Govt may miss budget targets for FY17 direct tax collections

Direct tax collections are likely to fall short of budget targets in 2016-17 with the government managing to garner only 73% of the estimated collections until February.

The pace of growth in indirect tax collections also slowed in February although the government may manage to meet the target for the full financial year.

The government may have to cut down expenditure in March, the last month of the fiscal year, to compensate for the revenue shortfall.

Data released by the finance ministry show that direct tax collections in April-february amounted to ₹6.17 lakh crore, a 10.7% rise from a year ago. After adjusting for refunds, corporate tax collections grew only 2.6% while personal income tax collections were up 19.5%.

Although the government had not budgeted for any tax inflows on account of the second income disclosure scheme under the Pradhan Mantri Garib Kalyan Yojana, ending March 31, only a good response to this scheme may bring the government closer to its direct tax collection targets for the full year.

Indirect tax collections until February amounted to ₹7.72 lakh crore, a 22% rise from the yearago period. This was 91% of the

revised indirect tax collection target set out in the budget. While excise collections till February were up 36% to ₹3.45 lakh crore, service tax grew 21% to ₹2.21 lakh crore and customs collections rose 5.2% to ₹2.05 lakh crore.

Indirect tax collections fell sharply in February mainly due to a drop in excise and service tax collections. While excise collections grew by only 7.4% in February as against 26% in January, the increase in service tax collection was also muted at 7.6% in the month against 9.4% in January.

The fall in excise duty collections can be attributed to the

removal of a favourable base effect. The Centre had raised the excise duty on petroleum products numerous times till January.

“From February 2017 onwards, the favourable impact of the hikes in excise duty on fuels undertaken from November 2015 to January 2016 have dissipated. The pace of growth of excise collections is now expected to reflect a level that is closer to the rise in consumption of fuels, as well as industrial activity in the economy,” wrote Aditi Nayar, principal economist, ICRA Ltd, in a note.

Delhi-based private equity fund Brands and Beyond is looking to invest 70 million dollars in home-grown luxury and lifestyle brands over the next three years. The fund, backed by large families from Europe, Singapore and India, has chosen India as its base after five years of market research and plans to take 12-14 Indian luxury and lifestyle brands to the global stage.

“Indian luxury market is still small. There is a lot of potential in Indian brands. Global markets are big and structured and growth is much easier. We want to take Indian brands global,” said Francois Arpels, founder and MD of Brands and Beyond. He was speaking on the sidelines of The Lyfe Symposium, an annual conference of the global luxury think tank ‘The Lyfe’.

Arpels is also on the advisory board of global skincare brand Skin Inc and the Taiwanese fine jewellery designer brand Cindy Chao.

The fund is looking to invest in luxury brands across categories such as beauty, ready-to-wear, accessories and jewellery, which Arpels described as ‘non-ethnic’ but in keeping with Indian design and aesthetics.

“Right aesthetic, non-ethnic style and keeping the Indian DNA intact in the products could very well be successful internation on the wealth of the nation in crafts. We are looking at such 100% ‘made in India’ brands,” said Arpels, without disclosing the details.

Speaking about the challenges of luxury brands in India, Arpels said that brands suffer from lack of infrastructure here. “There is no typical high-street in India. Additionally, real estate cost is high which poses difficulties for global luxury brands,” he said.

Rajat Wahi, partner and head (consumer markets) at consulting firm KPMG, agreed: “There is (a) real estate challenge plus the consumption story of luxury in India is very small.”

The big opportunity here, Wahi said, is to invest in Indian brands and take them to interna

The Delhi High Court on Friday set aside the operation of an injunction order against Britannia Industries Ltd, allowing the company to produce and sell its Nutrichoice Zero brand of digestive biscuits.

The injunction had been granted on a petition by ITC Ltd that claimed the packaging of Nutrichoice Zero was a copy of its Sunfeast Farmlite Digestive All Good biscuits.

The products of both companies were sold in blue and yellow packaging during the course of the case, but ITC informed the court that Britannia had now changed the colour scheme for its biscuit packaging. It has adopted a new yellow and purple packaging for its digestive biscuits.

“We are of the view that ITC is not entitled to the injunction. The single judge’s order restraining Britannia from selling its digestive biscuits is set aside,” said justice Badar Durrez Ahmed. The “colour blue could not be allowed to be monopolised,” he added.

The main point for consideration was whether or not the combination of yellow and blue used by ITC had become so identifiable with its biscuits that its use by others such as Britannia could be seen as an attempt to deceive the consumer.

“ITC could not claim exclusivity over the colour combination span of time.”, the order held. The combination was in use by ITC since May 2016.

It was held that ITC’S use of the colour combination could not be seen to have gained enough visi bility as to prevent competitors from using it. Although Britannia has adopted a new colour scheme ITC may consider bringing an appeal against the order.

“ITC will consider filing an appeal after reviewing the order passed by the court. We, however understand that Britannia has already withdrawn their label against which ITC filed the suit,” an ITC spokesperson said.

Britannia had contended that even if the colour scheme was similar, if the origin was indi cated through the use of a distinc tive trademark like Britannia, it would not amount to deception.

Claiming that Britannia had the right to use yellow in its pack aging, the company’s counsel Aryama Sundaram had argued “Yellow has been common to our trade of digestive biscuits since 2008 and it is coupled with blue for sugar free biscuits as the colour blue is associated with World Dia betes Day.”

“We are pleased with today’s order. It is an endorsement of our conviction that the packaging architecture for Nutrichoice has been built on a robust strategy backed by strong portfolio pack aging rationale and consumer logic. Our next course of action will be decided soon ” Britannia