OPINION, P8 COMPANIES, P6 SAUGATA BHATTACHARYA Even if there are no rate hikes, expect a more hawkish policy INTERNATIONAL, P14 EDITORIAL HIGH FUEL COST TRUMP TARIFF TRIGGER Srikrishna should have put more safeguards on govt use of citizens' data IndiGo reports steep 97% fall in Q1 net; worst in over 3 years China tempts Britain with free trade, says door to US talks open NEW DELHI, TUESDAY, JULY 31, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM VOL.XLIV NO. 129, 30 PAGES, `6.00 (PATNA `6.00, RAIPUR `7.00) 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 READ TO LEAD SENSEX: 37,494.40 ▲ 157.55 NIFTY: 11,319.55 ▲ 41.20 NIKKEI 225: 22,544.84 ▼ 167.91 HANG SENG: 28,733.13 ▼ 71.15 `/$: 68.68 ▼ 0.02 `/€: 80.23 ▼ 0.39 BRENT: $74.83 ▲ $0.54 GOLD: `29,773 ▲ `51 INVENTORY MODEL E-commerce FDI rules may be eased THE SUPREME COURT asked former telecom minister Dayanidhi Maran and his brother Kalanithi Maran to face trial in the decade-old illegal telephone exchange case, reports fe Bureau in New Delhi. While dismissing the appeal filed by Dayanidhi against a Madras HC order, a bench led by Justice Ranjan Gogoi said, “The allegation is that you used phones for your brother's business interests. You face the trial.” I think they (RBI) should lower interest rates in India, not raise them because you have many states with different economic situations all over the country. You got real differences in India. It would be a big mistake for them to raise. — MARK MOBIUS CO-FOUNDER, MOBIUS CAPITAL PARTNERS Special Feature Know how you can get a loan against property Public and private sector banks and even housing finance companies offer loans against property, usually providing around 60% of the value of the property as loan ■ Personal Finance, P13 QuickPicks Sensex maintains record-setting run for 6th day, Nifty at new high THE SENSEX rose by 157 points to close at a fresh lifetime high of 37,494.40, continuing its record-breaking run for the sixth session, reports PTI. The bellwether also scaled an all-time trading high of 37,533.50 before settling at 37,494.40. The broader Nifty advanced 41.20 points to end at a historic high of 11,319.55, bettering its previous record close of 11,278.35 hit on Friday. The 50-issue index also hit an alltime high of 11,328.10 during the day. PAGE 11 Axis Bank’s June quarter profit falls 46% on rise in provisions AXIS BANK reported a net profit of `701 crore in the June quarter of FY19, reports fe Bureau in Mumbai. This was 46% lower than a year ago, owing to a 42% y-o-y rise in provisions to `3,338 crore. The bank had reported a net loss of `2,189 crore in Q4FY18. Net interest income, the difference between interest earned and interest expended, rose 12% y-o-y to `5,167 crore, and domestic net interest margin, a key measure of profitability, rose 8 bps sequentially to 3.67%. PAGE 10 Total retail ~9% 4x e-comm ~36% 6.2% 6.0 4.5 3.0 1.8 1.5 0 0.2% 0.3 FY12 FY13 0.4 FY14 Source: Edelweiss research 1.8 2.1 1.0 e-commerce penetration (%) FY15 management controlled by Indians, and foreign equity would not exceed 49%. Currently, it’s allowed only in case of domestic food items. However, this suggestion was not considered at length on Mondaybyathinktankheaded by commerce and industry minister Suresh Prabhu, given the sensitivity of the matter and fierce opposition by brickand-mortar stores, said a government official. Commerce secretary-designate Anup Wadhawan said the think tank on Monday deliberated upon the suggestions by various working groups, comprising industry and some government officials, and a final draft policy will be put out in due course. The think tank will hold further consultations with stakeholders if required,he added. FY16 FY17 FY18 FY23E As per suggestions of the workinggroups,aseparatewing in the Directorate of Enforcement will be set up to handle grievances related to implementation of FDI rules.While theextantFDIpolicybarse-tailersfromgivingdiscountsthemselves,brick-and-mortar stores have often accused these ecommerce players of flouting the rules, citing inadequate oversight of the implementation of the policy.For their part, AmazonandFlipkart—justlike other e-commerce players — claim that they have always compliedwiththerulesandthat the discounts are offered bythe sellersofthegoodsontheirplatform,and not themselves. The working groups on ecommercesoughttomakethis restriction even more explicit. ■ Market leaders asked to calculate ITC benefits accrued to them ■ Asked to check if it was enough to pass on to end users ■ Under new regime, telcos are can claim ITC on a host of inputs ■ GST rate for airlines’ economy class is 5%, business class at 12%, along with ITC benefits sector, which saw a rise in tax incidence after GST was rolled out,thesourcesaid,“Theremay not be enough room for passingonthebenefits,buttheNAA is seeking calculation from market leaders to