For the first time, the Finance Ministry has started sending letters to service tax, customs and excise duty defaulters asking them to come clean on certain dubious transactions carried out by them.The letters are being issued by two lead intelligence agencies under the Finance Ministry -- Directorate General of Central Excise Intelligence (DGCEI) and Directorate General of Revenue Intelligence (DGRI) -- and Commissionerates of Service Tax and Central Excise, spread across the country, officials said.The DGCEI is sending the letters to service tax and excise duty defaulters and the DGRI is issuing these correspondences to suspected customs duty evaders, they said.The letters are being sent to an entity or an individual to seek clarification on a financial transaction, red flagged by economic intelligence agencies as black money or seen as an attempt to dodge authorities from paying taxes, carried out by them, they said.The number of letters issued to the entities were not immediately known.It is for the first time that such letters have been issued to indirect tax defaulters, a senior Finance Ministry official said, adding that the Income Tax department has been issuing such letters to direct tax dodgers.The Finance Ministry has decided to go after about 12 lakh service tax assesses who had stopped filing returns. The Ministry officials are also focusing on top 100 excise duty assessees in the country to ensure that there is no evasion towards the indirect tax collection kitty.There are 1.2 lakh excise duty assessees across the country. Whereas, there are 17 lakh registered assesses under the service tax.The aim behind sending such letters is to remove bureaucratic hassles and develop faith in people about tax authorities, the officials said.Under this process, those getting the letters need not to appear in person before the tax authorities but need to furnish information on the queries sought from them.Chidambaram had advised DGCEI and DGRI to consider issuing polite letters to entities, reported in a Suspicious Transaction Report (STR) issued by the Financial Intelligence Unit (FIU)-- an agency tasked with analysing and disseminating information relating to dubious transactions.An STR involves a transaction of Rs 10 lakh and above, which gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime and black money.The officials said a person or company on receipt of such letters can attach relevant documents as proof against a suspected transaction, earmarked by FIU or other intelligence agencies, while writing back to the authorities.The Finance Ministry feels that sending these letters will help in checking tax evasion and result in more voluntary filing of returns by such dodgers.The Finance Ministry had from May this year implemented one-time amnesty scheme--Voluntary Compliance Encouragement Scheme (VCES)--for service tax defaulters to pay their dues without any penalty or late payment charges.The Finance Ministry has set indirect tax collection target of Rs 5.65 lakh crore for 2013-14, up from Rs 4.73 lakh crore in the last fiscal.The idea to send such "polite letters" is the brain child of Finance Minister P Chidambaram, they said. (PTI)
Read More
The rupee slumped to a record low near 69 to the dollar on Wednesday, 28 August, on growing worries that foreign investors will continue to sell out of a country facing stiff economic challenges and volatile global markets.The pummelling in markets sent the rupee reeling 3.7 per cent to an all-time low of 68.85 with the unit closing just a touch off that, at 68.80/81 per dollar, its biggest single-day fall since October 1995.It closed on Tuesday at 66.24/25.In absolute terms too, the 256-basis-point fall in the rupee was the biggest ever.An assault on the psychologically key 70 level now appears imminent, as intervention from the central bank seen mid-morning only gave the rupee a brief respite.In the stock market, state-run Life Insurance Corp, which was spotted buying shares, allowed the domestic benchmark index to erase steep early losses and end the day stronger."If steps are not taken to implement the reforms necessary to tackle the structural issues, the government will be left with the so-called '3D options': debt default, devaluation, deflation," said Angelo Corbetta, head of Asia equity for Pioneer Investments in London."In India, devaluation is happening now and deflation could be about to start. The good news is that the debt default is highly unlikely."Foreign investors have sold almost $1 billion of Indian shares in the eight sessions through Tuesday - a worrisome prospect given stocks had been India's one sturdy source of capital inflows in the first half of 2013.If more foreign investors throw in the towel, traders fear it will put the country in a vicious cycle in which the hit to confidence in turn slams shares and the currency even harder.Policymakers have consistently struggled to come up with steps that can convince markets they can stabilise the rupee and attract funds into the country despite extraordinary measures last month by the central bank to drain liquidity and action to curb gold imports and cut India's huge oil import bill.Rising Oil Prices, Fed Fears Amplify PressureIndia badly needs foreign capital as it struggles with a record high current account deficit, growing fiscal pressures and an economy growing at the slowest in a decade.The failure to address India's economic challenges is becoming an increasing source of tension at a time when fears of a possible U.S.