Deepshikha Sikarwar

Raghuram Rajan discussed global economic concerns. He highlighted worries about election promises of cash transfers. He spoke about US tariffs and their impact on India. He mentioned the potential of AI and challenges from protectionism. Rajan also discussed the need for India to focus on high-skilled services.

India's import data since July is under scrutiny due to a potential miscalculation in gold imports. A transition in data portals may have led to errors, prompting a government investigation. November's gold imports were initially reported at a record high, impacting the trade deficit. Officials are examining whether gold movements within special economic zones were double-counted.

Synopsis India's import data since July may have to be recast as the ministries of finance and commerce & industry look into the sudden spike recorded in imports of gold. Officials from both ministries will hold discussions this week and next to examine the issue. India's import data since July may have to be recast as the ministries of finance and commerce & industry look into the sudden spike recorded in imports of gold. Officials from both ministries will hold discussions this week and next to examine the issue. Transmission of data from the special economic zone (SEZ) portal to the Indian Customs Electronic Gateway (Icegate) may have led to calculation errors in the case of gold. Officials ruled out a similar issue with any other commodity. “SEZ Online was merged with Icegate in July,” an official said. “We will examine the import data since then, and it could be recast.” Another official said, “We are checking if there are errors related to this transition. Sometimes, there are flaws when we shift to a new system. So, all imports (numbers) will be checked if that is the case.” A similar issue had surfaced in 2011, when over-reporting of export data on account of mis-classification, as well as double counting due to problems in the computer software, had led to the recast of systems at the erstwhile DGCEI. The Directorate General of Central Excise Intelligence is now the Directorate General of GST Intelligence (DGGI). India's exports rose 2.17% to $284.31 billion, and imports by 8.35% to $486.73 billion, during April-November, according to data released on December 16. The trade deficit widened to $202.42 billion, from $170.98 billion in the year-ago period. Another official said it was likely gold imports to SEZ warehouses and movement to the domestic tariff area had been double-counted. Any product entering India's territory through filing of bills of entry at Customs is counted as an import. Any movement of gold within the country for use in SEZs, export-oriented units (EOUs), or the Gujarat International Finance Tec-City (GIFT City) for subsequent domestic sales should not figure in total import calculations. Separate data on gold imports by free trade warehouses at GIFT City have been shared with the Directorate General of Commercial Intelligence and Statistics (DGCIS) since May 2023 and it needs to be seen how errors may have crept in. The commerce and industry ministry on Wednesday ordered a probe into the data. Official data released on December 16 had showed that gold imports in November touched an all-time high of $14.8 billion, widening the trade deficit to a record $37.84 billion. Imports increased 27% year-on-year to a record $69.95 billion, while exports contracted 4.85% to $32.11 billion. The commerce and industry ministry releases trade data every month that doesn't include gold imported by the Reserve Bank of India. This gets included in the capital account. The industry said the rise in value doesn't imply a rise in volumes. “It's pertinent to understand that the increase in value doesn't necessarily translate to a significant rise in physical volumes,” said Vipul Shah, chairman of the Gem and Jewellery Export Promotion Council (GJEPC). In FY24, India imported 795.25 tonnes of gold valued at $45.54 billion, while in the current fiscal year, it imported 658.21 tonnes in April-November, valued at $49 billion. “The rise in value terms can best be attributed to the nearly 30% rise in the gold price and also the decline in the gold price in November after Donald Trump's election,” he said. India's annual gold imports have historically fluctuated between 650 and 1,000 tonnes on-year for the last 10 years, and the current trend of April-November 2024 aligns with this pattern. Shah said India's gold imports do not appear headed toward 1,000 tonnes. Imports of petroleum, crude and products rose 7.88% in November to $16.11 billion, while in the first eight months of the fiscal, they were $123.26 billion, up 7.15% from the year earlier. Domestic petroleum, oil and lubricants consumption accounts for about 73.6% of total local production and imports of crude oil and petroleum products make up the rest.

States urged the Centre for increased interest-free loans, greater capex scheme flexibility, and a higher borrowing limit to boost their economies. They also requested disaster relief funds, Jal Jeevan Mission assistance, and state-specific infrastructure projects. The finance minister highlighted increased devolution to states under the 15th Finance Commission.

