Hitting the GST hurdle

Experience is the name the wise give to their mistakes. Through lessons learned from Modvat and later from VAT (which are also based on the same concept of tax credit, as in GST), it would be simple, even now, to gauge what GST would bring about.CAG audits on Modvat revealed huge evasion, while one of the Collectorates had listed 13 ways that companies were taking wrong credits. The CII had also reported about the failure of Modvat. The VAT generated rampant evasion to the extent of even 50% in 11 of the 23 States, where audits were carried out in 2010. Other undetected wrongdoings and many unrevealed cases of harassment would add further to this sorry state of affairs.

RV’s advice

Anticipating all these, well-meaning experts had already forewarned about complex multipoint levies with input tax credit at each stage, as in Modvat, VAT and GST. The then President, Mr. R. Venkataraman (also former Finance Minister) had stated, even in 1986, that for our country, only single-point taxation would be necessary. To those who still advocate GST , one may ask, “Then, why was VAT of 1995 in Maharashtra abandoned soon and why was Modvat christened as Madvat?”GST would actually bring forth even greater problems. These have already begun to show as tips of a large iceberg — business climate being affected badly, fall in exports and other difficulties, including conditions in complex notifications (such as GST notification 41/2017), which cannot even practically be fulfilled. For July, on transitional credit refund claims alone, as much as ₹65,000 crore had been claimed. Highly questionable, it is also practically impossible to check every claim. Unbridled ‘sophistication’ and hi-tech requirements only make things worse.

Besides, the need for countless documents, returns, formats, GST-1, GST-2, certified copies, subsidiary invoices etc., has prompted the Trade Confederation to term GST ‘a nightmare’.

The root of the problem

It would only be clear that the way-out is not through merely lowering tax rates.Things will not ‘settle down’, but would only go from bad to worse. With regard to VAT, the protests alone came down after some time, as many tax payers endured what could not be cured; while many learned to become street-smart to outsmart this ghastly tax regime, through collusion with tax officials and evading tax, through remaining within the exemption limit. They were also freed of audits and did not have to answer show-cause notices. Ethics and tax compliance were sacrificed for sheer survival.

The above also explains why, in the GST regime, many opt for exemption through fragmenting their business, and persuading their suppliers and buyers to do also so. For, if they opt to pay duty under composition scheme, there would be a break in the GST chain.Same is the case with service providers, who too would choose not to pay service tax through splitting their units or by undercutting the value of their clearances. Thus, unwittingly though, they would also pay far lesser income tax than what they would willingly have done otherwise.

A very important reason for the price rise, which has constantly followed Modvat, VAT and also the present GST, is the inherent uncertainty. Faced with the prospects of having to pay huge amounts demanded after protracted and costly litigation, many would choose to increase prices for obtaining greater profits, to be kept as reserve. This uncertainty is also revealed in the ‘disclaimer’ in several FAQs, stating that replies are only for guidance and do not hold any legal validity.

The grey areas are so vast and deep that even higher forums of appeal cannot judge with any certainty, let alone FAQ answers or ‘Suvidha providers, GST kendras’ etc., conceived of in this drama of pretence and make-believe.

All of the above underlines the truth that evasion and aberrations can never be checked by making statute and procedures elaborate and stringent. The arbitrariness, which these would generate, only serve to promote a far stronger culture of ‘permit raj’ and greater loopholes.

The solution lies through single-point GST levy, with simple statute, procedures and documentation and a tariff with broad-based headings for goods and taxing only organised services. Adam Smith stipulated four ‘canons’ for a good taxation system — equality, certainty, convenience and economy.

Guided by these and also by our own well-meaning experts, a truly ‘Good and Simple Tax’ should replace the present one, which, indeed, is highly grotesque and cruelly ‘sophisticated’!


