n a recent update, the Goods and Services Tax Network (GSTN) has rolled out a significant change concerning the reversal of Input Tax Credit (ITC) for suppliers who fail to file GSTR 3B. The conversation between fictional characters, Arjuna and Krishna, sheds light on the press release and Rule 37(A) issued on November 14, 2023.
Clarification on ITC Reversal Requirement:
Arjuna seeks clarification from Krishna regarding the new requirement for taxpayers to reverse ITC due to defaults or non-compliance by their suppliers in filing GSTR 3B.
Press Release and Rule 37(A) Overview:
Krishna explains that the department issued a press release on November 14, 2023, emphasizing the need for taxpayers to reverse ITC claimed when their suppliers fail to file GSTR 3B, as outlined in Rule 37(A) of the CGST Act.
Simplified Explanation:
Breaking down the press release and Rule 37(A), Krishna simplifies the concept. Taxpayers who have claimed ITC for invoices and debit notes reported by their suppliers in GSTR 1/IFF returns face a reversal obligation if the suppliers haven’t filed their GSTR 3B returns for those transactions by September 30th, post the financial year when the credit was claimed. The reversal must be completed in the GSTR 3B return before November 30, 2023, ensuring compliance with the new mandate. Immediate attention and action are crucial for taxpayers to adhere to this regulatory change and avoid penalties.
In a proactive move to alleviate the mounting burden of litigation faced by both the government and taxpayers, the income tax department has set ambitious targets for the resolution of appeals. With 285 appeal units spread across India, the department aims to streamline the appeal resolution process and has mandated each unit to submit a comprehensive report card to the board by January. This initiative precedes the finalization of measures slated for announcement in the upcoming budget.
Lingering Challenge of Appeals:
Recent data reveals a concerning trend where the disposal of appeals lags significantly behind the influx of fresh appeals filed annually. To counter this, the government is poised to introduce measures in the budget aimed at curbing litigation and enhancing efficiency in the appeal resolution process.
Escalating Appeal Backlog:
As of March 31, 2023, the number of pending appeals has risen to 5.16 lakhs from 4.96 lakhs recorded on March 31, 2022. Notably, more than 2.8 lakhs appeals have been pending for over three years, contributing to the persistent challenge faced by the income tax department.
Enforcing Rigorous Targets:
To expedite the disposal of appeals, the tax department has instituted strict targets for its officers. Each appeal unit is tasked with resolving a minimum of 450 appeals for the fiscal year 2024. Moreover, these units are mandated to dispose of all cases pending as of April 1, 2023, involving demands of ₹50 crore and above. Additionally, there is a compulsory resolution of all appeals filed prior to April 2020, especially if the demand exceeds ₹10 lakh. This strategic approach aims to address the backlog effectively and enhance the overall efficiency of the appeal resolution process.
DSP Mutual Fund has unveiled its latest offering, the DSP Banking & Financial Services Fund (DSP BFSF), an open-ended scheme designed to provide investors with a gateway to the long-term structural opportunities within the banking and financial services domain. The fund extends its focus beyond traditional banks, encompassing key sectors such as NBFCs, Housing Finance Companies, Life Insurance, Non-Life Insurance, AMC, Exchanges & Depositories.
Riding the Growth Wave:
The Banking and Financial Services sector in India has showcased remarkable growth, consistently outperforming the broader Nifty 50 Index over 10-year periods. Despite a brief underperformance since September 2019, the sector’s potential for a reversal, coupled with attractive valuations and robust balance sheets, presents a compelling investment opportunity. The Nifty Financial Services TRI has demonstrated over 12% returns in 90% of times over a 7+ year timeframe.
Strategic Approach:
DSP BFSF adopts a stock-specific approach that prioritizes business fundamentals over market outlook, boasting a high active share compared to the benchmark. The fund also offers flexibility for global investments, allowing the Fund Manager to tap into fundamentally sound businesses internationally.
Asset Allocation:
Under normal circumstances, DSP BFSF maintains an asset allocation between 80% to 100% in equity and equity-related securities of companies in the Banking and Financial services sector. It further allocates up to 20% in equity and equity-related securities of other companies, up to 20% in debt and money market instruments, and up to 10% in units issued by REITs and InvITs.
Subscription Details:
The New Fund Offer for DSP BFSF opens for subscription on November 20th, 2023, and concludes on December 4th, 2023.
