What Could Be The Problems During Rollout Of GST   Jun 16, 2017

June 16, 2017
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Impact

The Parliament has cleared the way for the roll out of the Goods and Services Tax (GST). The Council for GST has finalised the tax rates for respective categories of good and services.

But this was only half the battle…

As we approach July 1, 2017 – the rollout date for GST – most traders, professionals, and businessmen are feeling the butterflies in their stomachs. This is because there’s too much uncertainty, confusion, and fear of the unknown.

Some of the common issues corporations, individual businessmen, and professionals are likely to face are:
 
  • The entire process of invoicing, filing returns, and claiming input tax credit will go paperless and will be carried out through the Goods and Services Tax Network (GSTN). Various platforms have questioned the operational preparedness of this system.

    Finance Minister of West Bengal, Mr Amit Mitra has raised serious doubts about the readiness of the IT infrastructure. "Entire GST will depend on one IT system of GSTN. The presentation given by them clearly shows that they are not ready and need more time. They have appointed 34 Suvidha providers for the whole country...will that be sufficient?", ¬he expressed to media. This reaction from a person who headed the GST committee has raised many eyebrows.
     
  • Many businesses, especially the smaller one are still ill-prepared to handle the transition amid a host of rigorous compliance processes. Plus, there is a tendency among the unorganised sector participants to dodge the tax liabilities through manipulated systems, which will be severely challenged under GST. The migration to GST will be cumbersome for such businesses and there are questions about the sustainability of such organisations under the GST regime. While filing returns and claiming input tax credits, there’s a thin margin for errors. This means small businesses will have to seek professional help or appoint a full-time person, else their business arithmetic may suffer from miscalculation. Filing as many as 4 returns every month, plus one annual return is not child’s play. Multi-state registration might be tedious for smaller companies doing business across states.
     
  • Implementation of GST might cause some working capital problems for small and medium enterprises initially; until the majority of businesses become well-versed with the system and compliance level, in general, goes up.
     
  • The mechanism of GST is such that there’s a little scope for manipulations as the uploaded returns will automatically get double-checked, and the discrepancy, if any, will make it simpler for the tax authorities to fix the tax liability.
     
  • In contrast, large companies that work with the Enterprise Resource Planning (ERP) software will find it comparatively easy to move to the GST regime. A few modifications in the software would take care of increased compliance. Moreover, those in the manufacturing industry would find it relatively simple to migrate to GST as compared to other players in the services industry. The latter will have to substantially improve their understanding of new laws since compliances are likely to increase.
     
To sum-up…

So, the implementation of GST and its successful rollout is easier said than done. The rating system proposed under GST will be a crucial factor going forward. As the compliance record of an entity (be it an individual or a company) will encourage or discourage others from doing business with it.
 
Impact

Assets Under Management (AUM) of the mutual fund industry fell by a little over Rs 22,000 crore in May 2017. This was the second decline in 3 months until May. In March too, AUM had dropped by nearly Rs 34,000. But it would be wrong to conclude that investors have turned bearish on Indian capital markets.

It’s noteworthy that, the industry had witnessed massive inflows worth Rs 1.72 lakh crore in April. The category of liquid funds saw inflows worth Rs 99,403 crore in April followed by outflows to the tune of Rs 64,692 crore in May.
 
A fall in AUM: Just a blip?

(Source: AMFI, PersonalFN Research)

Investments in liquid funds are mostly dominated by institutional investors. Based on their financial needs and the return potential of various investment avenues, institutional investors keep changing their investment preferences. So, don’t read too much into the outflows recorded in May.

The AUM of equity mutual funds (which are dominated by individual investors) grew by Rs 10,208 crores while the balanced fund category received the net inflows of Rs 7,663 crores. The folio count in the equity-oriented mutual funds jumped 2% from 5.62 crores to 5.72 crores. Out of these 10 lakh folios, equity funds added 7.39 lakh folios. Within equity funds, the folio count increased by 88,000 in Equity Linked Savings Funds (ELSS), while another 1.67 lakh folios got added in the balanced fund category.

Another comforting factor is that the majority of new investments are channelled through Systematic Investment Plans (SIPs). This suggests that the effects of investor education programmes conducted on various platforms have slowly started showing results. PersonalFN too, has worked incessantly to educate investors about their personal finances and help them take sound investment decisions.