GST, a work in progress

The introduction of the Goods and Services Tax (GST) raised much hope that it would herald the emergence of a ‘good and simple tax’ with ‘one nation, one market, one tax’. However, there has been considerable concern with the new tax, both in its structure and operational details, including the ease of paying the tax and filing returns. Trade and industry have been grappling with the problem of payment, filing the returns and claiming input tax credit, and exporters have been facing liquidity crises as the zero-rating of the tax has not worked and refunds have not been forthcoming, with difficulty in filing returns. Of course, the GST Council has been quite responsive to tweak the structure and operational details to make it simpler. Yet, considerable work needs to be done to ensure a smooth transition and to reap the revenue and productivity gains to the economy.

History of GST

Introduction of the GST is an important reform and is a standard policy recommendation for every country going in for the structural adjustment programme of the International Monetary Fund. This has been a major money spinner and a source of productivity gain. According to Michael Keen, of over 165 countries which have adopted GST in one form or another, only five have repealed it (Belize, Ghana, Grenada, Malta and Vietnam), but have reintroduced the tax later. The GST has taken centre-stage in many countries and is considered important in view of the competitive reduction in corporation tax rates due to high mobility of capital. It is also true that there is no “one-size fits all” GST and each country has to adopt the structure depending on political bargains and operational feasibility. It is a major reform, and even as every country makes a lot of preparations before it is introduced, it takes time to smoothen the rough edges and settle contentious issues.

International experience shows that some features of the reform are inherently desirable. It is important not to have too low thresholds. In fact, reasonably high thresholds will reduce the compliance burden to a large number of small businesses without much impact on revenue. Richard Bird and Pierre-Pascal Gendron, after a detailed examination of a number of countries adopting GST, suggest that in developing countries, a threshold closer to $100,000 would eliminate 75% of the taxpayers with a revenue loss of less than 4%. (See Bird and Gendron, The VAT in Developing and Transitional Countries, Cambridge University Press, 2007). Another desirable feature of a successful GST is to have fewer rates. Multiple rates create classification problems, are harder to administer and would require the general rate of tax to be higher. It would also invite a lot of lobbying by special interest groups. Third, it is important to prepare well before the plunge. Most countries take at least two years to prepare for the introduction of reform to ensure a smooth transition. This is particularly necessary for developing and testing the technology platform, educating the tax collectors and tax payers and to avoid any anomalies in the structure of the tax.

The Indian version

In the Indian context, given that the reform had to be evolved by taking into account the views of 29 States, two Union Territories with legislatures and the Union government, compromises are inevitable and it is impossible to expect the structure of the tax to be ideal. As stated by Bird and Gendron, some bad initial features may be an essential compromise to get the tax accepted in the first place.

It would have been preferable to evolve the structure with two rates, one lower on items of common consumption and another general rate on consumer durables and luxuries. Notably, given that the VAT in the earlier regime had predominantly two rates, it should have been possible to convince the States of the need to fix the GST rates at two rather than four. In addition, the levy of three rates of cesses has further complicated the structure. Having four tax rates and three rates of cesses should have been avoided. As mentioned above, multiple rates create problems of classification, inverted duty structure and large-scale lobbying. It enormously complicates the technology platform to ensure input tax credit mechanism. It therefore appears desirable to move immediately towards three slabs with the final goal of reducing the slabs to two. It would also have been desirable for the “fitment committee” to evolve the rates by thinking afresh instead to merely adding up the excise and VAT rates to fit the item to the nearest rate decided. This is particularly relevant in the case of commodities which are predominantly inputs as in the earlier VAT regime they were placed in the lower rate category. Hopefully, the GST Council will act soon on this.