CEO’s Perspective:
Kalpen Parekh, MD & CEO of DSP Mutual Fund, expresses optimism about the venture, emphasizing the sector’s substantial profits, diverse business additions, and favorable valuations, making it an opportune time for investors. The launch aligns with the fund’s strategy of raising capital in sectors with enduring growth potential during periods of price consolidation or correction.
In a landmark decision on October 16, the Supreme Court dismissed the plea of telecommunication companies, including Bharti Airtel and Vodafone Idea, seeking to categorize license fees paid post-July 1999 as revenue expenditure. The apex court upheld the Income Tax Department’s stance that such payments, linked to Adjusted Gross Revenue (AGR), are essentially toward license fees and do not qualify as revenue expenditure.
Background of the Case: The legal dispute, spanning over a decade, between the income tax department and telecommunication companies reached its conclusion with the recent Supreme Court ruling. Notably, the Delhi High Court had previously ruled in favor of the telecom firms, asserting that license fees should be considered a part of revenue under the AGR scheme, hence not qualifying as capital expenditure.
SC’s Verdict and Income Tax Department’s Contention: The Supreme Court, however, sided with the Income Tax Department, emphasizing that the annual payments tied to Adjusted Gross Revenue are explicitly directed at license fees. The court rejected the argument that the mode of payment, based on annual gross revenue, should determine its classification as revenue expenditure. Instead, it deemed the license fee payments as capital expenditure.
Resolution of a Decade-Old Litigation: This decision marks the culmination of a prolonged legal battle between the tax authorities and telecom giants. The Supreme Court’s verdict stands in contrast to the earlier stance of the Delhi High Court, settling the debate on whether license fees should be treated as capital or revenue expenditure. The clarity provided by the apex court brings finality to this complex issue.
The National Small Industries Corporation Ltd. (NSIC) is seeking applications for the position of Chairman-cum-Managing Director through the Search-cum-Selection Committee (SCSC). This announcement supersedes the previous advertisement dated 27.09.2022.
Position Details:
Scale of Pay: Schedule ‘B,’ ranging from Rs. 1,80,000 to Rs. 3,20,000/- (Revised).
Application Deadline: 14.08.2023, by 15:00 hours.
About NSIC: NSIC, a Central Public Sector Enterprise (CPSE) under the Ministry of Micro, Small and Medium Enterprises, is wholly owned by the Government of India. The corporate office is located in Okhla, New Delhi, with authorized and paid-up capital of Rs. 535 crores and Rs. 532.99 crores, respectively, as of March 31, 2023.
Eligibility Criteria: Interested officers are required to apply afresh based on the new ‘Job Description.’ Applications submitted in response to the earlier circular (dated 27.09.2022) will not be considered.
Application Process:
Eligible candidates should submit their applications by 15:00 hours on 14.08.2023.
Use the prescribed proforma available on the Ministry of MSME and NSIC websites.
Include necessary documents: attested copies of CR dossiers/APAR for the last ten years, cadre clearance, vigilance clearance/integrity certificate, and a statement detailing any major or minor penalties imposed in the last decade.
Widespread Circulation: To ensure broad dissemination, kindly circulate this vacancy information among various offices, entities, and public sector enterprises under the Ministry/Department. Host the circular on the Ministry’s/Department’s website.
Traders often face the challenge of maintaining the right amount of money in their brokerage accounts. While saving bank accounts offer some interest, it is unattractive. To address this issue, savvy traders park their funds into liquid Exchange Traded Funds (ETFs).
What are Liquid ETFs?
Liquid ETFs invest in debt instruments that mature overnight. They offer attractive returns and provide the liquidity to trade seamlessly. Gains are either paid as dividends or credited as fractional units.
Advantages of Liquid ETFs
No credit risk: They invest in tri-party repo on government securities and treasury bills.
Attractive returns: They provide returns in line with money market interest rates.
No duration risk: Money is redeployed daily.
Saves time and costs: No need to transfer money from bank to brokerage account.
How to Invest in Liquid ETFs
Liquid ETFs can be bought and sold like any other stock on a stock exchange. Most brokers offer margin as high as 90% on these units.
Conclusion
Investing in liquid ETFs can be very attractive for traders planning for a short break. They save time, costs, and provide peace of mind.
