Sunday, August 20, 2017

India’s refined palm oil imports to fall as duty change makes crude palm cheaper


India’s refined palm oil imports are likely to plunge in the next marketing year, industry officials said, as changes in trade tariffs make imports of crude palm oil cheaper, a boon for refiners previously hit by cheaper imports of rivals’ goods.

Indonesian and Malaysian refiners, which ramped up capacity to cater to India’s demand, are likely to come under pressure due to the decision by India, the world’s biggest palm oil importer, to widen the import duty gap between refined, bleached and deodorized (RBD) palm olein and crude palm oil (CPO).

In a move designed to protect domestic farmers, India last week doubled import duty on CPO to 15 percent, and raised the levy on RBD palm olein by 10 percent to 25 percent. The move widened the gap in duties between refined and crude palm oil to 10 percent from 7.5 percent previously.

“We expect a significant shift from imports of RBD palm olein to CPO due to the hike in duty differential,” said Dinesh Shahra, managing director of Ruchi Soya Industries, a leading Indian refiner. “Share of CPO in total palm imports is expected to rise to over 90 percent from 69 percent last year.”

If the change is good news for Indian refiners, reactions among exporters suggest concern.

“It’s not going to be easy now, there will be an impact where refiners will be getting a lot of the blow,” said an upstream manager with a Malaysian plantations company, speaking on condition of anonymity.

India’s imports are traditionally dominated by crude oils which are then refined for the domestic market. But moves by Indonesia and Malaysia to put higher taxes on exports of crude palm oil than refined products – an effort to promote domestic refining industries – made imports of refined products cheaper for India.

The changes allowed refined palm oil to corner 31 percent of India’s total palm oil imports in 2015/16 year ended in October, up from 17.4 percent a year ago in 2016/17 and just 3.6 percent in 2006/07.

“We believe that (palm) prices are likely to be more biased towards the downside once…the increase in import duties in an important market like India work its way through,” said Sunny Verghese, chief executive of Olam International Ltd..

Since the duty change, some Indian importers have already begun requesting sellers to replace refined palm shipments with CPO, said Sandeep Bajoria, chief executive of the Sunvin group, a Mumbai-based vegetable oil importer.

In the first nine months of the current marketing year started on Nov. 1, India has imported 6.74 million tonnes of palm oil, including 2.2 million tonnes of refined palm oil.

Palm oil’s share in India’s total edible oil imports has been falling consistently due to competition from rival soyoil and sunflower oil. In 2015/16 palm’s share fell to 58 percent from 80 percent in 2012/13.

After the recent duty changes, crude soy oil now attracts 17.5 percent duty, lower than 25 percent for CPO, which could encourage imports of soyoil, dealers said.

“Regular demand will always be there but because soyoil duty is less, buyers may switch to soy,” said one Kuala Lumpur trader, who declined to be named.

Arun Jaitley urges states to lower VAT rate on petroleum products used for manufacturing


Finance Minister Arun Jaitley has requested states to evaluate the possibility of reducing the Value-Added Tax (VAT) rate on petroleum products used for manufacturing products that attract GST, in a bid to end any disruption in the cost.

In a letter to state chief ministers, Jaitley said that concerns are being raised by the manufacturing sector regarding the rise in input costs of petroleum products due to transition to Goods and Services Tax (GST) regime from July, finance ministry said in a statement.

“The Union Minister of Finance Arun Jaitley has written to State Chief Ministers urging the States to reduce burden of VAT on petroleum products used as inputs in making of goods after the introduction of GST,” the statement read.

Five petroleum products–crude oil, natural gas, aviation turbine fuel, diesel and petrol–have been not been included in the GST framework in order to alleviate the concerns of states’ revenue loss.The date of inclusion of these commodities will be communicated by the GST Council at a later date.

Exclusion of these five items from GST has led to some disruption in costing of goods and has hit industries such as oil and gas and steel. Input taxes paid on the output of, say, natural gas or crude oil will not receive the credit, thereby, increasing the tax burden.

Before the implementation of GST from July 1, petroleum products as well as the final goods produced, attracted VAT. Therefore, input tax credit of petroleum products being used as inputs by manufacturers was allowed to varying extent by different states.

After July 1, the manufactured goods have come under the ambit of GST, while the inputs of petroleum products used in the manufacturing, attract VAT, which will bear the risk of cascading of taxes.

“In the pre GST regime, certain states had lower rate of 5 percent VAT on compressed natural gas used for manufacturing of goods. Some states also had lower rate of VAT on diesel being used for manufacturing sector,” the statement said.

Form to claim past credit under GST expected from tomorrow


GST tax portal is likely to offer from tomorrow forms to claim credit on sales made before the rollout of GST which the taxpayers have to file by August 28, a government official said today.

As GST return forms did not have a column for claiming transitional input credit, the government yesterday gave some breather to such taxpayers by giving them an extra week till August 28 to file returns.

