ANALYSIS OF THE HINDU AND ECONOMIC TIMES DATED 21 ST SEPTEMBER,2019

• NEWS PAPER ANALYSIS
• THE HINDU AND ECONOMICS TIMES
  21 ST  SEPTEMBER,2019

• THE HINDU(1) IN BIGGEST BOOST THE GOVT CUTS CORPORATE TAX
  THE ET (1) HOWDY INVESTOR

1. ISSUED AN ORDINANCE TO REDUCE THE CORPORATE TAX RATE FOR THE DOMESTIC FIRMS AND NEW MANUFACTURING UNITS BY 10 TO 12 PERCENTAGE POINTS EFFECTIVELY BRINGING WITH ITS COMPETING PEERS
2. FINANCE MINISTER NIRMALA SITARAM SAID THAT THE EFFECTIVE TAX RATE FOR THE DOMESTIC CORPORATE INCLUSIVE OF SURCHARGE WILL FALL FROM 34.94% TO 25.17% IF THEY STOP AVA LING ANY OTHER TAX SOPS
3. FOR NEW MANUFACTURING FIRMS SET UP AFTER OCTOBER 1 2019 AND COMMENCE OPERATION BY MARCH 2023 THE EFFECTIVE TAX RATE WILL FALL FROM 29.1% TO 17%
4. ISSUED AN ORDINANCE TO AMEND THE INCOME TAX ACT OF 1961 AND FINANCE ACT OF 2019

• IMPORTANT DECISIONS
• 6 KEY DECISIONS
• CUT IN CORPORATE TAX RATE FROM 30% + SURCHARGE+CESS TO 22% TAX RATE FOR DOMESTIC COS
• 25.17% EFFECTIVE TAX RATE,(10% SURCHARGE +4% EDUCATION CESS)
• COMPANIES OPTING FOR THIS REGIME CANNOT CLAIM ANY EXEMPTION/INCENTIVES)
• LOWER TAX FOR NEW MANUFACTURING UNITS:
• 17.01% EFFECTIVE TAX RATE INCLUDING SURCHARGE AND CESS
• COMPANIES OPTING FOR THIS REGIME CANNOT CLAIM ANY EXEMPTION OR INCENTIVE

• MAT RELIEF FOR COS CONTINUING WITH CURRENT TAX REGIME:-
• 15% MAT AGAINST 18.5 EARLIER
• SURCHARGE RELIEF INCORPORATED IN LAW
• TAX RELIEF FOR BUYBACKS  ON LISTED COMPANIES THAT HAD ANNOUNCED BEFORE JULY 5 EXEMPTED TAXATION
• CSR FUNDS MADE AVAILABLE FOR INCUBATORS,UNIVERSITIES AND RESEARCH BODIES
• SEVEN BIG GAINS

1. MAY HELP REVERSE SLOW DOWN
2. WILL ENCOURAGE MAKE IN INDIA
1. INDIA COULD ATTRACT INVESTMENT MOVING OUT OF CHINA
2. THOSE ALREADY MADE INVESTMENT COULD SCALE UP PLANS
3. TELECOMS EQUIPMENT /HANDSETS PRESENTS BIG OPPORTUNITY
4. COULD ATTRACT INDUSTRIES LIKE TEXTILE BACK TO INDIA
3. MAY BOOST CONSUMPTION:
4. COMPANIES COULD RAISE INCENTIVES AND SALARIES
1. HIGHER DIVIDEND PAYOUT
2. SHARE MKT GAIN COULD ENCOURAGE SPENDING

5. LIFT SENTIMENTS,REVIVE INVESTMENTS

                                          i.    BIGGER PROFITS AND LOWER TAXES COULD ENCOURAGE MORE INVESTMENTS

                                        ii.    MORE COMPETITIVE CORPORATE MAY BOOST EXPORTS

1.    LOWER TAXES WILL MAKE THE COMPANY MORE ATTRACTIVE

2. BOOST FOR STOCK MARKETS
3. RISE IN EARNING FOR INDIAN COMPANIES
4. STOCKS WILL BECOME MORE ATTRACTIVE
5. JOB CREATIONS MAY GET A PUSH:
6. INVESTMENTS EXPECTED TO CREATE MORE DEMAND
7. RISE IN DEMAND FROM FISCAL BOOST MAY ENCOURAGE COMPANY TO HIRE

