Scrapping of interstate trade tax under scanner Sanjiv Puri moves a step closer to ITC top job G20 vow boosts markets Eligibility for Suuti bankers eased

In a way, it is an overture by the National Democratic Alliance, the ruling coalition, to the Congress, after the former showed its reluctance to accept the latter’s demand of incorporating a cap on the GST rate in the Constitution amendment Bill.

Minister of State for Finance Arjun Ram Meghwal on Monday said, “A consensus is likely to be reached on at least two of the three demands put forth by main Opposition party, the Congress, indicating that an agreement was possible on scrapping of one per cent additional tax besides the dispute resolution mechanism.

“Many states, including Bihar, West Bengal, Uttar Pradesh and Odisha, feel that once GST is passed, it would be good for the country. We are trying to build a consensus. We are trying to get the GST Bill passed in the monsoon session of Parliament.”

The select committee wanted the exact definition of interstate supply of goods, which would attract up to one per cent tax, be made at the time of framing GST laws.

“The committee feels that the provision of one per cent additional tax in its present form is likely to lead to cascading of taxes. Therefore, the committee strongly recommends that in the concerned GST law, an explanation should be given that for the purpose of Clause 18, the word ‘supply’ would mean all forms of supply made for a consideration,” the committee had said.

The Clause 18 of the Constitution amendment Bill deals with the one per cent tax.

However, experts are of the opinion that the select committee's panel would not entirely address the issue of cascading.

It should be noted that the Constitution Amendment Bill is an enabling mechanism to allow the Centre and states to impose GST. After the Bill is passed, the new indirect tax regime would need another central law as well as state laws on GST. It is in these laws that the committee wanted this explanation to be incorporated.

States are demanding that they should get sole administrative powers to carry out assessment, scrutiny and passing of orders for entities and traders up to an annual turnover of ~1.5 crore and beyond that both states and the Centre should have these powers.

In response to that, the GST committee, set up by the Central Board of Excise and Customs (CBEC), proposed two options in its report to iron out the administrative differences under the unified indirect tax regime.

The CBEC committee, headed by member Ram Tirath, recommended doing away with the threshold altogether. Or alternatively, it has said that if states get exclusive control over up to ~1.5 crore, the Centre should get exclusive control over above that limit.

“The Centre is of view that there should be no administrative threshold at all. Although if the states are keen on exclusive control for up to ~1.5 crore, then the Centre should have exclusive administrative control over all cases falling above the threshold. The finance minister will take a final call on that matter,” said a senior government official, who did not wish to be quoted.

States, including Gujarat, Maharashtra, West Bengal, Tamil Nadu and Karnataka, are pressing for authority over tax assessments and adjudication for entities with an annual turnover of up to ~1.5 crore. According to states, this will help small businesses from being harassed by dual control.

The CBEC also suggested a “crosspower” model, which means if there was no threshold, the Centre could initiate action and carry out scrutiny in case it detects a state GST case and adjudicate, and vice-versa.

According to the mechanism, the states can also initiate action on detecting a Centre GST (CGST) case, and inform the Centre. So, states will be authorised to initiate action in CGST case while the Centre will be authorised for SGST cases as well. The board decision to redesignate Puri as COO came on a day Deveshwar addressed the company's annual general meeting in joint capacity as chairman and CEO for the last time. From Deveshwar's AGM speech it was clear Puri's task was cut out. The goal, as set out by the incumbent, is to make ITC a multinational corporation.

There are tangible goals as well. ITC is aspiring to be the top player in the FMCG space and has set a revenue target of ~1,00,000 crore by 2030. There are also new forays to manage like chocolates, dairy and coffee.

Puri probably is most suited to make the targets achievable, having handled a wide range of responsibilities in ITC from manufacturing, operations to information and digital technology.

The big break came in 2006 when Puri went on to lead ITC Infotech. Three years later, he became divisional chief executive of ITC's India tobacco division, handling additionally the charge of the company's trade marketing and distribution function. And then finally he was president of the FMCG business in 2014. There has been no looking back since.

Known to be conservative, ITC made quite a few acquisitions in the FMCG space around this time like the B-Natural juice brand. Among the bigger acquisitions were the brands Savlon and Shower to Shower.

It is most likely that there will be more acquisitions along the road. Puri told Business Standard in March acquisitions would happen because of the company’s target of achieving ~1,00,000 crore revenue from new FMCG businesses. G20 finance chiefs over the weekend said they will use “all policy tools” to lift global growth.

Foreign investors on Monday bought shares worth nearly ~900 crore ($140 million), extending their monthly buying tally to nearly ~8,000 crore ($1.2 billion). The benchmark Sensex and the Nifty, which have gained over four per cent so far this month, are on course to post their best monthly advance since March.

Most global markets too, particularly emerging markets, have performed well in July buoyed easy liquidity and expectations of central banks in US, Europe and Japan taking steps to boost growth. The hopes on increased after the UK voted to exit the European Union late last month.

“Central banks have signaled easier monetary policy for longer postBrexit which is likely to ensure that liquidity conditions remain favourable for growth assets,” said Shane Oliver, head of investment strategy, AMP Capital.

Benchmark indices have rallied more than 22 per cent from their 2016 lows touched in February on the back of robust inflows from foreign institutional investors (FIIs) and signs of revival in the domestic economy and earnings.

“The earnings growth cycle is turning. Growth is likely to accelerate in the coming months from around 0 per cent to double digits. We are forecasting 16 per cent and 14 per cent CAGR in earnings for the BSE Sensex and the broad market, respectively, over the next two years… Reforms momentum is intact, but the growth cycle is likely to be U-shaped given headwinds from global sources,” Morgan Stanley had a said in a note, while upping its one-year Sensex target 15 per cent to 30,000.

FIIs have pumped in over $4 billion into the Indian markets so far this year, which has seen the Sensex and the Nifty rise 7.6 per cent and 8.7 per cent respectively. Market experts say easy global liquidity and earnings support by domestic companies will be the key for the ongoing rally to sustain.

Driven by strong stock market rally, the total valuation of BSE-listed companies surged to an all-time high of ~108 lakh crore on Monday.

At close of trade, market capitalisation (m-cap) of all companies listed on BSE soared to ~1,08,03,154 crore or $1.61 trillion.

Investor wealth of BSE-listed firms, measured by market capitalisation, had seen a previous record high of ~1,07,00,756 crore on Thursday. Group B companies comprise eight unlisted entities where sUUTI has shares. These are National Securities Depository Ltd, North Eastern Development Finance Corporation, NSDL e-Governance Infrastructure, Over the Counter Exchange, STCI Finance, Stock Holding Corporation, UTI-IAS and UTI Infrastructure Technology.

The merchant bankers would be required to advise on the method of sale of Suutishareholding in these companies. Once the method of transaction is approved by Suuti, the process of the transaction would be initiated separately by Suuti and the merchant bankers would not be required to carry out this transaction.

The group C companies consists of 40 companies, other than ITC, L&T and Axis Bank,listed on the stock exchanges. These companies include Aditya Birla Fashion & Retail, Aditya Birla Nuvo, Alstom T&D India, Ambuja Cements, Bharat Petroleum corporation Ltd, CEAT, Cumins India, DCM Shriram, Grasim Industries, Hindustan Unilever, ICICI Bank, Reliance Industries Ltd, TATA Motors, TATA Steel, TECH Mahindra, Titan.

The merchant bankers would provide regular equity research reports on each of these companies along with stock market outlook.