"All
happy families resemble one another, each unhappy family is unhappy in its own
way."
—Leo Tolstoy (Russian, 1828-1910)
Word for the day
Nocturne (n)
Music:
a piece appropriate to the night or evening.
(Source: Dictionary.com)
Malice towards none
GST may
be a good beginning, but by no means it's panacea for all that ails Indian
economy.
First random thought this morning
The Congress Party disrupted
the entire monsoon session of the Parliament insisting that EAM Sushma Swaraj,
MP CM Shivraj Singh and Rajasthan CM Vasundhra Raje must resign before the
Parliament transacts any business. The winter session has begun and we are not
hearing any such demand. What should we infer from this?
(a) Congress Party is not
serious about the issues it raises. (b) The Party was actually bargaining for
some something else and resignations were not the real issue. (c) The
government has offered something really meaningful to Congress for not raising
the issue of resignations again.
In any case where do the People
of India come in the whole picture?
2016 Budget Speculations - 1
The government looks determined to make laws and procedures
relating taxation simpler, transparent and predictable. The objective is to
promote ease of doing business, improve compliance level, minimize litigation
and disputes, and augment revenue collection through better Tax-GDP ratio.
Everyone acknowledges it is going to be a tall order. It may lead
to higher incidence of tax in the short to medium term. For many who are used
to exploiting the loop holes in the extant system or have managed to stay out
of the taxation net, the process may rather excruciating.
Some of the most garrulous supporters of the tax reforms may
actually not savor the actual implementation of taxation reforms, inasmuch as
the tax reform for them usually means more exemptions & lower incidence of
tax.
In my view, the process of taxation reforms may actually impact
the sentiments in stock market negatively.
Though I sincerely believe that the government may not want to
rock stock markets when, inter alia:
(a) The global markets are
entering a period of turbulence with rate hike by US Fed;
(b) The government might
need to raise much higher amount of resources through sale of public sector
equity;
(c) The public sector
banks may need to raise resources to meet capital adequacy and growth
requirements;
(d) FPI flows could turn
materially negative due to unwinding of US carry trade and risk-off conditions
in global markets.
From the bytes I have gathered from the ministers and officials at
North Block, in particular the following tax proposals in the Union Budget for
FY17 could rattle the sentiments of market participants:
(1) Abolishing the complete
exemption of long term capital gain on sale of equity share and equity mutual
funds. This may not have much revenue impact, but may be considered critical
for improving compliance, especially in light of the recent SEBI probe into
blatant misuse of this provision for money laundering and tax evasion.
(2) High service tax to
align service tax rates with proposed GST rates.
(3) Withdrawal of a
multitude of exemptions for business class assesses so that the marginal rate
of tax could be brought down to target 25%. This will definitely result in
higher incidence of taxation of business.
(4) The implementation of
7th Pay Commission and OROP will leave a large hole in finances of governments
(state and center) and railways. The hole may be sought to be filled partially
through higher effective tax on discretionary consumption and lower subsidies.
(5) The government may also
consider some sort of "smart city cess".