assesses industry-wide impact.” When asked forcomments, an IndiGo spokesperson said, “The benefits of the GST rate reduction on tickets have been passed on to the customers by all airlines. We had a meeting with the competent authority to discuss the relevant details and have submitted the same for their review.” An Airtel spokesperson, however, said “We have not received any notice from the authoritiesaskingforareport.” The tax rate for telecom service providers was hiked to 18% in the GST regime, which was rolled out from July 1, 2017, from the erstwhile service tax rate of 15%, including cess. ■ Central bank officials have visited the head offices of banks ■ Seek recent, historical data on stressed loans even from 4 years ago ■ Ensure no ‘weak’ a/c goes unnoticed in current round of resolutions ■ Banks told in Feb to begin resolution plan as soon as default is spotted Public Shareholding (%) Promoter 48.89 51.11 Dec 2017 0 March & June 2018 Promoter referred to is President of India People wait in queue to check their names on the draft list at the National Register of Citizens centre at a village in Nagaon district, Assam, on Monday Report on Page 19 In the filings for Q4FY18 and Q1FY19 on both the BSE and NSE, HPCL clubbed ONGC which owns its 51.11% share among “public shareholders” whilestillmentioningthePresident of India (read the Union government) as its promoter with 0% stake. The “deviation” has caused muchheartburninONGCandit hasalreadyapproachedthegovernment for a resolution of the issue,sources said.The explorer hadtoforkout`36,915croreto acquire a majority stake in the oil marketing company on being prodded by the government,whichwantedtoboostits non-debt capital receipts. Continued on Page 2 Tariff tangle FE BUREAU Usage up, realisations down Low tariffs courtesy Jio led to higher usage of voice and data by consumers but realisations for incumbent operators continued to take a hit in the June quarter. VOICE (Volume, million mins) Usage/per customer/mins) reporters that the bank could see some increase in bad loans and provisions following the RBI review of accounts. “We could have some pop-up in the NPA(non-performingasset)and provisioning numbers because there are many accounts that are being subjected to the RBI reviewanditispossibletheywill take a different view than what we have,” Jayakumarsaid. HPCL's filings on BSE 100% RBI auditing banks’ books for weak a/cs 4 million in limbo THE RESERVE BANK of India (RBI) has, for more than three weeks,been checking for stressed assets on banks’ books to ensure no“weak”account goes unnoticed in the current round of resolutions,bankers told FE. According to a seniorpublic sector banker, the exercise, while similar to the central bank’s annual inspection of accounts,is farmore thorough. The banker said RBI officials have visited the head offices of banks,seeking both recent and historicaldataonstressedloans dating back to even fouryears. “We have been told to explain what steps were taken to resolve stress in these accounts,” he said, adding that bankshavenotyetreceivedany clarityonthecourseofactionin these accounts. Bankers said these loans under inspection are primarily from the power and infrastructure sectors. PS Jayakumar, MD & CEO, Bank of Baroda, recently told THOUGH OIL REFINERRETAILER Hindustan Petroleum Corporation (HPCL) was taken over by Oil and Natural GasCorporation(ONGC)inJanuary this year,the former is yet to recognise the upstream major as its promoter in the mandatory quarterly filings with the stock exchanges. Public Continued on Page 2 CHECK-UP PRASANTA SAHU & SAURABH KUMAR New Delhi, July 30 Continued on Page 2 ASSET QUALITY REVIEW SHAYAN GHOSH Mumbai, July 30 For HPCL, majorityowner ONGC is not promoter Promoter 700 744 Bharti Airtel Reliance Jio DATA (Volume, million MB) Usage/per customer/MB) 10,600 7,864 609 8,000 64,20,000 IN THE NEWS Maran to face trial in telephone exchange case THE FOREIGN DIRECT investment (FDI) rules for e-commerce segment may see considerable easing but it could be accompanied by an institutionalised regime of oversight to safeguard the interests of domestic brick-and-mortar stores and consumers at large. Awatchdogwill be set up to regulate the e-commerce sector,includingtheallegedabuse of FDI rules through hefty discountsbye-tailerslikeAmazon and Flipkart, among others, if suggestions by various industry-government working groups on e-commerce are endorsed by the Centre. Foreign e-commerce firms operating in India could even be asked to store consumer data locallywithin two years. Importantly, one of the working groups has suggested that the FDI rules be eased by allowing e-commerce marketplaces to hold inventory of locally-produced items. However, in such a case, the founder/promoter of the ecommerce player will have to be a resident Indian, with its ‘18-23E CAGR INPUT, OUTPUT THE GOODS AND services tax (GST) anti-profiteering authority has sought inputs from telecom operator Bharti Airtel and budget airline IndiGo on whether the GST or credit allowed on inputs in the new regime has created room for reduction in prices. Takingsuomotucognisance oftheimpactofGSTonpricesin the telecom and aviation sectors, the National Anti-Profiteering Authority (NAA) has asked the market leaders in the sectorstocalculatetheinputtax credit (ITC) benefits that have accrued to them andwhetherit was enough to pass on to end users,a source told PTI. “The companies have been asked to submit the calculation within a fortnight,” the source said. With regard to the telecom 3,49,500 FE BUREAU New Delhi, July 30 7.5 PRESS TRUST OF INDIA New Delhi, July 30 4,48,710 ECONOMIC RESURGENCE India’s e-commerce vs total retail growth ● EXCHANGE FILINGS Inputs sought from Airtel, IndiGo on GST benefits 6,84,191 BENGAL TOWARDS Government may set up regulator, ask foreign e-tailers to store consumer data locally ANTI-PROFITEERING 21,50,645 Idea Cellular Bharti Airtel 9,92,000 Reliance Jio Idea Cellular 105 Blended Bharti Airtel Arpu (`) Reliance Jio 100 Idea Cellular 134.5 Continued on Page 2 ● DND APP Little meeting of minds between Apple, Trai FE BUREAU New Delhi, July 30 THE STAND-OFF BETWEEN Telecom RegulatoryAuthority of India (Trai) and Apple over allowing the“Do Not Disturb” (DND) app on the company’s App Store and iPhone devices may take a while to get resolved because there’s still no meeting ground between the two with both parties adamant on their stand.Sources said that Apple is not opposed to an app which basically enables users to report unwanted calls and messages but it wants to do it in its own way and simply not give access to Trai’s DND app. Meanwhile, Trai at this point is not willing to back off from its stand. For instance, industry sources said thatApple’s iOS 12 software update is expected to come with an extension that allows subscribers to report unwanted calls and text messages. However, this data will not go to Trai and the user’s phone book would not get synced with Trai’s app. Continued on Page 2 GST Half of taxpayer base had the option to stay out, but chose otherwise SUMIT JHA New Delhi, July 30 OVERHALFOFthe96lakhregulartaxpayersregisteredforthe goods and services tax (GST) have an annual revenue below the `20-lakh threshold where the tax kicks in,confirming the abilityoftheyear-oldregimeto promotecompliance.Ofcourse, these small businesses that have got themselves registered have a negligible share in the government’s GST revenue — eventhosewithaturnoverupto `5 crore contribute just 5% — but they have still chosen to be in the tax ambit. The incentives for being in the tax chain are many.Availability of input tax credit and the fact that registered suppliers are preferred by larger procurers over unregistered ones arethemainones.Thateventhe pre-GST (VAT/Cenvat) regime had a taxpayer base of over 80 lakh (the VAT turnover thresholdwasinthe`5-10lakhrange, and service tax started from `10 lakh) also may be a reason forasectionofthebusinessesto sign into GST, despite a higher turnovercut-off.Under-reporting of turnoverbyconsiderable sectionsofthesetaxpayerscannot,however,beruledout,given the abysmally low amounts of taxes that theypay. 96 lakh Regular taxpayers for GST (additional 18 lakh under composition scheme) 80 lakh Comparable number of taxpayers in pre-GST regime ~52% Registered regular taxpayers below `20 lakh turnover In the pre-GSTregime over 60% of assessees under central (excise and service) and state tax (VAT) laws were reporting less than `20 lakh as annual revenue. 5% Share of GST paid by businesses below `5 crore turnover “The fact that 90% of the GST registrants have a turnover of less than `3 crore signifiesthatwhilethetaxbase is expanding, the tax collections from this segment will take some time to increase. Severalsmallbusinesseswould have come into the GST net as they deal with larger businesses which would have insisted on dealing only with registered dealers,” said MS Mani,partner,Deloitte India. However,taxofficialsadmitted that such a large portion of taxpayers under `20 lakh revenue suggested that massive under-reporting of income was a norm as it was suspected that the average revenue for even small and medium enterprises wasbetween`20lakhand`1.5 crore. Continued on Page 2 Most white goods cheaper by 8% THANKS TO THE recent GST rate cut from 28% to 18%, washingmachines,refrigerators and microwave ovens, among other goods, have become cheaperbyaround8%,effective last Friday, report Anushree Bhattacharyya&SumitJhain New Delhi. However, despite theexemptiongiventosanitary napkins (it attracted 12% GST earlier),the item’s price cut has not been commensurate as nil output tax resulted in unavailabilityofinputtaxcreditstothe manufacturers.PAGE 2
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