-led military strike against Syria are knocking down Asian markets, with the prospect that the Federal Reserve will soon end its prolonged period of cheap money further raising concerns.At the same time, rising domestic bond yields threaten to raise borrowing costs across the already slowing economy, while global prices of oil and gold - the country's two biggest imports - have surged this week."The end game for the current decline would be the day the rupee stops falling, alongside government measures like a substantial diesel price hike," said Samir Arora, a fund manager at Helios Capital in Singapore.BNP Paribas on Wednesday slashed its economic growth forecast for India for the fiscal year to March 2014 to 3.7 percent from its previous 5.2 per cent - the weakest growth since 1991-92 when India buckled under a balance of payments crisis that required a loan from the International Monetary Fund."India's parliament remains toxically dysfunctional with little, if any, business conducted," BNP said."And, with next year's general election looming ever nearer, the government's willingness to instigate a politically unpopular fiscal tightening is close to nil."India is due to post April-June gross domestic product data on Friday, with analysts estimating the economy grew at an annual rate of 4.7 per cent, roughly in line with the previous quarter. It will also post July federal fiscal deficit figures.Lacking ConfidenceThe rupee has plunged more than 20 per cent this year, by far the biggest decliner among the Asian currencies tracked by Reuters.India's main National Stock Exchange index fell as much as 3.2 per cent, although suspected buying by LIC led the index to recover in the afternoon.Foreign investors are paring equity positions, having sold a net $3.6 billion in stocks since the start of June, but still their net purchases so far this year total nearly $12 billion.Among the blue chips that fell the most on Wednesday were Axis Bank Ltd and ICICI Bank Ltd, a concern given foreign investors had so far largely held on to their investments in lenders, owning more than 40 per cent of each.In bond markets, foreign investors have sold more heavily, with outflows reaching nearly $4.6 billion so far this year.Yet the government has so far failed to provide a coherent response, analysts said. Its approval of infrastructure projects on Tuesday was trumped by concerns about the fiscal deficit after India's lower house of parliament this week approved a Rs 1,35,000 crore ($19.6 billion) plan to provide cheap gain to the poor.In its latest initiative, the government late on Tuesday proposed setting up a task force to look into currency swap agreements, a measure analysts said could bring some relief if carried out in time by reducing market demand for dollars or other major currencies."Let's see what the authorities do, but if the government can come out with some really big currency swap arrangement with some countries, that can be a strong positive," said Uday Bhatt, a forex dealer with UCO Bank in Mumbai.(Reuters)
Read More
Gold prices zoomed to a record high of Rs 34,500 per ten gram with a biggest ever single day surge of Rs 2,500 in opening trade in bullion market on Wednesday, 28 AUgust, amid the rupee hitting historic low of 68.75 a dollar.The current upsurge surpassed its record price of Rs 32,975 per ten gram, set on November 27 last year, with its biggest ever single day surge as panic-striken investors rushed to purchase gold as a safe haven during current financial crisis when forex and equity melting fast.The rupee has been witnessing an unprecedented plunge in its value as it dropped to an all-time intra-day low of 68.75 per dollar today, while the BSE benchmark Sensex also declined sharply."The bullion demand has got a boost as the rupee hit fresh record low and equities tumbled, leaving no place for investors but to park their funds in gold as a safe-haven," Surender Jain, Vice President, All India Sarafa Bazar told PTI.He said the yellow metal climbed to over three-month high in global markets as speculation that the US could lead military action against Syria within days spurred investors' demand for a haven.A Delhi-based bullion merchant Rakesh Anand said the outlook for gold is bullish as dollar-priced metal moving hand-in-hand with forex market and shifting of investors funds from melting equities."Gold will have more upward strength in coming days keeping in view the approaching festival and marriage season," Anand said.The gold in Singapore, which normally set price trend on the domestic front here, dropped by 0.3 per cent to 1,419.55 dollar an ounce.Traders said a steep rise in gold prices on the Multi Commodity Exchange in early trade today further supported the uptrend, indicating more demand for the precious metals in coming sessions.(PTI)
