CALL US : 
WAPP : 
The MSME package announced by Prime Minister Narendra Modi recently will address the working capital needs of the garment industry, said Rahul Mehta, president of the Clothing Manufacturers’ Association of India.
Mr. Mehta said in a press release that shortage of working capital was a major constraint for the garment industry, 75 % of which is in the MSME sector.
The 2 % interest subvention for new loans, 2 % additional subvention for export credits, and clearance of loan applications in 59 minutes will help the garment industry.
Regulation of visits by inspectors will also benefit the units, he said.
Ujwal Lahoti, chairman of the Cotton Textiles Export Promotion Council, said increase in interest subvention for pre and post shipment finance will provide the much-needed support and encouragement to the MSMEs.
The council presented 56 awards in 32 categories recently for best export performance during 2017-2018.
Speaking at the function, according to a press release, Union Textile Minister Smriti Irani urged the council to look at giving a boost to exports from the MSME sector. With the announcement of the MSME package, it is the first time that banking institutions were directed to give in-principle approvals to loans in 59 minutes.
Archives
The Finance Ministry said that GST refunds of Rs. 82,775 crore to exporters has been cleared as on October 31, which is 93.8% of the total such claims.
The Ministry said Rs. 5,400 crore worth GST refunds were still pending with the government and being “expeditiously processed.”
“As on October 31, 2018, total GST refunds to the tune of Rs. 82,775 crore have been disposed by the Central Board of Indirect Taxes and Customs (CBIC) and the State authorities out of the total refund claims of Rs. 88,175 crore received so far,” the Ministry said.
The GST and Central Excise Department has established GST Special Helpdesks in Tiruvallur and Vellore districts in Tamil Nadu to assist micro, small and medium enterprises (MSME) in all matters relating to Goods and Services Tax (GST).
Support for MSMEs
This is part of the Government of India’s initiative to support and reach out to MSMEs in 80 districts.
The helpdesks will be at the Tiruvallur GST and Central Excise Range Office (Smisha.Rajan @icegate@gov.in) , Poonamallee GST and Central Excise, division office (pmle-divnouter-tn@gov.in), Vellore GST and Central Excise Division Office (supdt-vlrdtech@nic.in) and Ranipet GST and Central Excise Division Office (Rpt-div-tn@gov.in).
For all Goods and Services Tax (GST) related queries, the Goods and Services Tax (GST) Helpdesk of the GST and Central Excise Department located at its Anna Nagar Headquarters office can be contacted at 26142850, 26142851, 26142852 and 26142853 or by writing to sevakendra-outer-tn@gov.in
While China’s cost advantage is formidable, there are select sectors where India can be an alternative supply source for US firms
The US-China trade war has reached unprecedented levels. After having levied tariffs on imports worth $250 billion, US President Donald Trump has not toned down his rhetoric. He has threatened to impose tariffs on another $267 billion worth of imports, which should pretty much cover all of China’s exports to US. Either side is determined not to blink first. Trump wants China to capitulate while Beijing has made it clear that it does not intend to do so. The global economy is consequently feeling the chill. Amidst this development, is there a real opportunity for India to warm up to?
To answer this question, one needs to understand the evolving US-China relationship. Over the last few decades, the nature of their relationship was one of ‘nether friends nor foes’ and all they wanted was a ‘win-win economic engagement’. In other words, they were ‘co-operating rivals’. But that changed post the 2008 global financial crisis, which narrowed the gap between their economies.
In 2007, the US economy was four times that of China but by 2012, thanks to the great recession, it reduced to two-times. There is growing anxiety in the US about China’s growth. The Chinese, on their part, believe that the US is actively working to prevent their country from taking the rightful place in the world order. It is not just economic growth that has sowed seeds of discontent. China has been flexing its muscle militarily by spending heavily. China’s military, vexed at the US control over trade routes, has been trying to test its strength in the South China Sea. The two nations have had their share of skirmishes there. Also, President Xi Jinping’s Belt and Road initiative has unnerved the US which sees it as an attempt by China to play a larger role in the world. It is clear that China does not like the idea of a uni-polar world but the US wants to keep it that way.
