrompublicsectorfirms. AluminiummajorHindalco also witnessed rise in demand, taking its y-o-y net profit growth to 18%. If it was below market expectations, it was becauseofcertainprovisioning on account of the Supreme Court’sorderonminingregulations.On the back of the rise in prices of aluminium and copper on the London Metal Exchange, the company’s revenuesincreasedby18%.Ebitda growthwas up 36%y-o-y. For the country’s second largest commercial vehicle manufacturer,Ashok Leyland, ebitda margin expanded by 100 bps quarter-on-quarter to 11.1%,which was in line with estimates. The company was able to offset the impact of higher discounts through better mix and price hikes. Continued on Page 2
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