Read More
Indian-American South Carolina Governor Nikki Haley has said that she is keen on working with Indian private sector to help set up manufacturing facilities in her home state.Haley said India has made great strides in manufacturing and technology and she would welcome Indian industrialists to set up facilities that would help create more jobs in South Carolina."I am in touch with Indian Ambassador to the US Nirupama Rao in this connection and hopefully very soon something would turn out," she told PTI.Haley, who is seeking another term as governor, encouraged fellow Indian-Americans to run for elected office in large numbers to make a better America and give it back to the nation that helped shaped their destiny.The contribution of Indian-Americans in the field of medicine, law, academics, science and technology was phenomenal and now its time for them to serve the nation entering politics, she added."We have to see how much our parents have sacrificed in this country and how much our parents went through in the formative years. Its only our generation could push beyond what they did and make our voices heard as well in the right corridors of power," she said.She also lauded Indian-Americans for running in elections in different states at different levels.She was born inBamberg, South Carolina, to anIndian Sikhfamily who immigrated from Amritsar in North India.Haley is the first woman to serve as Governor of South Carolina. At the age of 41, Haley is theyoungest current governor in the United States.(PTI)
Read More
India's potential tax cut on iron ore exports could double its shipments of the steelmaking ingredient in the current year compared with industry estimates, though volumes will be far off peaks hit four years ago as mining bans in key states remain. An export tax cut would mark a shift in India's policy towards iron ore, a raw material it has so much of but has opted to conserve for its domestic steel industry. India is likely to drop the duty on iron ore exports to 20 per cent from 30 per cent, government officials said, as Asia's third-largest economy exhausts ways to boost foreign currency inflows and arrest a steep fall in the rupee, which is hammered to new lows nearly everyday. If that goes ahead, India's annual iron ore exports may rise to almost 20 million tonnes, even if mining remains banned in Goa and parts of Karnataka, said H.C. Daga, president of the Federation of Indian Mineral Industries. Without the tax cut, India's exports are only forecast at less than 10 million tonnes for the year ending next March, said Daga. With exports in major producing states Goa and Karnataka still banned amid a crackdown on illegal mining, volumes from India, previously the world's No. 3 shipper of iron ore, could remain well below the record high of more than 117 million tonnes seen in 2009-2010, limiting the impact on the global supply chain and on prices. "Certainly volumes will rise. If the impediments to exports are softened or are done away with, then definitely it will improve the competitiveness of India's exports," said Daga. "Once an international buyer gets an indication that the worst is over in terms of policy, more orders will happen." India exported 18 million tonnes of iron ore in the year ended March 2013, down about 70 per cent from a year ago. The massive drop followed a mining and export ban in Goa, the country's top iron ore exporting state, in September last year. In Karnataka, the third-biggest exporting state, shipments had been banned since July 2010 and mining, which was banned by the Supreme Court in 2011, has only resumed in 13 of a total 115 mines. The decline in India's exports allowed top suppliers Australia and Brazil and smaller producers from South Africa and Iran to sell more to China, the biggest market. Overseas Vs DomesticBulk of the exports may come from Odisha, India's eastern state that is the biggest producer of iron ore and whose output is forecast at 65 million tonnes for the current fiscal year. In Odisha and Jharkhand, there are about 80 million tonnes of iron ore fines lying in mines, said Daga, some of which could be exported if the duty is reduced. Current global iron ore prices were seen as supportive of exports. "We have a good requirement of iron ore from the domestic market but with 20 per cent duty and the current exchange rate and the fact that iron ore prices are on the $135-$140 level, there could be a momentum towards exports," said an official with an Odisha-based miner who declined to be named. From about 1.5 million tonnes in July, iron ore exports from Odisha could rise to 2 million tonnes a month, or at an annualised rate of 24 million tonnes, estimates Gunjan Aggarwal, senior consultant at CRU in Mumbai. At current global iron ore prices of around $120 a tonne, free on board, for the benchmark 62 per cent grade, exports fetch Rs 2,600 excluding the 20 per cent duty and the railway freight cost, higher than the domestic selling price of around Rs 2,200, said Aggarwal. Goa, which produces mostly low-grade iron ore fines, exported nearly all of its annual output of more than 43 million tonnes before mining was banned. Karnataka exported about 25 million tonnes a year before the curbs were implemented. An export tax cut would suggest the Indian government is bent on reviving exports after efforts in the past three years to keep more iron ore at home to boost its steel industry. "Now that they're talking about a 10 per cent cut in duty means that they are changing their thinking given the tough times that we're seeing," said CRU's Aggarwal. (Reuters)