Raising the threshold

As mentioned above, expert opinion based on international experience shows that there is much to be gained by having the threshold at reasonably high levels. As mentioned above, international experience is that a threshold closer to $100,000 would eliminate 75% of the taxpayers and the sacrifice in terms of revenue would be less than 4%. Moreover, it is the small businesses which produce and trade in commodities and services which are predominantly consumed by low income groups and therefore, keeping the threshold high would be desirable from the viewpoint of equity as well. Considering this, going further, it may be desirable to fix the threshold at ₹50 lakh. The revenue loss will be minimal but ease of doing business will be high. The inclusion of petroleum products in the GST base will depend on mainly the revenue gains from the reform. Nevertheless, it is a desirable objective and the GST Council must act on it. International experience shows that including real estate may not be easy.

Steps ahead

There is some concern that the revenues from GST in the past few months are somewhat below expectations. Things could improve as the new changes bring in stability and technology platform stabilises. Hopefully the implementation of GST may help in augmenting income tax as well.

Strong political commitment, to implementing the reform, thorough advance preparation, adequate investment in tax administration and taxpayer services, extensive public education programme, support from business community and good timing of reform are the important pre-requisites for successful implementation of the GST. It is also important to note that problems of transition to a major tax reform are unavoidable and most countries go through this. In this regard, the approach of the GST Council must be commended for being receptive to the concerns of businesses and in dealing with the glitches in technology. Some of the noise heard is also due to the fact that all traders, in one way or the other, are brought into the formal sector. That hurts some. The GST Council has recognised that it needs to carefully calibrate the reform until the desired goal of a Good and Simple Tax is realised. Hopefully the GST Council will keep the goals clear and consider the reform effort as a work in progress.

C. Rangarajan is former Chairman of the Economic Advisory Council to the PM and former Governor, RBI. M. Govinda Rao was member, 14th Finance Commission, and is Emeritus Professor, National Institute of Public Finance and Policy


GST, WB rank, Moody’s upgrade major events of 2017′

Implementing the GST, the improvement in India’s World Bank ease of doing business rankings, the sovereign rating upgrade by US agency Moody’s and bank recapitalisation all contributed to make 2017 a historic year, the Finance Ministry said on Monday.Besides, the cleansing of the financial system instrumentalised by demonetisation as well as the reversal of the deceleration in GDP growth in the second quarter ended September, following five consecutive quarters of decline, were listed as the other major achievements by the Ministry during the calendar year.”One year after the landmark move to cleanse the economy of black money, the successes of operations after demonetisation continued with high denomination notes brought down by 50 percent of value in circulation, 50 lakh new bank accounts opened to enable cashless transaction of wages, 26.6 percent increase in number of taxpayers added and 27.95 percent increase in number of e-returns filed, 2.24 lakh shell companies were struck off and undisclosed income worth Rs 29,213 crore detected and admitted,” an official statement said.

“Enhancing the quality of life remained primary goal for government when it put into implementation the recommendations of the 7th Central Pay Commission to benefit more than 48 lakh Central government employees,” it added.The Ministry recalled that during the year, Moody’s Investors Service upgraded India’s local and foreign currency issuer ratings after a hiatus of nearly 14 years, while the country also climbed by 30 places to reach 100 in the World Bank’s latest ease of doing business rankings.The Goods and Services Tax (GST) rolled out from July 1 is a “transformational” reform which overhauled the indirect tax system in place since Independence.The Ministry also said the government has constituted a task force last month to review the Income-tax Act and “draft a new direct tax law in consonance with economic needs of the country”.Moreover, on the revenue front, the Centre has raised a total of Rs 52,389.56 crore in the current fiscal through disinvestment till December 15.

The second quarter GDP figures show a “reversal of the deceleration trend”, the statement said.”The real GDP growth data for the second quarter of fiscal 2017-18 showed growth at 6.3 percent, a substantial increase from 5.7 percent in the first quarter,” it added.Other major “accomplishments” listed by the Ministry, include the institutionalisation of the Monetary Policy Committee of the Reserve Bank, the decision to phase out the Foreign Investment Promotion Board and India’s first International Financial Services Centre that became operational at the Gujarat International Finance Tec-City at Gandhinagar.