That apart, the two nations do not see eye to eye when it comes to political values nor do they have common security interests. So this trade war is not just about trade. Going forward, their relationship would at best remain frosty.
De-risking operations
This puts US companies in a piquant position. Over the years, taking advantage of low costs, they have increased their dependence on China for their supply chain needs and manufacturing. Such is the depth of the arrangement that over 50 per cent of the products HP, IBM, Dell, Cisco, Microsoft and Intel or their suppliers use come from China. It is the second largest exporter of auto parts to the US auto giants (after Mexico). The list of sectors heavily dependent on China is long and US companies are realising the need to de-risk their operations — supply chain as well as manufacturing.
The US is already pushing ICT players to reduce their dependence on China. Investors are also beginning to question US companies on their fall-back plan if US-China relationship goes into a spiral.
This situation presents a clear opportunity for Indian companies. After all, the US and India see each other as natural allies. Former US President Barack Obama even described the relationship as ‘one of the most defining partnership of the 21st century’. Trump too wants a close relationship with India, a democracy with shared values. Not surprising that US companies have already started making enquiries about sourcing from Indian players, especially in the auto-component space.
But taking a share of China’s supply chain or manufacturing is easier said than done. Over decades China has invested a lot in upgrading its infrastructure. Also, the scale of manufacturing is such that it will be difficult for India to match in terms of cost. But the silver-lining is that the recent imposition of tariff by the US has levelled the playing field, at least in select sectors.
Competitive enough
These sectors have certain common traits that help them to be as competitive as those in China. They have good scale thanks to a strong domestic market in India. They have also built a solid supply-chain network (this is critical as India cannot grab a share of the ICT exports from China as it lacks proper supply chain, especially in semi-conductors). They also export a fair share of their production and, consequently, their quality is tested and is as good as anywhere in the world. Auto components, leather and textiles are some sectors that top the list.
The government must direct its ‘Make in India’ initiative on these sectors with suitable incentives. However, low manufacturing cost alone is not enough. Logistics cost, to move the manufactured goods from the factory to the destination, is critical. China excels here. India has been building roads, improving port infrastructure/connectivity to the hinterland through Sagarmala and Bharatmala programmes.
It is also trying to enhance coastal shipping and boost transportation through inland waterways. To rival China on logistics costs, it has to redouble its efforts. In developed markets, companies outsource 70 per cent of their logistics operations that can be outsourced to lower costs. In India it is just 35 per cent. Even though India’s steep climb in the recent ‘ease of doing business’ ranking is noteworthy, it still has a long way to go in reforming labour laws and the land-acquisition process which are essential for lowering costs further.
Indian entrepreneurs, for their part, must take advantage of the situation and invest aggressively. De-risking from China will remain a long-term strategy for the US and European companies. Higher exports will also help in neutralising domestic cycles that plague some sectors such as auto components.
It will be a difficult call for Indian entrepreneurs to make as many of them have been investing abroad to de-risk their investments in India. It is a leap of faith.
If they take it, India will not miss the manufacturing bus, as it did in the 1980s and 1990s that saw emergence of East Asian Tigers and China as manufacturing hubs for the world, yet again.
The Fed has virtually become the world’s central bank. Now nations, including India, are looking to rely less on the dollar
India and Japan have agreed to raise the value of currency swap from the $50 billion (agreed in 2013) to $75 billion during Prime Minister Narendra Modi’s two-day visit to Japan on October 28-29. This means India can now readily borrow up to $75 billion from Japan in exchange for rupees. This was the latest measure taken by the government to dampen the rupee’s slide against the dollar.
But India is not the only country taking measures to reduce dependence on the dollar. Many countries have started settling trade transactions in local currencies.
Germany and France are setting up a Euro based trading system to continue trading with Iran in the wake of the US call to punish countries having any trade relation with Iran.
Every few years local currencies across the world face intense pressure in the forex market. This pressure has a direct link to the US-controlled global financial system. As if connected through an umbilical cord, countries prosper and decline in sync with the US Federal Reserve’s actions. But how did the dollar become the centre of global finance? And, what does it mean for India and the world?
