Daily Financial News Analysis – 27th August’20

Table of Contents

GST Compensation

GST Council is expected to be a stormy one
States are set to clash with the Centre on the issue of delayed compensation payments.
Many states have opposed the idea that that states should themselves borrow from the market if the Centre is unable to pay GST compensation because of revenue constraints.
The Centre is yet to pay the first instalment of GST compensation to states for the current financial year.
These are typically paid out on a bimonthly basis.
It paid about ₹1.65 lakh crore to states in FY20.
States may also call for the compensation cess to be extended to 10 years from present five, ending in 2022.
States are likely to push the Centre to borrow from the market
States may also suggest that the compensation cess is levied on more products to raise funds.

The Supreme Court said the government hadn’t addressed the “plight of the people due to the lockdown” and was only “interested in business” as it had failed to take a stand on waiving interest during the six-month loan moratorium that’s to end on August 31.
The Reserve Bank of India had announced the halt on repayments to support borrowers hit by the Covid-19 pandemic and the lockdown that followed, but without any waiver of interest.
The court has given the government — which said it backs the RBI’s stand — until the next hearing on September 1 to clarify its own view on the matter.
“The problem has been created by your lockdown. You cannot be interested only in business and not in sufferings of the people,” said the three-judge bench led by justice Ashok Bhushan on Wednesday.

Nearly a month after reintroducing import curbs on TV sets, the government has not granted import licences to any company, setting the stage for a shortage of premium large-screen TV sets during the upcoming festive season.
Four industry executives said the big global television makers — Samsung, Sony, LG and TCL — had all applied for import licences, but none of them has received a permit yet.
This segment accounts for just 5-6% of the Indian TV market by volumes. But its value share is 15-18%.
The Chinese-owned firm has been accused of being a threat to US national security by the Trump administration.

Kevin Mayer joined TikTok in June after leaving his role as Disney’s head of streaming services.
TikTok was given 90 days to be sold to an American firm or face a ban in the US.
Both TikTok and Chinese messaging app WeChat face bans in the US as tensions rise between Washington and Beijing over a wide range of issues including national security concerns about Chinese tech firms.
President Trump’s executive order prohibits transactions with TikTok’s owner ByteDance from mid-September.
The firm has gone to court to challenge the ban.

41st meeting GST Council meeting is likely to deliberate on various proposals to raise funds for the states facing revenue shortages.
Several states such as Delhi, Bihar, Punjab, etc. have requested the GST Council to consider mobilizing funds by levying maximum possible cess on sin goods such as cigarettes, pan masala, and aerated drinks.
While there is no doubt that tobacco products do not merit any concessional tax rate, any ad-hoc increase in GST rates or compensation cess on selective tobacco products such as cigarettes is likely to produce negative results for the industry as well as the economy.
Tobacco at its core is agricultural produce
Cultivated in more than 13 states and is a source of livelihood for 47.5 million people
Tobacco farmers have been consistently highlighting for successive years that the yield of Flue-Cured Virginia (“FCV”) tobacco has declined despite there being no decrease in consumption of tobacco in India.
One of the major reasons for such decrease in the production of FCV is the reduced demand of the produce by the manufacturers on account of a year on year increase in taxes.