GST, demonetisation implementation: FMCG, white goods makers pin hope on 2018 to erase woes of 2017

Recovering from the double impact of demonetisation and GST implementation, FMCG companies and consumer durable firms are pinning hopes on 2018 that improved market sentiment will bring them back to the growth path. With the streamlining of the process after GST implementation behind them, the companies feel that the prospects of good economic growth, coupled with a revival in demand and consumption, will help them overcome the hit they took in volumes and profits in 2017. Interestingly, these firms believe that the demand should be evenly distributed between urban and rural markets. “With the market sentiment showing signs of improvement and stability returning post-GST implementation, we expect the demand scenario to move up, both in rural and urban markets,” Whirlpool of India Managing Director Sunil D Souza told PTI. Expressing similar views, Emami Ltd Director Harsha Vardhan Agarwal said retail and rural businesses have bounced back fully and are growing in healthy double digits while wholesale channel is yet to recover fully at about 80 per cent of the base. “We believe that economic reforms like GST and demonetisation would help drive economic growth in a structured way in the long term and we expect further improvement in our performance in coming quarters,” he said.

Sony India Head of Sales Satish Padmanabhan also said the industry is already seeing “positive comeback signs post the implementation of GST and expects 2018 to only be better”. Recollecting challenges faced in 2017, GCPL Business Head (India and SAARC) Sunil Kataria said, “Demonetisation was a black swan event for the Indian economy. Among many challenges, the biggest disruption was caused in the distribution network for FMCG companies.”Dabur India CFO Lalit Malik said: “In the short term, both demonetisation and GST impacted wholesale trade because of issues related to execution and led to a massive amount of destocking across the trade channel.” With the hurdles now history, the companies, especially electronic goods and appliances makers, are gearing up to bring innovative products to woo consumers to showrooms in 2018. “In 2018, we will continue to bring industry first innovations for Indian consumers with an exciting line-up of future-ready products,” said Rajeev Bhutani, Samsung India V- P, Consumer Electronics Business.

Samsung will kickstart 2018 with the world’s first innovation in the AC segment that would take the consumer convenience and comfort to the next level, he claimed. Likewise, Padmanabhan said Sony India will continue to roll out “technologically advanced products across categories in future and keep our customers engaged with Sony products”.Panasonic India is also not lagging in its plans for new products with a major transition in portfolio and positioning in the offing. “We will strengthen as a comprehensive consumer electronics maker to offer solutions that fulfils the wishes of customers while improving our individual products,” said Manish Sharma, Panasonic India and South Asia President and CEO.

When contacted, a spokesperson for LG India said, “Product leadership is the key and we will continue bringing newer technologies based on Indian consumer insights.” With the government pushing for domestic manufacturing, Sharma, who is also President of Consumer Electronics and Appliances Manufacturers Association (CEAMA), said the industry expects ratio of local manufacturing to increase, going forward.“The industry acknowledges the pro-industry reforms undertaken by the government and is looking forward to the Phased Manufacturing Programme (PMP) policy in 2018, which in turn will boost indigenous manufacturing,” he added.


GST slashed on your Restaurant bills

Eating out & ordering food much more affordable.

Particular Rate of Tax (CGST + SGST) / Composition Levy
Restaurant under composition scheme Composition levy @ 5% of the turnover *
All stand alone restaurants (Air-conditioned or otherwise) 5% (without ITC)
Restaurants in Hotel premises having room tariff of less than Rs. 7,500 per unit per day. 5% (without ITC)
Restaurants in Hotel premises having room tariff of Rs. 7,500 and above per unit per day (even for a single room) 18% (Full ITC)
Is there any restaurant where the rate of tax is 28% ? No
Rate on tax on takeaway As applicable on serving of food for consumption on premise of that restaurant
Outdoor catering 18% (full ITC)


Note : As alcoholic liquor for human consumption is outside the purview of GST, such liquor served in restaurants will attract local taxes as per state laws.