Read More
The government has decided to set up a task force which will look at the possibility of having currency swap agreements with key trading partners, a move which would help in bridging current account deficit. The 11-member task force would include representatives from the the commerce ministry, department of economic affairs and financial services, RBI, SBI, CII, Ficci and exporters body FIEO. "In view of the rising trade deficit and consequent CAD, a need has been felt to examine the role of Currency Swap Arrangement/ Agreements in order to suggest a possible mechanism to address the issue. It has been decided to constitute a Task Force," an official statement said. The issue came up for discussion during the meeting of Board of Trade which was chaired by Commerce and Industry Minister Anand Sharma. The Task Force examine various types of such arrangements and their implication for Indias trade and financial system besides studying the pros and cons of such pacts the country's commerce. It would also explore the possibility of Currency Swap Agreement between India and identified countries and make recommendations accordingly. "The Task Force may submit its recommendations to the Department of Commerce in four weeks," it said. Currency swap agreements involve exchange of one currency for another currency. A dollar swap arrangement would help India support the rupee. Swap agreements in US dollar is expected to provide confidence to the market and prevent excess volatility in financial and foreign exchange markets. Currency swap has emerged as an important derivative tool after the global financial crisis of 2008 to hedge the exchange rate risks. India has signed currency swap agreements with Japan ($15 billion) and Bhutan ($100 million). China has shown active interest in entering into such an agreement with India, but it is yet to be signed. (PTI)
Read More
The rupee tumbled to an all-time intra-day low of 65.72 per dollar on heavy month-end demand of the US currency from importers and banks amid sharp fall in the local equity market.
Read More
Indian gold futures jumped more than 2 per cent to hit a record high as a drop in the rupee to a record low made imports expensive. The most-traded gold for October delivery on the Multi Commodity Exchange (MCX) hit its peak at Rs 32,526 rupees per 10 grams, breaching its last record hit in November last year. (Reuters)
Read More
The rupee weakened to 65 to the dollar in opening trade, not far from its record low of 65.56 reached last week, as the lower house of Parliament approved a plan worth nearly $20 billion to provide cheap grain to the poor.The Food Security Bill is a key part of the ruling Congress party's strategy to win re-election.The partially convertible rupee was trading at 65.21/25 per dollar at 0904 India time (0334 GMT), sharply below its close of 64.30/31 on Monday, 26 August.The benchmark 10-year bond yield dropped 4 basis points at open to 8.30 per cent as the central bank announced an open market purchase of bonds but soon edged higher, tracking weakness in the rupee.(Reuters)
Read More
Retail prices of onion in the national capital remained high today at Rs 70 a kg due to lower supplies in the wholesale market. Traders said the wholesale prices of the kitchen staple are ruling firm at Rs 45-50 per kg as supplies from producing regions have been lower in the past couple of days. "Supply continues to be below normal, due to which prices are high," Onion Merchant Traders Association President Surendra Budhiraj said. At present, about 40-50 trucks are entering the market as against 60-70 trucks earlier, he added. Street vendors charge anything between Rs 55 and Rs 70 for one kg of onion in Delhi, depending on the locality and quality of the bulb, a key ingredient in most food items. In a bid to ease high onion prices -- a politically sensitive issue -- cooperative major Nafed has been asked to import onions to boost domestic supplies. The vegetable's prices recently touched Rs 80 a kg. Organised retailer Mother Dairy is selling onions at around Rs 50 per kg through its 400 Safal outlets in the NCR. Nafed is offering a price of Rs 40 per kg through its 5 outlets and mobile vans. At Lasalgaon in Nashik district of Maharashtra, a major producing region, prices have risen by Rs 3 per kg to Rs 43 per kg today, and supplies have come down to 3750 qunitals from 4,249 quintals last week, according to National Horticulture Research and Development Foundation (NHRDF) data. "Prices will remain high as farmers and traders are going to keep supplies under stress to maintain high level of onion prices," a senior official of NHRDF said.(PTI)
Read More