• BUT SIGNIFICANT FISCAL COST

1. 1..45 LACS CRORE REVENUE FORGONE
2. FISCAL DEFICIT WILL RISE BECAUSE OF TAX SHORT FALL
3. INTEREST RATES COULD GO UP IF THE GOVERNMENT BORROWING RISE
4. GOVT WILL HAVE TO MEET DEFICIT TARGET
5. IF SPENDING IS CUT TO MEET DEFICIT TARGET,PUBLIC INVESTMENT WILL FALL

• FISCAL DEFICIT AS % OF GDP
• FRIDAY BLOCKBUSTER CHEER D STREET BULLS ( THE ET (1))
• UP,UP AND AWAY
• FRIDAY BLOCKBUSTER CHEER D STREET BULLS ( THE ET (1))
• BOTH THE INDICES POSTED THEIR BIGGEST SINGLE DAY GAIN IN PERCENTAGE TERMS SINCE MAY 2019

1. HERO MOTOR CORP
2. MARUTI SUZUKI
3. INDUSBANK
4. BAJAJ FINANCE
5. STATE BANK OF INDIA ( ROSE BY 10.14)

• THE RUPEE ROSE 40 PAISA SETTLE AT 70.94 TO THE DOLLAR
• TAX CUTS FOR NEW PLANTS TO LURE MNCS LOOKING BEYOND CHINA ( THE ET 1)
• WITH LOWER TAXES RATE FOR NEW MANUFACTURER THE GOVT IS LOOKING TO ATTRACT INVESTMENT FLOWING OUT OF CHINA FOLLOWING TRADE DISPUTE WITH THE US
• INDIA NEEDS TO REMOVE MAJOR OTHER OBSTACLES FOR MNC TO CONSIDER AS AN ALTERNATIVE DESTINATION TO THE NEIGHBOURING COUNTRY
• TAX RATE IS LOWEST IN SOUTH AND SOUTHEAST ASIA
• HURDLES : HIGHER TAX RATES.POOR INFRASTRUCTURE,STRINGENT LABOUR LAWS AND DELAY IN LAND ACQUISITION

• TAX CUTS FOR NEW PLANTS TO ALLURE MNCS LOOKING BEYOND CHINA ( THE ET 1)
• MORE THAN 50 MNCS INCLUDING APPLE,HP,DELL AND NINTENDO HAVE EITHER PARTY MOVED OUT OF CHINA IN THE PAST ONE YEAR AND ARE IN THE PROCESS OF SHIFTING BASES
• EVEN CHINESE ELECTRONICS COMPANY TCL HAS BEEN REPORTED TO MOVING TV PRODUCTION TO VIETNAM WHILE TYRE MAKING SALUM TIRE IS TRANSITIONING ITS MANUFACTURING LINE TO THAILAND

