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TraderRavi

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Letter sent to states: GST Council rings first alarm bells on revenue

In its first admission of strain on tax collections and the Centre’s inability to compensate states for loss of revenue, the GST Council has written to states telling them that the GST and compensation cess collections in the last few months has become a “matter of concern” and that the compensation requirements are “unlikely to be met”.

The GST Council is a Constitutional body chaired by the Union Finance Minister and comprises the Minister of State for Finance/ Revenue and finance ministers of all states. It makes recommendations on all important issues related to the Goods and Services Tax.

The GST Council is now scheduled to meet on December 18 to focus on “revenue augmentation”. Some state finance ministers are scheduled to meet Union Finance Minister Nirmala Sitharaman on Wednesday to discuss the GST compensation dispute. “Hope Centre would concede what is due to states,” Kerala’s Finance Minister Thomas Isaac tweeted Tuesday.

The Centre has already delayed compensating states for the shortfall in GST revenues for August-September, payment for which was due in October. At least five Opposition-ruled states/UTs – Kerala, West Bengal, Delhi, Rajasthan and Punjab, had issued a joint statement on November 20 raising concerns about this.

As per the GST Act, states are guaranteed compensation for any revenue shortfall below 14 per cent growth (base year 2015-16) for the first five years ending 2022. GST compensation is paid every two months by the Centre to states.

As per publicly available data with the Union finance ministry, the Centre had collected Rs 64,528 crore in compensation cess during April-November and paid out Rs 45,744 crore for April-July period, leaving Rs 18,784 crore in its kitty assuming no payment has yet been made to states for August-September. Officials said the payments were held back to states in anticipation of the shortfall in collections and the resultant impact on the government’s fiscal deficit.

The GST Council has now asked states to give their inputs and proposals regarding review of items under exemption, GST and compensation cess rates on various items, rate calibrations for inverted duty structure, compliance and revenue augmenting measures by December 6.

Given that cess is imposed only on luxury and sin goods under GST, any measure to generate more cess collections would either include imposing a higher cess on those items or a tinkering at the highest 28 per cent tax slab under the indirect tax regime.

Besides faltering indirect tax collections, the mop-up on the direct tax front is also not optimistic, with gross collections during April-November growing a mere 5 per cent to Rs 7 lakh crore. Net collections (less refunds) rose a meagre 0.7 per cent to Rs 5.5 lakh crore, as against last year’s 14 per cent and the Budget target of 17.3 per cent.

Corporate tax collections contracted 1 per cent during April-November, while personal income tax grew 5 per cent, a government official said.


Net direct tax collections have posted low growth because of a sharp 22.7 per cent rise in refunds during April 1-November 28 to Rs 1.46 lakh crore. The tax department processed 2.10 crore refund returns for the current assessment year 2019-20, a rise of 20 per cent, a CBDT official said.

The slowing stream of both direct and indirect tax collections poses a big challenge for the government to meet its tax receipt targets set in the Budget. Tax data made available by the Controller General of Accounts (CGA) for April-October shows that net direct tax collections had grown by around 3.5 per cent to Rs 5.18 lakh crore during the period. This would mean that gross tax revenue must grow 35.4 per cent during the remainder of the year.

This would be the second consecutive year when the government’s direct tax collections look out of reach. The government had missed the target in 2018-19 by Rs 63,000 crore. Last year, the government had initially estimated direct tax revenue at Rs 11.5 lakh crore, which was revised up to Rs 12 lakh crore. However, the actual direct tax receipts for 2018-19 were Rs 11.37 lakh crore.


Following the shortfall in direct tax revenue target for 2018-19, the government had reduced the tax targets for the current financial year. Direct tax revenue target has now been estimated at Rs 13.35 lakh crore for 2019-20, Rs 45,000 crore lower than the estimate of Rs 13.8 lakh crore in the Interim Budget presented in February.


https://indianexpress.com/article/b...on-revenue-tax-collection-sitharaman-6149310/
 

TraderRavi

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SAT to decide who owns Karvy’s pledged shares

India’s top two private banks, HDFC Bank Ltd and ICICI Bank Ltd, on Tuesday fought to lay their hands on client shares that Karvy Stock Broking Ltd had pledged with them, seeking to recover ₹1,000 crore they had lent to the brokerage.