*This is an amount to be paid in lieu of tax payable by restaurants opting for Composition Scheme & they shall not collect any tax from the customer on supplies made by them.

Central Board of Excise and Customs & 
Commercial Taxes Departments of States/Union Territories 
www. cbec.gov.in, www.cbec-gst.gov.in

Parliament Winter Session begins today

The winter session of Parliament beginning on Friday is likely to be stormy with the opposition parties all set to corner the government over a range of issues like the Rafale deal, the adverse impact of GST and demonetisation on the economy, the plight of farmers and religious intolerance.

The session, which was delayed due to the Gujarat Assembly polls, is also likely to be hit by the poll outcome along with that of Himachal Pradesh.

If the BJP retains Gujarat and snatches Himachal Pradesh from Congress, the grand old party under its new president Rahul Gandhi would find it difficult to corner the government over the issues they raised during the polls.

But if the Congress wins Gujarat, even if it loses Himachal Pradesh, the opposition party would take on the government over the issues that have raised the political temperature.

The winter session, which lasts about a month, is normally called in the last week of November and concludes days before Christmas. This year, Parliament is meeting from 15 December to 5 January — with 25 and 26 December being declared holidays on account of Christmas.

Seventeen Opposition parties led by Congress, which have joined hands to put up a united fight against the ruling NDA, met on Thursday at Parliament House to chalk out the strategy to corner the government.

TMC leader Saugata Roy told IANS: “Bad impact of GST and demonetisation on economy, religious intolerance, killing of a West Bengal labourer in Rajasthan will be the major issues which we will raise in Parliament.” He said the opposition parties would coordinate over the issues to be raised and would definitely take a call on the issues pertaining to corruption.

The Opposition parties that include the Congress, CPM, Trinamool Congress, Samajwadi Party, Nationalist Congress Party, BSP, the Rashtriya Janata Dal and DMK among others, have already clarified that they will have floor coordination in Parliament to corner the government.

Congress leader KC Venugopal said that it would raise the issues like impact of GST and demonetisation, Rafale deal, linking of Aadhaar with PAN and other documents. CPI leader D Raja said: “Damage caused due to cyclone Ockhi, farmers distress, increasing hate crimes, inflation, GST and fallout of demonetisation” would be raised.

The government has convened an all party meet to discuss the agenda of the session. Lok Sabha Speaker Sumitra Mahajan will meet the leaders from all parties on Thursday evening over dinner on the eve of the session.

A bill to provide Muslim women the right to seek maintenance from the ex-spouse after divorce and another aimed to end discrimination against transgenders, among other proposed legislation, are listed for taking up during Parliament’s winter session starting on Friday.

At least 14 new bills are set to be introduced during the session, according to a list compiled by think tank PRS Legislative Research.


GST, demonetisation shock to last two more years, says Reddy

Growth levels of 7.5-8% unlikely in next 24 months’

Refusing to hazard a guess on GDP growth in the short-term given the “shocks” such as the Goods and Services Tax, demonetisation and the mountain of bad loans, former Reserve Bank Governor Y.V. Reddy said the economy needed two more years to “consolidate” and claw back to higher growth levels.

It was difficult to make a forecast on growth now or say when the economy would return to the potential growth levels of say, 7.5-8%, which is unlikely in the next 24 months, he said.

“In a shock, the negative element is front-loaded. There will be some moderation, and there can be some gains. The pain is there now, the gains will come later. How much gain and in what gap, are the issues,” Mr. Reddy told reporters.

Mr. Reddy said the economy was helped by a positive shock for almost three years following the massive drop in crude price, which he said was at a third of what it was during his governorship.

However, negative shocks such as the implementation of the GST, demonetisation of currency notes last November and also the high quantum of non-performing assets of banks have hurt the growth rate, Mr. Reddy said.

Reckless lending in the high-growth years during the previous government and certain developments in the telecom, power and coal sectors following graft charges created a lot of stress in the corporate world and left many of them over-leveraged.


