Skip to main content

GST takes the sheen off services in August, too

By
GST takes the sheen off services in August, too
Introduction of the nationwide goods and services tax (GST) continued to be a drag on activity in the services sector in August, for a second month, with companies having to handle higher input prices and slow demand.

The widely tracked Nikkei Purchasing Managers´ Index (PMI) showed a reading for the services sector of 47.5 in August.The 50 point mark separates expansion from contraction.

However, the decline was softer than in the previous month of July, when the PMI had plunged toanearly fouryear low of 45.9. Last week, the latest gross domestic product (GDP) data showed a three year plunge in economic growth at 5.7 per cent in the first quarter of the current financial year.

While PMI data for manufacturing rebounded in August, rising to 51.2 points from 47.9 in July, services´ providers continued to grapple with a slow down in new businesses.The entities surveyed blame this on sub dued demand and rising competitive pressures emanating from GST. “The tax rates under GST for anumber of services have increased.

More companies are affected by this, as compliance has also gone up,” said Aditi Nayar, principal economist at ratings agency ICRA.

The slowing in services could also be attributed to the fact that some of the major segments within the sector such as banking, telecom and information technology are dealing with unique sets of issues, she added.

The PMI survey for July showed output and new work had started declining for the first time since January. Likewise, factory orders had decreased in July, at the quickest pace since February 2009.

As a result of these trends, the labour market continued to be adversely affected, with employment continuing to decline, albeit marginally, for a second month.However, job shedding is expected to ease to a marginal pace, as the vast majority of service providers have left headcounts unchanged.

“The underlying trend for services is of uncertainty.
Businesses are holding back on investment, leading to falls in employment,” said Pollyanna De Lima, principal economist at IHS Markit, which compiles the data, and author of the report.

Interestingly, manufacturers took on extra staff at the quickest rate in nearly four and a half years in August.

The Business Standard, New Delhi, 06th September 2017

Comments

Post a Comment

Popular posts from this blog

April GST collections at new high despite rate rationalisation in December

By
Goods and services tax (GST) collection touched a record high in April, exceeding Rs 1 trillion for the third time in four months. The mop-up was 10 per cent higher over the previous year. Gross collection for the month was Rs 1.13 trillion, said the finance ministry. Despite the recent rate rationalisation in December, a rise in collection was reported. Of the total collected, the CGST (central GST) contributed Rs 21,163 crore, the SGST (state GST) Rs 28,801 crore, the IGST (integrated GST) Rs 54,733 crore (including Rs 23,289 crore on import) and cess Rs 9,168 crore (including Rs 1,053 crore on import). After settlement of the IGST and the balance IGST in a 50:50 ratio between the Centre and states on a provisional basis, the CGST stood at Rs 47,533 crore and SGST at Rs 50,776 crore. The CGST target in the Union Budget for 2019-20 is Rs 6.1 trillion. “The April collection indicates the tax base is increasing gradually, with GST getting stabilised with measures such as e-way bills and…
Post a Comment
Read more

Defaults are Costly: Bankruptcy Law Gives Lenders More Teeth

By
Lenders can bargain strongly on asset recovery, defaulting borrowers can lose control of co With the Bankruptcy Act in place, banks can breathe easy, at least in the medium term, as corporate borrowers will now intensify their efforts to avoid loan defaults and the likely loss of management control of business, said Moody's Investors Service. This will empower lenders to bargain strongly in matters of asset recovery, while borrowers can gain with lower borrowing costs after three-four quarters. “The (defaulting) borrowers will lose control of the company as soon as the process is initiated,“ Srikanth Vadlamani, vicepresident, Financial Institutions Group, Moody's Investors Service, told ET from Singapore.“This, in itself, should act as a key incentive for them not to default in the first place.“ A few weeks ago, the government passed the Bankruptcy Bill, introducing a time-bound settlement process against loan default. With the Bankruptcy Act, the resolution process-from the date …
2 comments
Read more

SC order on RBI circular: More options for banks to tackle defaulting firms

By
Lenders also have the option of restructuring the loans Lenders to companies which are under stress could now have three options to deal with them if they default on loans: take a haircut as part of a one-time settlement, restructure the loans for a longer tenure as they did when corporate debt restructuring schemes were allowed, or go to the Insolvency and Bankruptcy Code (IBC) for redress. These changes in the options available to lenders come, according to PE funds and bank lawyers who are involved in the IBC process, in the wake of the Supreme Court on Tuesday setting aside the 12 February RBI circular, which allowed a 180-day window to banks to resolve a company default.But they can still find a resolution. According to a Reserve Bank of India circular, a loan becomes a non-performing asset when banks cannot find a way of recovering their money in 90 days. In short, banks still have a window to resolve the default. Lenders can take a haircut as part of a one -time settlement of du…
1 comment
Read more