The case will require the Securities Appellate Tribunal (SAT) to address a core dilemma: who owns these shares — the client who bought the shares, or the lender who advanced money against them without verifying their actual ownership?

At Tuesday’s hearing, the lenders sought to quash a 22 November order by the Securities and Exchange Board of India (Sebi), which prevented them from accessing these shares. They also wanted SAT to set aside the National Securities Depository Ltd’s (NSDL) transfer of these securities to client accounts on Monday. Consequently, they have also made NSDL and the National Stock Exchange parties to the case.

The lenders said in their petitions that following the Sebi order, they had requested the regulator not to initiate any action on transferring these shares to clients as they had bona fide rights to them. The two banks told the tribunal that it was common industry practice to lend against pledged shares (LAS) and there was no reason to suspect Karvy’s claim that it owned these shares.

Sebi’s 22 November order said Karvy had misused client securities, pledging them to raise money, some of which was transferred to related-party businesses such as Karvy Realty Ltd. SAT will rule on the banks’ petition on Wednesday.

On Tuesday, while ruling on a Bajaj Finance Ltd plea of a similar nature, SAT asked Sebi to hear the lender’s representation and pass appropriate orders by 10 December and put a stop to any more transfer of securities to clients’ accounts. A petition by IndusInd Bank was also merged with the petitions by HDFC Bank and ICICI Bank. The brokerage firm owes the lender ₹132.50 crore against pledged shares.

(Graphic: Sarvesh Kumar Sharma/Mint)

Mint reported on 3 December that NSDL had transferred securities worth ₹2,013.77 crore to the accounts of 83,306 clients. Karvy owes ICICI Bank ₹642 crore and HDFC Bank had granted the brokerage a loan facility of ₹350 crore. Bajaj Finance has an exposure of ₹345 crore.

In its petition, HDFC Bank claimed that following the Sebi direction, the loan which was earlier secured by pledged shares had suddenly become unsecured as it cannot access those shares.

During the course of arguments, the lenders said LAS facilities are a common market practice and are routinely used by brokers for working capital and margin requirements. The lenders said their loan sanction letters specifically stated that pledged shares belonged to Karvy, its group companies or its promoters.

The Sebi counsel, however, said banks should have ascertained the ownership of these shares and conducted better due diligence. Counsel Rafique Dada said banks remained ignorant despite the Sebi circular of June 2019, which ruled that brokers cannot pledge clients’ securities and starting 1 October, brokers had to unwind such pledges.

HDFC Bank, however, countered that since the shares were from Karvy’s account, it believed that the broker was the owner of the securities and “there was no reason to enquire or ascertain whether these securities belonged to Karvy or any of its clients".

ICICI Bank said in its petition that such an order without hearing the bankers is detrimental to its 800,000 public shareholders and banking customers. On 5 November, ICICI Bank had issued a notice to Karvy to return all the loans, failing which it would invoke the pledges for recovery.

The lenders also alleged that Sebi and NSDL did not respond to their requests on transfer of securities to clients’ accounts, which would leave them with almost no shares.

NSDL said that it complied with Sebi’s 22 November directions and transferred securities to the beneficial owners, which are the clients. In fact, the depository conducted a board meeting before taking a call as this was not a routine case, but one of alleged fraud.

https://www.livemint.com/companies/...ns-karvy-s-pledged-shares-11575395854603.html
 

TraderRavi

low risk profile
Shiv Sena govt puts ₹7 tn infrastructure projects under lens


(Graphic: Sarvesh Kumar Sharma/Mint)

According to a PTI report, Thackeray said after the meeting that no project has been halted yet, and that only the Aarey car shed has been stayed.