• NO  GST RELIEF FOR AUTOMOBILES
  THE HINDU (1)
  IN BOOST TO HOTEL INDUSTRY GST RATE CUT ON ROOM TARIFF ( ET 1)
• IN BIG BOOST TO THE HOTELS INDUSTRY THE GOODS AND SERVICES TAX COUNCIL CUT RATES ON HOTEL TARIFF SHARPLY ON THE TOURISM AND TRAVEL INDUSTRY.
• CUT RATE OF TAX ON CUPS AND PLATES MADE OF LEAVES FROM 5% TO NIL TO PROVIDE A BOOST TO THE COTTAGE INDUSTRY
• GST RATE ON CAAFENITAED DRINK WAS RAISED FROM 18 TO 28% ALONG WITH 12% COMPENSATION CESS IN VIEW OF THE HARMFUL SIDE EFFECT OF SUCH CAFFEINE
• THE GST RATES ON HOTELS ROOM WITH TARIFFS ABOVE RS 7500 PER DAY WHICH IS PRESENTLY 28% HAS BEEN REDUCED TO 18% WHILE THE TAX ON ROOMS WITH A TRANSACTIONS VALUE OF RS 1001 TO 7500 PER DAY WILL BE 12% DOWN FROM 18%
• THE COUNCIL LEFT THE RATES UNCHANGED ON THE PRODUCTS LIKE AUTOMOBILES AND BISCUITS THAT HAD BEEN CLAMOURING FOR A RATE OF RATIONALIZATION
• AMONG THE MANY PROCEDURAL CHANGES, THE COUNCIL ARRIVED AT THE IN PRINCIPLES DECISIONS TO LINK AADHAAR WITH REGISTRATION OF TAX PAYERS UNDER GST AND EXAMINE THE POSSIBILITY OF MAKING AADHAR MANDATORY FOR CLAIMING REFUNDS.
• TO FACTORS IN THE CREATION OF UT OF JAMMU AND KASHMIR AND AS WELL AS LADAKH SUITABLE AMENDMENTS IN THE CENTRAL GST ACR,THE UNION TERRITORIES GST ACT AND THE CORRESPONDING GST ACT HAVE ALSO BEN APPROVED
• `THE EDITORIAL PAGE THE HINDU (8)
  DEEP CUT
• FINANCE MINISTER NIRMALA SITHARAMAN USHERED IN DEEPAVALI EARLY ON CORPORATE INDIA AND THE MARKETS ON FRIDAY WITH HER ANNOUNCEMENT OF DEEP CUTS IN CORPORATE TAXES AND ROLL BACK OF SOME MARKET UNFRIENDLY PROPOSALS IN TH BUDGETS
• THE MOVE TO CUT CORPORATE TAX TAXES FOR WHICH AN ORDINANCES HAS ALREADY BEEN ISSUED BY THE GOVT IS ON PAR WITH IF NOT HIGHER THAN THE SENTIMENTS BOOSTING DREAM BUDGETS OF 1997 WHEN FINANCE MINISTER P CHIDMABRAM CUT TAXES WITH GUSTO
• CORPORATE RATES HAVE BEEN CUT FROM 30 PERCENT TO 22% THAT DO NOT AVAIL EXEMPTIONS
• COMPANIES THAT ARE INCORPORATED AFTER OCTOBER I AND WHOSE PROJECTS WILL BE COMMISSIONED BEFORE 31/3/2023 .THE TAX RATE WILL BE LOW AS 15%
• THE EDITORIAL PAGE THE HINDU (8)
  DEEP CUT
• THE OBJECTIVE IS TO GENERATE :

1. PRIVATE INVESTMENT
2. ATTRACT FOREIGN INVESTORS
3. THE ONUS IS IN THE ORGANIZATION TO DELIVER NOT JUST IN TERMS OF FRESH INVESTMENT BUT ALSO PASSING THE BENEFITS OF LOWER TAXES DOWN THE CHAIN TO CONSUMER AND INVESTORS
4. REVENUE FOREGONE IS 1,45,000 CRORE ( VERY SIGNIFICANT)

• DEFICIT TARGET 3.3 IS UNATTAINABLE
• THE BOUNTY OF 1.75 LACS CRORES RECEIVED FROM THE RBI HAS BEEN GIVEN THIS WAY
• FOR MEETING THE FISCAL DEFICIT TARGET:

1. THE GAP FROM THE ORIGINAL OVER ESTIMATION OF REVENUES HAS TO BE BRIDGED
2. GO BIG ON DISINVESTMENT WHERE IT HAS ALREADY BUDGETED RS 1,05,000 CRORE FOR THIS YEAR AND THE ACTUAL PROCEEDS SHOULD BE DOUBLE
3. REDUCTION IN TAX RATES ARE GOOD FOR THE ECONOMY IN MEDIUM TERM BUT SHORT RUN THERE IS DEFICIT UNTIL THE REVENUE BOUNCE BACK