These taxpayers will, however, have to pay taxes by August 20 on the portal of the GST Network (GSTN)- the IT infrastructure provider for the new indirect tax regime.

While GSTR 3B is the form for filing GST return, TRANS I is the form in which the businesses will have to give the details of credit that they are claiming for payment of taxes before the rollout of GST.

“The transitional form is almost ready and we are working to upload it by tomorrow so that businesses can start filing TRANS I,” a senior revenue department official said.

Yesterday, the finance ministry had said the TRANS I form will be available on the GSTN website from August 21.

Giving relaxation to the businesses that need to claim transitional input tax credit, the ministry yesterday allowed them to deposit taxes on the basis of self-assessment by August 20, but gave them one more week till August 28 to file return.

The taxpayers who do not claim any transitional input tax credit will have to necessarily pay tax and file return in Form 3B before the due date of August 20.

Over 71.30 lakh excise, service tax and VAT payers have  migrated to the GSTN portal. Also, 15 lakh fresh registrations have happened on the portal.

For an easy compliance, the GST Council has allowed businesses to initially file their returns on self-assessment basis in the first two months of the GST rollout.

So, GST returns for July and August will be filed on GSTN portal by filling GSTR 3B form. Return filing commenced on August 5.

Debtors will have to service their debts or make way for someone else: FM


Finance Minister Arun Jaitley sent out a loud and clear message on bad loan resolution for defaulting debtors to service their unpaid loans and preserve the value of the assets.

“If a debtor has to survive, he will have to service his debt or he will have to make way for somebody else. I think this is the only correct way by which businesses would now be done and this message has to go loud and clear,” Jaitley said at the National Conference on Insolvency and Bankruptcy organised by the Ministry of Corporate Affairs.

He added that if the debt isn’t paid, there is an effective alternative mechanism by which you exit or you take in a partner and some alternative mechanism by which business can be saved.

“The ultimate object really is not liquidation of assets, the ultimate object as a preference will have to be to save these businesses, get either the existing promoters with or without new partners or new entrepreneurs to come in and make sure that these valuable assets are preserved,” the minister said.

Speaking about the Insolvency and Bankruptcy Code (IBC), which has set a timeline of 180-270 days for resolution of the mammoth non-performing assets (NPAs) on the banks’ balance sheets, Jaitley said, “One thing is very clear. The old regime by which the creditor would get tired chasing the debtor and end up recovering nothing is now over…I think this (IBC) has significantly reversed the defaulting debtor-creditor relationship.”

Jaitley highlighted that conventionally, Indian courts have two standards. “When timelines are laid for executives, they (courts) normally maintain these are binding. When timelines are meant for judicial institutions, courts have conventionally held that these are only directory,” he said.

According to him, some of the existing laws aimed at NPA resolutions have not been able to achieve their objective.

“You had insolvency laws in the state which were almost ineffective. You had a provision in the Companies Act which provided for commercial insolvencies and a remedial action but was an extremely slow-moving process that would result in some form of settlement in court,” Jaitley said.

The Sick Industrial Companies Act (SICA) experiment, he said, was an absolute failure. He said that while SICA was brought in with an idea that sick companies would be revived, but ended up providing borrowers an iron curtain and disallowing lenders to make recoveries for indefinite periods.

On the workability of the IBC in resolution, Jaitley said, “Insolvency Resolution professionals will have to remain detached, they will have to avoid conflicts of interest, have to be extremely objective…Speed will help in the effective implementation of the law.”

On improvements required further, Jaitley stated that 9-10 months may be too short a period to have a knee-jerk reaction on what improvements are required. “We will have to wait for an additional period of time,” he added.

Commerce ministry holds 60 outreach programmes on GST


The commerce ministry has organised over 60 outreach programmes since July 1 for members of trade and industry on issues related to the Goods and Services Tax (GST), an official said today.

It has also established GST cells in all public sector undertakings including MMTC, STC, PEC and India Trade Promotion Organisation (ITPO), which come within the ministry’s purview.

The whole aim is to disseminate all information related to GST to all the stakeholders, said the official, who did not want to be named.

Besides these state-run firms, the Directorate General of Foreign Trade (DGFT) here and its different regional offices too have set up a GST facilitation cells to resolve issues of exporters and importers.

All the senior officials of the ministry and customs authorities are attending those outreach programmes being organised by Federation of Indian Export Organisations (FIEO) and different export promotion councils, the official said.

Although the ministry is taking steps to help exporters deal with issues related to indirect tax regime, FIEO has demanded resolution of their concern pertaining to liquidity crunch.

“Besides high cost of credit which has been blunting the competitive edge of our exports, restriction on inter-state job work from unregistered suppliers are also some of the other major issues which should be looked into by the government,” FIEO President Ganesh Kumar Gupta has said in a statement.

He added that the order booking position from October onwards is not very promising and increasing pressure on liquidity under GST may affect exports in the last quarter of 2017.

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