The Shiv Sena’s past opposition to the Japan-backed bullet train project and the refinery project stems from its support to protesting farmers, who fear their land will be acquired for the projects.

https://www.livemint.com/news/india...cture-projects-under-lens-11575394148497.html
 
SAT to decide who owns Karvy’s pledged shares

India’s top two private banks, HDFC Bank Ltd and ICICI Bank Ltd, on Tuesday fought to lay their hands on client shares that Karvy Stock Broking Ltd had pledged with them, seeking to recover ₹1,000 crore they had lent to the brokerage.

The case will require the Securities Appellate Tribunal (SAT) to address a core dilemma: who owns these shares — the client who bought the shares, or the lender who advanced money against them without verifying their actual ownership?

At Tuesday’s hearing, the lenders sought to quash a 22 November order by the Securities and Exchange Board of India (Sebi), which prevented them from accessing these shares. They also wanted SAT to set aside the National Securities Depository Ltd’s (NSDL) transfer of these securities to client accounts on Monday. Consequently, they have also made NSDL and the National Stock Exchange parties to the case.

The lenders said in their petitions that following the Sebi order, they had requested the regulator not to initiate any action on transferring these shares to clients as they had bona fide rights to them. The two banks told the tribunal that it was common industry practice to lend against pledged shares (LAS) and there was no reason to suspect Karvy’s claim that it owned these shares.

Sebi’s 22 November order said Karvy had misused client securities, pledging them to raise money, some of which was transferred to related-party businesses such as Karvy Realty Ltd. SAT will rule on the banks’ petition on Wednesday.

On Tuesday, while ruling on a Bajaj Finance Ltd plea of a similar nature, SAT asked Sebi to hear the lender’s representation and pass appropriate orders by 10 December and put a stop to any more transfer of securities to clients’ accounts. A petition by IndusInd Bank was also merged with the petitions by HDFC Bank and ICICI Bank. The brokerage firm owes the lender ₹132.50 crore against pledged shares.

(Graphic: Sarvesh Kumar Sharma/Mint)

Mint reported on 3 December that NSDL had transferred securities worth ₹2,013.77 crore to the accounts of 83,306 clients. Karvy owes ICICI Bank ₹642 crore and HDFC Bank had granted the brokerage a loan facility of ₹350 crore. Bajaj Finance has an exposure of ₹345 crore.

In its petition, HDFC Bank claimed that following the Sebi direction, the loan which was earlier secured by pledged shares had suddenly become unsecured as it cannot access those shares.

During the course of arguments, the lenders said LAS facilities are a common market practice and are routinely used by brokers for working capital and margin requirements. The lenders said their loan sanction letters specifically stated that pledged shares belonged to Karvy, its group companies or its promoters.

The Sebi counsel, however, said banks should have ascertained the ownership of these shares and conducted better due diligence. Counsel Rafique Dada said banks remained ignorant despite the Sebi circular of June 2019, which ruled that brokers cannot pledge clients’ securities and starting 1 October, brokers had to unwind such pledges.

HDFC Bank, however, countered that since the shares were from Karvy’s account, it believed that the broker was the owner of the securities and “there was no reason to enquire or ascertain whether these securities belonged to Karvy or any of its clients".

ICICI Bank said in its petition that such an order without hearing the bankers is detrimental to its 800,000 public shareholders and banking customers. On 5 November, ICICI Bank had issued a notice to Karvy to return all the loans, failing which it would invoke the pledges for recovery.

The lenders also alleged that Sebi and NSDL did not respond to their requests on transfer of securities to clients’ accounts, which would leave them with almost no shares.

NSDL said that it complied with Sebi’s 22 November directions and transferred securities to the beneficial owners, which are the clients. In fact, the depository conducted a board meeting before taking a call as this was not a routine case, but one of alleged fraud.

https://www.livemint.com/companies/...ns-karvy-s-pledged-shares-11575395854603.html
So, it is the small guy who gets the shaft. The only the investor is sure of is that he doesn't own his shares.
 

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