The roots
Since the early 19th century, countries struggled to find the best way to settle trade balance. It was not easy as each had its currency with no check on more printing. Finally, most countries agreed to settle trade deficits through the exchange of gold. This system continued up to Word War I.
Then many countries stopped their currencies’ convertibility to gold so they could print more money to finance the war effort. Disappearance of gold as a common anchor led to the collapse of the global financial system and became one of the reasons leading to great depression in the early 1930s.
Bretton Woods
Realising the importance of an anchor like gold for promoting stable trade and finance, countries on the winning side of Word War II agreed to establish a robust global financial system. They considered many options.
John Maynard Keynes on behalf of Britain proposed creating an International Clearing Union (ICU) to keep account of countries’ exports and imports. The unit of account for such transactions would be Bancor (French for Bank Gold).
Exports would add Bancors while imports would subtract these in a country’s ICU account. Limits were proposed on the amount of deficit, and if it exceeded, the country’s currency was allowed to depreciate. It was a currency neutral system.
But the US rejected Keynes’ proposal and proposed that the new system should rest on both gold and the US dollar.
No one liked this idea as this would make the dollar the supreme currency of the world. But the US, the principal financier of the victorious side of the war prevailed. And except for the Soviet Union, all 44 participating nations signed the Bretton Woods agreement in 1944 at Bretton Woods, New Hampshire, US.
The member-countries agreed to maintain a fixed exchange rate which could be adjusted if deficits or surpluses persisted. The International Monetary Fund (IMF) was created to lend to member-countries in need of foreign exchange.
The price of gold was fixed at $35 per ounce. The US agreed to supply gold at this price in the exchange with dollars held by other countries.
De-linking of gold and dollar
The gold for dollar system worked during 1950-70. But it came under strain as the US started printing and spending a large value of dollars on post-war reconstruction efforts. When countries holding these dollars went for exchange with gold, the US gold reserves started vanishing.
Gold supply was finite, but the dollar printing knew no limits. The story came to an end in August 1971 when the US reneged from its commitment to convert the US dollar to gold.
De-linking gold with dollar made the US the linchpin of global finance. Other countries need to earn foreign exchange by exporting; the US Fed has just to hit the print button. Fed has almost become the central bank of the world. Central banks all over the world must calibrate their policies to be in sync with the Fed’s.
It could print dollars without bothering about domestic inflation or balance-of-payments as over two-thirds of all dollars in circulation are held outside the US. It could carry out massive expenditures on military activities and foreign aid to achieve its political objectives.
The Soviet Union was the only major country opposing the dollar’s status, and that was the main reason for the Cold War. Europe and Japan reluctantly joined the US political and military umbrella, and accepted dollar as the de facto world currency.
Impact of $-centric system
A country’s economy is ransom to Fed’s actions. If Fed increases the interest rate, dollars flow back to the US, and if it lowers rates, dollars move to the world to take advantage of growth stories or interest rate arbitrage of individual countries.
Trillions of dollars loaned to corporates at near zero interest rate transfer wealth from the people to corporates, a key reason for the concentration of wealth in the top one per cent of the population.
US actions are being emulated by China and other countries which have also printed and offloaded large volume of money in the past 10 years. Awash with cheap loans, Chinese firms export subsidised goods with no relation between cost and price. This has distorted the world trading pattern.
India’s options
The key to managing the rupee are: One, avoid the lure of hot money that comes for investment in debt market and shares. It leaves the economy devastated while leaving.
Two, reduce our $90-billion annual crude oil import bill. This is possible through transparent regulation, investment in domestic oil exploration and switching to green energy options. Many countries, including the US, have turned from energy importers to net energy exporters using these strategies.
And, three, India is batting far below its potential in exports. Make export a national do-or-die priority.
The writer is from the Indian Trade Service. The views are personal.
Higher global oil prices, sharp depreciation in rupee, and rising borrowing costs due to tightening monetary policy are among a host of factors that will limit the pace of the Indian economy’s growth over the next few years, with the real GDP growth in 2019 and 2020 pegged at 7.3 per cent against around 7.4 per cent in 2018, said Moody’s Investors Service.
The global credit rating agency has cautioned that the greatest downside risk to India’s growth prospects stem from concerns about its financial sector.