Synopsis The GST Council is contemplating exempting gift vouchers from GST and reducing tax rates on insurance premiums. They are also considering an 18% GST on used cars, including electric vehicles, and a potential 35% slab for sin goods. However, states have differing views on these proposals, requiring further discussion. India could spare gift vouchers, offered by companies, particularly in the retail sector, from the levy of Goods and Services Tax (GST), said people with knowledge of the matter. The GST Council, the apex decision-making body for indirect tax, is likely to take up several issues, including the tax on gift vouchers and insurance products, besides increasing the levy on used cars, including electric ones, to 18% from 12% now. It's also likely to clarify the levy of tax on food delivery apps and flavoured popcorn. Union Finance Minister Nirmala Sitharaman, who arrived in Jaisalmer on Friday, will chair the 55th meeting of the council on Saturday. A government official familiar with the deliberations said the law panel under the council had recommended that gift vouchers be covered under the definition of prepaid instruments recognized by the Reserve Bank of India (RBI) that are used as a consideration to settle an obligation. They would thus fall under a category that can't be taxed under GST. In cases where the vouchers are not treated as a consideration, these would be “actionable claims” and still not be treated as a supply of goods or services, according to the law panel. Tax experts said this will resolve past disputes. Bipin Sapra, partner at EY, said, “The clarification that transactions in vouchers are not liable to GST will put to rest all disputes regarding the nature of vouchers, and confirm that vouchers are mere instruments and not supplies in themselves.” The retail sector had asked the government for clarity following a ruling by the Karnataka Authority for Advance Rulings in the case of Premier Sales Corp., which held that the vouchers were goods and therefore taxable. The council could take a call on reducing tax rates on life and health insurance premiums. A group of ministers (GoM) set up by the council under Bihar Deputy Chief Minister Samrat Chaudhary had suggested exempting insurance premiums paid for term life insurance policies from GST. Health insurance premiums paid by senior citizens, as well as premiums for coverage up to ₹5 lakh paid by all individuals, could be exempted or face a reduced rate instead of the current 18%. The council is likely to discuss a hike in the tax rate on old electric vehicles. It could also debate rationalization of the tax rate for about 148 items, including raising the levy on luxury watches, pens, shoes, and apparel. Discussions could also include a separate 35% tax slab for so-called sin goods and tax cuts on food delivery platforms like Swiggy and Zomato to 5% without input tax credit, from the current 18% with credit, said the official cited. The four-tier GST slabs of 5%, 12%, 18%, and 28% will remain. The 35% levy proposed by the GoM is outside of this. However, there are wide divergences on these issues among states, a state finance minister told ET. “These issues need deeper discussion... Some states are not keen on many changes,” he said, adding some were even opposing exemption or cut in tax on insurance products. The council could give the ministerial panel looking into the future of compensation cess more time, until June 2025, to submit its report. The compensation cess, which is levied on goods falling in the 28% tax bracket, comes to an end in March 2026, and a call has to be taken on its future.

The 55th GST Council meeting in Jaisalmer deliberated on tax relief for insurance, increasing the tax rate on used EVs to 18%, clarifying the levy on food delivery apps, and potentially exempting gift vouchers from GST. A final decision on reducing insurance premiums and raising taxes on luxury items is pending, with states holding divergent views on certain proposals.

The GST council met on Saturday. It decided to not tax gift vouchers. Used cars purchased by businesses will face an 18% tax. This includes electric vehicles. The tax on fortified rice kernels is reduced to 5%. A decision on insurance product tax rates is postponed. The council clarified tax rates for different types of popcorn.

The GST Council will form a group of ministers (GoM) to explore Andhra Pradesh's request for a 1% calamity cess on luxury goods for disaster relief. This follows flooding in the state. The GoM will examine the process for such state-specific levies, considering there's currently no defined process within the GST law.

Synopsis States will receive interest-free 50-year loans for disaster-related programs, including infrastructure rebuilding and mitigation measures. An additional ₹5,000 crore incentive will encourage urban planning. The Scheme for Special Assistance to States for Capital Investment (SASCI) will provide up to 100% additional funding for eligible states, prioritizing disaster-affected districts and future catastrophe mitigation.

India is introducing Unique Identification Marking (UIM) for specific goods like tobacco to combat tax evasion. Non-compliance will result in penalties. The GST Council approved this 'track & trace' mechanism, defining UIM as a secure, non-removable digital mark. This system, inspired by the WHO protocol, will track products throughout the supply chain, detailing manufacturing information and pricing.