The past six months witnessed a significant surge in financial markets, propelled by heightened investor enthusiasm. However, this rapid ascent has led to inflated valuations, particularly in mid and small-cap stocks. Consequently, there has been a 7-8% correction in index levels, with some stocks experiencing more substantial declines. The benchmark Nifty 50 recorded its worst month in 2023, losing nearly 3% in October. Given the recent rally and increased market volatility, investors are advised to exercise caution, especially in small-cap allocations.
Volatility as a Constant in Investments
Volatility remains an ever-present factor in the investment landscape, influenced by various macroeconomic factors. Despite recent corrections, the possibility of a 5-10% further drop cannot be discounted. Recognizing this unpredictability, savvy investors are reassessing their portfolios to manage risks while identifying opportunities.
Shift Towards Large Caps: Stability Amidst Turbulence
In response to market instability, a growing strategy involves reallocating investments toward large-cap stocks. Large caps, having underperformed compared to mid and small caps in recent years, present relatively more reasonable valuations. Investors often turn to the stability, global reach, and established business models of large-cap companies during turbulent market phases. The current trend suggests that large caps might serve as a sanctuary, providing stability in uncertain times.
Mutual Funds: A Strategic Approach
Amidst market shifts, mutual funds continue to be a favored choice for diversification and professional management. October saw a surge in net SIP additions, reaching a record high. SIPs, constituting a larger share of inflows, indicate a structural shift. The resurgence of large-cap funds aligns with broader market recovery. Balanced advantage funds and multi-asset funds emerge as strategic choices to navigate market challenges.
Balanced Advantage Funds: Dynamic Asset Allocation for Risk Mitigation
These funds offer flexibility in dynamically allocating assets between equity and debt, allowing adjustments based on market conditions. As market volatility increases, these funds can strategically shift to a more conservative approach, safeguarding investors’ capital.
Multi-Asset Funds: Diversification Across Asset Classes
Multi-asset funds take diversification a step further by investing in various asset classes, including equities, debt, and sometimes alternative investments like gold. In the current environment, with geopolitical concerns impacting markets, these funds provide unique advantages. They offer exposure to assets like gold, historically acting as a hedge during adverse events.
Gold as a Hedge in Multi-Asset Funds
Gold, a traditional safe-haven asset, tends to rise during financial market turbulence. Multi-asset funds, with allocations to gold, provide a strategic advantage. In times of uncertainty, gold serves as a hedge against adverse event risks, enhancing the overall resilience of the investment portfolio.
Micro, Small, and Medium Enterprises (MSMEs) play a pivotal role in India’s economic growth, requiring funding for establishment and expansion. The Government of India has launched various schemes to provide credit to MSMEs, recognizing their significant contribution to the economy.
Pradhan Mantri Mudra Yojana (PMMY)
Launched by the Hon’ble Prime Minister, PMMY offers loans up to ₹10 lakh to non-corporate and non-farm small or micro-enterprises. Classified under MUDRA loans, it provides crucial financial support through refinancing to banks, microfinance institutions, and NBFCs.
Prime Minister’s Employment Generation Programme (PMEGP)
A merger of PMRY and REGP, PMEGP focuses on generating self-employment opportunities for unemployed youth and artisans through micro-enterprises. Executed by the Khadi and Village Industries Commission, it provides financial assistance with a maximum project cost of ₹25 lakhs.
Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT MSE)
Established by the Ministry of MSMEs and SIDBI, CGTMSE provides credit guarantee support to MSMEs, eliminating the need for third-party guarantees or collateral. It covers up to 85% for Micro Enterprises and encourages private sector investments.
Credit Linked Capital Subsidy Scheme (CLCSS)
CLCSS offers a 15% subsidy for technology upgradation in MSMEs, facilitating the induction of state-of-the-art technology. It aims to enhance the competitiveness of MSMEs by providing subsidies on institutional finance up to ₹1 crore.
Equity Infusion for MSMEs through Fund of Funds
Addressing the equity shortage for MSMEs, this scheme encourages growth and listings on stock exchanges. The government supports VC or PE firms, providing leverage of ₹50,000 crore for private sector investments in viable MSMEs.
Credit Guarantee Scheme for Subordinate Debt (CGSSD)
Supporting stressed MSMEs, CGSSD helps promoters infuse funds into units to maintain debt-equity ratios. It offers a 90% guarantee for sub-debt, with a 7-year moratorium on principal repayment.