What to expect?

Mutual Funds may continue to witness inflows, especially in the equity oriented categories —thanks to the growing awareness and falling interest rates on bank fixed deposits. Real estate and gold—the other important asset classes---aren’t generating impressive returns either.

PersonalFN believes investors should invest in mutual funds based on their personalised asset allocation drawn in line with their financial goals and risk appetite.

In case you need any guidance on your mutual fund investments, subscribe to PersonalFN’s unbiased mutual fund services. Recently, PersonalFN released an intensively researched report on mutual funds— Strategic Funds Portfolio For 2025--exclusively for investors who wish to beat inflation and grow their wealth with a time horizon of 7-8 years.
 
 
Impact

Court rulings on financial issues are not always easy to understand, especially when it involves technical aspects. But as many of these could directly impact our everyday life, we must strive to correctly understand the court’s verdicts. You’ll probably recall, the Government had recently amended the Income Tax Act making it mandatory for the taxpayers to link their Aadhaar and PAN. It was decided that PANs of non-compliant citizens would be invalid. Moreover, it is compulsory for taxpayers to provide their Aadhaar number at the time of filing Income Tax (I-T) returns. According to the Government, this was done to (or “intending to”) curb the tendency to avoid filing taxes observed among citizens and to curtail the circulation of black money within the system.

To read more about this story and Personal FN’s views over it, please click here.
 
Impact

Retail inflation, measured by the movement of the Consumer Price Index (CPI), dipped to 2.18%, a 5-year low, in May 2017 from 2.99% the month before. A higher base effect year and negative food inflation (of -0.22%) were the main factors that worked in its favour.

Pulses and products recorded a steep fall of -19.45% in May (v/s -15.94% in April), while vegetable prices were down -13.44% in (v/s -8.59% in April). Cereal and products, milk and products, sugar and confectionary and prepared meals & snacks reported over 4% inflation as against the much higher numbers of the previous month. Similarly, fruits, eggs, spices and meat, and fish recorded a price rise of sub 2% lower than the price reported for the previous month.

To read more about this story and Personal FN’s views over it, please click here.
 
 
Impact

Over the past few months, it has been hard to miss advertisements promoting the tagline—“Mutual Funds Sahi Hai”(mutual funds are cool). These adverts are on billboards at bus stops, publications, and TV. The infomercials talk about the different aspects and benefits of mutual funds. The advertisements are simple and to the point, eliciting the viewers’ curiosity about investing in mutual fund schemes.

To read more about this story and Personal FN’s views over it, please click here.
 
 
Impact

You can’t judge a book by its cover and a mutual fund by its short-term performance.

Time and again, investors are lured by the short-term gains of mutual funds and the equity market in general. Fund houses capitalise on this and launch schemes or promote categories of schemes that have done well over the recent past. Over the past month and a half, fund houses have filed offer documents with the regulator to launch as many as 12 equity-oriented schemes including hybrid funds, themed funds, and sector funds.

To read more about this story and Personal FN’s views over it, please click here.
   
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The To increase employment in the formal sector, Government decided to contribute 8.33% to Employees’ Provident Fund (EPF) accounts of new employees for the first 3 years. The Government had allocated Rs 1,000 crore for this purpose in the last year’s Budget.

It seems the scheme is now facing some operational glitches.

Over a lakh of the beneficiaries who were absorbed into the formal job market through Pradhan Mantri Rozgar Protsahan Yojana (PMRPY) and the Pradhan Mantri Paridhan Rozgar Protsahan Yojana (PMPRY) haven’t received this benefit.

Reason?

Their details as per the EPFO Universal Account Number (UAN) and those as per Aadhaar didn’t match. The Employees’ Provident Fund Organisation (EPFO) has asked its field officers to resolve this matter by the end of June 2017. A letter issued by EPFO addressing its field workers directed them to “physically verify Aadhaar details vis-à-vis records.”
 

Disinflation: Disinflation is a slowing in the rate of price inflation. It is used to describe instances when the inflation rate has reduced marginally over the short term. Although it is used to describe periods of slowing inflation, disinflation should not be confused with deflation, which can be harmful to the economy.
Quote :"Beware of little expenses. A small leak will sink a great ship." - Benjamin Franklin
 
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