• LOWER TAX WILL BOOST SENTIMENTS.LIQUIDITY AND INVESTMENTS
  PAGE 8 ET
• AMITABH KANT CEO NITI AAYOG
• AMIDST THE GLOBAL TURMOIL,THE WORLD IS CLOSELY FOLLOWING INDIA’S GROWTH STORY
• WILL DECIDE THE COURSE OF THE GLOBAL ECONOMY AND ALSO THE STANDARD OF LIVING OF 1.3 BN PEOPLE
• GOVERNMENT IS FULLY AWARE OF THE RESPONSIBILITY TO KEEP INDIA ON TRACK TO 8-9% GROWTH RATE
• CLOCKED AN AVERAGE GROWTH RATE OF 7.5 %
• DUE TO WHICH WE ARE TO ABLE 271 MN PEOPLE OUT OF POVERTY
• ON THE MOVE TO PROVIDE HOUSING.ELECTRICITY,DRINKING,WATER AND CLEAN COOKING FUEL TO ALL INDIAN
• LOWER TAX WILL BOOST SENTIMENTS.LIQUIDITY AND INVESTMENTS
  PAGE 8 ET
• INDIA HAS CAUGHT IN THE EYES OF GROWTH CONUNDRUM DUE TO GLOBAL TRENDS AND DOMESTIC SLOW DOWN
• INDIA WILL AND IS TRYING TO BEST MAKE USE OF ADVERSE GLOBAL TRENDS
• INDIA RECORDED GROWTH RATE OF 5%
• DUE TO II&FS FIASCO THAT HAD DOMINO EFFECT ON THE ECONOMY
• IMPACTED ADVERSELY THE ECOSYSTEM PARTICULARLY THE BANKS

• RBI AND GOVT QUICLY SWUNG INTO ACTION AND SINCE JAN OF THIS YEAR REPO RATES WAS REDUCED BY 110 BPS
• REPO RATE WAS REDUCED FROM 6.5% TO 5.4%
• THREE REFORM BOOSTER:

1. THE INITIAL INJUNCTION OF INR 70,000 CRORE INTO THE BANKING SYSTEM,,
2. FOLLOWED BY THE INR 5 LACS CRORE LIQUIDITY ALONG WITH INR 20,000 CRORE SUPPORT TO HOUSING FINANCE COMPANY
3. HISTORIC MERGER OF TEN BANKS INTO 4

·         NOTABLE MEASURES IMPACTING BANKING AND FINANCE.MSME.INVESTMENTS,AUTOMOTIVE SECTOR,INFRASTRUCTURES.FINANCIAL MARKETS,CORPORATE GOVERNANCE TRADE HOSING ETC

•  
• FOURTH REFORM –A BIG ,BOLD AND HISTORIC ANNOUNCEMENT
• REDUCTION OF CORPORATE TAXES ON DOMESTIC COMPANIES FROM 30 TO 22%
• NEW MANUFACTURING FRON 25% TO 15%
• ALSO NOT REQUIRED TO PAY THE MINIMUM ALTERNATE TAX
• UPLEASH THE ANIMAL SPIRITS
• BOOST PRIVATE INVESTMENTSS AND IMPROVE THE COMPETITIVENESS
• FILLIP TO MAKE IN INDIA PROGRAMME

• IMPACT
• OUR CORPORATE TAX WILL BE COMPARABLE TO ASIAN PEERS
• THESE ARE NOT STANDALONE ACTIVITIES BUT HEY ARE BALANCED MOVES TO MAKE INDIA 5 DOLLAR TRILLION ECONOMY AND WILL MAKE INDIA COMPETITIVE AND PREFERRED DESTINATION WITH BEST BUSINESS
• NEXT ROUND OF REFORMS WILL HAVE TO BE STRUCTURAL. AGRICULTURE,COAL AND MINING,TEXTILES AND LABOUR REFORMS ALONE CAN SUSTAIN INDIA’S GROWTH STORY WITH EMPLOYMENT OVER A LONG PERIOD OF TIME
• SUMMARY OF IMPORTANT NEWS
• THE ANNOUNCEMENT HAS INFUSED HAS HOPE ACROSS SECTORS BEFORE THE FESTIVE SEASON AND THEY EXPECT THE GOVT MOVE TO BOOST BUSINESS AND CREATE EMPLOYMENT. PROFITABLE COMPANIES IN SECTOR LIKE CONSUMERS.RETAIL,INDUSTRIAL MANUFACTURING AND CONSTRUCTION WOULD SEE ADDITIONS OF JOBS AND INDUSTRIES AUTO AND AUTO ANCILLARIES THAT HAVE BEEN ALSO HIT BY SEVERE SLOW DOWN THIS MAY COME IN AS MUCH NEEDED RELIEF AND HELP PROTECTED EMPLOYMENT BEFORE LEADING TO NEW JOBS
• ADEQUATE CARE HAS BEEN TAKEN TO ENSURE THAT 15% TAX IS AVIALBALE ONLY TO NEW INVESTMENT IN MFGS AND NOT ENTITIES FORMED BY SPLITTING UP OR RECONSTRUCTING BUSINESS