SIDBI Make In India Loan For Enterprises (SMILE)
Facilitating ‘Make in India,’ SMILE offers soft loans and term loans for MSMEs to meet debt-equity ratios. Emphasizing financing smaller enterprises, it aids both new and existing MSMEs in seizing growth opportunities.
MSME Business Loan for Startups in 59 Minutes
Ensuring swift processing, this online portal offers automated approval for MSME loans within 59 minutes. Eligible businesses, whether GST registered or not, can secure loans ranging from ₹1 lakh to ₹5 crores with or without collateral.
MSME Loan Scheme by Banks
Banks and financial institutions provide term loans and working capital loans to MSMEs, supporting daily operations and capital expansion. These schemes offer varied interest rates and conditions, with many providing collateral-free options.
In collaboration, government initiatives and banking schemes aim to empower MSMEs, fostering growth and sustainability in India’s dynamic business landscape.
During Diwali or other occasions, individuals may receive cash gifts, prompting questions about tax implications. According to Section 56(2)(x) of the Income Tax Act, 1961, if the aggregate cash received as gifts exceeds Rs. 50,000 in a financial year without consideration, it becomes taxable under ‘Income from Other Sources.’
Tax Exemption Threshold and Implications
To simplify, if an individual receives cash gifts, either from one or multiple sources, exceeding Rs. 50,000 in a financial year, the amount surpassing this limit will be taxed at the applicable slab rates for that individual. However, if the aggregate cash gifts remain below Rs. 50,000, there will be no tax implications.
Employee Gifts: Additional Considerations
It’s crucial to note that if an employee receives cash gifts from an employer, the entire amount, even if below Rs. 50,000, becomes taxable under ‘Income from Salary.’ Additionally, gifts in kind (vouchers, hampers, tokens) received by employees with an aggregate value exceeding Rs. 5,000 in a financial year are subject to tax as a perquisite under the ‘Salary’ category. Gifts in kind below Rs. 5,000 are exempt from tax, as per Rule 3(7)(iv) of the Income Tax Rules.
Navigating Diwali Gifts and Tax Compliance
In summary, individuals can receive cash gifts up to Rs. 50,000 in a financial year without incurring tax obligations. However, exceeding this limit triggers tax liability, emphasizing the need for careful consideration and compliance with applicable rules, especially in the context of employer-employee relationships.
Following the Reserve Bank of India’s (RBI) decision to increase the risk weight on unsecured lending, including credit card receivables by banks and non-banking finance companies (NBFCs), borrowers are likely to face higher equated monthly installments (EMIs). The interest rate hike will be more pronounced for individuals with a credit score below 750, potentially leading to stricter terms and conditions for obtaining credit cards or personal loans.
Current Interest Rates and Implications
Currently, interest rates on personal loans range from 10.5% to 17%, while credit card rates vary between 36% to 45%. The elevated risk weight may prompt lenders to reduce the supply of unsecured loans, particularly those perceived as higher risk, as they will need to allocate more capital to cover these loans.
Impact on Borrowers and Lenders’ Response
Individuals seeking personal loans may find it challenging to secure favorable terms, and even eligible borrowers may face increased scrutiny. Lenders, especially those with a higher exposure to unsecured advances, are expected to recalibrate their priorities, potentially impacting borrowers with elevated costs.
Expert Perspectives and Competitive Market Dynamics
Adhil Shetty, CEO of Bankbazaar.com, notes that banks with significant exposure to unsecured loans may react more sharply. However, the competitive market may drive lenders to explore various channels, including retail investors, to acquire low-cost funds.
Online Lending Apps and Supply of Unsecured Loans
Online lending apps may respond to the altered risk weight by increasing interest rates to maintain profitability in the competitive market. Borrowers are advised to stay informed about any changes and regularly review their financial situation for informed decisions.
Impact on NBFCs and Credit Cards
The RBI’s measures could potentially reduce the supply of unsecured loans by NBFCs and credit cards, depending on how banks reassess their strategies in response to the risk weight adjustment.
In conclusion, the RBI’s move is expected to have widespread implications, influencing interest rates, loan availability, and borrower eligibility in the unsecured lending landscape. Borrowers are urged to stay vigilant and informed about evolving market dynamics.