“The 7.9 per cent growth in India’s economic activity in the first half of 2018 in part reflects post-demonetisation base effects. Still, the economy remains one of the strongest performers, supported by robust domestic consumption and a pick-up in investment activity. The larger picture is, however, mixed,” it said.
Moody’s assessed that the impact of higher global oil prices compounded by a sharp rupee depreciation raises the cost of households’ consumption basket, and will weigh on households’ capacity for other expenditures.
“Borrowing costs have already risen because of tightening monetary policy. We expect that the Reserve Bank of India (RBI) will continue to steadily raise the benchmark rate through 2019, further dampening domestic demand,” the agency said.
Economy at the risk of a credit squeeze from NBFCs
While cautioning that the greatest downside risk to India’s growth prospects stem from concerns about its financial sector, Moody’s observed that the RBI has taken steps toward recognising the extent of non-performing loans through extensive asset quality review and pushed banks to take large non-performing accounts to the bankruptcy court under the Insolvency and Bankruptcy Code.
“It (RBI) has placed the 11 weakest banks under the prompt corrective action framework, aimed at improving the financial health of banks. Stabilising the banking sector will likely be a long drawn-out process. But the economy is now at the risk of a credit squeeze from non-bank financial entities, following the Infrastructure Leasing & Financial Services Ltd default crisis.
“For now, wider systemic risk has been contained with assurances of liquidity support from the RBI, securities regulator and the Finance Ministry. In the short term, however, while measures to stabilise the financial sector are put in place, credit growth is likely to slow,” the agency said.
Downside risks from a prolonged liquidity squeeze for non-bank financial institutions, which could lead to a sharper slowdown in their credit provision, remain, it added.
Global growth to slow in 2019 and 2020
Global economic growth will slow down in 2019 and 2020 to a little under 2.9 per cent, from an estimated 3.3 per cent in 2018 and 2017, Moody’s said in a report.
In addition, a slowdown in global trade amid rising trade tensions will have an adverse impact not only on growth in the US and China, but also on growth in open economies such as Japan, Korea and Germany.
“Growth in advanced economies will slow but remain solid in 2019, while G20 emerging markets growth will remain weak,” says Moody’s Vice-President Madhavi Bokil, lead author of the report.
“In the US, waning fiscal stimulus, ongoing removal of monetary accommodation and more restrictive trade measures will lower growth. The euro area will also see cyclical moderation to trend growth. Among G-20 emerging market countries, Turkey and Argentina will experience contractions, while China will experience a slowing economy.”
The agency opined that gradual removal of monetary policy accommodation by major central banks will continue to have large spillovers outside the currency areas.
“As major central banks start to rescind forward guidance and withdraw monetary accommodation, financial volatility, term premia and credit spreads will increase globally. Moody’s baseline forecasts assume this will occur relatively smoothly, occasionally interrupted by stints of financial market volatility,” the report said.
The Central Board of Indirect Taxes and Customs (CBIC) will monitor on a daily basis the grievances of the MSMEs relating to the GST as part of efforts to resolve issues being faced by small businesses in the new indirect tax regime.
The move comes at a time when the government has initiated a major support and outreach programme for MSMEs to ensure growth and expansion of the sector.
The GST help desks have already been set up in all the 80 districts where a 100 day support and outreach programme for the micro, small and medium enterprises (MSMEs) have been launched by the government on November 2.
The CBIC has now decided to set up a Feedback and Action Room (FAR) under the Directorate General of Goods and Services Tax (GST) to record and process all grievances raised by MSMEs, an official said.
The GST help desks will have nodal officers for trade facilitation who would guide the small businesses on their queries surrounding the GST.
These nodal officers would report all the grievances on a real-time basis to the FAR, which would then provide the solution.
“The FAR would comprise of officers from Delhi and NCR. They would compile a master record of all grievances at various stages of resolution, and send a summary report to the Board on daily basis,” an official told .
Prime Minister Narendra Modi had on November 2 launched a slew of measures for the MSME sector, including faster sanction of loans and easier compliance with environmental rules.
Also, GST-registered MSMEs will get a 2 per cent subvention or subsidy on a new loan or incremental loan of up to Rs 1 crore.
The MSME sector constitutes a vast network of over 63 million units and employs 111 million people, contributing around 30 per cent to the GDP. It accounts for about 45 per cent of manufacturing output and around 40 per cent to total exports.
The GST Council, chaired by the Union Finance Minister and comprising state ministers as members, had in July allowed companies with turnover of up to Rs 5 crore to file GST returns quarterly, up from the Rs 1.5 crore threshold fixed earlier. The move benefited about 93 per cent of the GST registered taxpayers.
https://timesofindia.indiatimes.com/business/india-business/cbic-to-daily-monitor-msme-grievance-on-gst-sets-up-help-desks-to-resolve-queries/articleshow/66512185.cms
India is yet to decide whether to challenge the World Trade Organization’s recent ruling against safeguard duties imposed by the country on imports of hot-rolled steel flat products as the Steel and Commerce Ministries have adopted opposing views on the issue.
“While the Steel Ministry is in favour of contesting the WTO ruling, the Commerce Ministry believes that there is no need for such a move as the safeguard duties that have been found violative of existing rules do not exist any more,” an official told BusinessLine.
India imposed safeguard duties — penal duties to protect vulnerable domestic industry against a surge in imports — on hot-rolled steel products in March 2016 fixed at 20 per cent which were tapered off and totally removed in March 2018.
On Tuesday, a WTO dispute settlement panel, set up at the request of Japan, gave its ruling and mostly upheld Tokyo’s contention that the safeguard duties imposed by India did not adhere to the WTO norms. The WTO verdict, however, was not all against India. There were several claims made by Japan which were struck down as well. “The Steel Ministry believes that the decisions going against India could be challenged at the WTO with the country submitting more evidence to establish its case. It feels that getting the verdict changed could help India score a larger point,” the official said.
But the Commerce Ministry is of the opinion that there is no point in doing so as the safeguard duties had already been rolled back in March and the challenge would lead to a waste of effort and resources, the official added.
New Delhi does not have to decide immediately on the issue. Members have 30 days to appeal against a panel decision once it is made public.
The Andhra Pradesh Authority of Advance Rulings in an application filed by M/s. Synthite Industries held that the process of providing job work service to foreign customer is taxable at 18% under the Andhra Pradesh GST Act.
HTH Hamburger Teehandel GmbH lm. & Export, Hamburg is a foreign company which entered into an agreement with the applicant job worker for the work of processing Tea, the other way round called removing Caffeine from Tea. The raw material/ packing material is supplied by the foreign Principal and after the process has been undertaken, the de-caffeinated tea will be exported to the Principal. The applicant sought for a ruling on whether the process of providing job work service to foreign customer is taxable under GST. The Authority referred to Section 2(68) of the Central Goods and Service Tax Act, 2017 (CGST) defining ‘Job Work’. It is ‘any treatment or process undertaken by a person on goods belonging to another registered person’. Further, the one who does the said job would be termed as a ‘Job Worker’. Also, the ownership of the goods does not transfer to the Job Worker but it rests with the Principal. The Job Worker is required to carry out the process specified by the Principal, on the goods.
The bench constituting of Sri. J.V.M. Sarma and Sri. Amaresh Kumar as members held that the process of providing ‘Job Work’ service to the foreign customer as in the present case in the premises of the applicant as per the specifications of the recipient of services is taxable under the Andhra Pradesh GST Act at a rate of 18%.
During April-September 2017-18, the country had exported cotton textiles (raw cotton, yarn, fabrics and made-ups) worth $4,917 million, the association said in a statement.
India will gain from the ongoing trade war between the US and China, according to the Cotton Textiles Export Promotion Council (Texprocil). Exports of cotton textile grew 26 per cent at $6,235 million in the first six months of the fiscal and the on-going trade war could open up new export opportunities, Texprocil added. During April-September 2017-18, the country had exported cotton textiles (raw cotton, yarn, fabrics and made-ups) worth $4,917 million, the association said in a statement. According to Ujwal Lahoti, chairman, Texprocil, India should be ready to explore new opportunities that will open up because of the brewing tension between the US and China. Being the second largest textile exporter in the world, India holds a special place in global textile trade.