GST: Centre not releasing Punjab’s share of Rs 3500 cr, says Sunil Jakhar

Punjab Congress chief Sunil Jakhar alleged today that the Union government was not releasing Rs 3500 crore share due to the state from the Goods and Services Tax (GST).

“The Union Government is not releasing Rs 3500 crore share of Punjab from GST, which has been adversely impacting the social welfare schemes of the state government,” Jakhar said in a statement.

The Gurdaspur MP alleged that the Modi government was delaying the release of GST share to non-BJP ruled states.

“Instead of building their own image among the people of the country through their works, the Narendra Modi government at the Centre wants to pressurise its opponents at any cost,” Jakhar alleged.

 He said that GST system was implemented by the Modi government in such a manner “that it has crippled the industry and the trade”.

Jakhar alleged that the Centre had proved completely unsuccessful on the economic front.

To hide its weaknesses, the Centre is now creating hindrances for the non-BJP ruled state governments, he claimed.

Source : http://www.moneycontrol.com/news/business/economy/gst-centre-not-releasing-punjabs-share-of-rs-3500-cr-says-sunil-jakhar-2452985.html

GST: Anti-profiteering becomes a board issue

MUMBAI: Anti-profiteering under the goods and services tax (GST) has gone from being a plain costing issue to one that’s worrying board members. Several directors have written to company CFOs and finance teams seeking an update on price reductions under GST, said people aware of the matter.

The government has been actively pushing companies to pass on the benefits of GST, especially after rate reductions earlier this month, and directors don’t want their companies to get caught up in complaints on this score with the anti-profiteering authority about to be established, experts said. On the other hand, they are also concerned about maintaining profitability.

Central Board of Excise and Customs (CBEC) chairperson Vanaja Sarna recently wrote to about 100 consumer goods companies regarding GST benefits being passed on to consumers. Directors in most of these companies are asking for updates on anti-profiteering, said the people cited above. Some of the queries are also being directed at tax advisors, they said.

“Anti-profiteering has become a board issue, subsequent to the letter from CBEC,” said Sachin Menon, national head, indirect tax, KPMG India. “The basic question is what will be the benchmark price that companies must take, on the basis of which reduction has to be applied.”

Tax experts said companies are also concerned about profitability. While some companies have already announced by how much prices would be slashed, it’s just beginning of a complex pricing exercise, they said.

“While passing on rate reductions to end customers is a complex task in itself, considering the specific supply chain and pricing aspects that are relevant to a business, determining input tax credits that are required to be passed on is a very intricate exercise requiring significant cost accounting expertise,” said MS Mani, partner, Deloitte India.

India’s biggest fast-moving consumer goods (FMCG) including Hindustan Unilever, Proctor and Gamble, Marico, Dabur and Mondelez told ET they have already passed on the benefits of GST by either slashing the maximum retail price (MRP) or by increasing grammage.

Insiders said many boards are planning to discuss anti-profiteering at upcoming meetings, with CFOs and tax advisors asked to make presentations along with the latest updates.

“Many companies require external assistance in order to prepare a report card documenting the steps taken and outcomes achieved in order to comply with the anti-profiteering regulations,” said MS Mani, partner, Deloitte India.

FMCG companies, especially listed ones, need to balance the expectations of investors and consumers, experts said. While being penalised for profiteering is a risk, not able to show healthy margins could backfire on the company’s stock.

“The problem for several companies is maintaining a balance between price reductions and profitability,” said an independent director with one of the companies. “It’s a reputation risk if tomorrow the government pulls up the company but if margins dip, it could reflect on investor sentiment.”

Most companies are conducting extensive product-wise analysis, having cut prices to avoid being on the wrong side of the law, said tax experts. This is mainly because there is no mechanism to estimate anti-profiteering and whether companies can deduct compliance costs from the benefits they derive from GST rate cuts.

Tax experts also said there is no guides on cutting prices.

“Most products will have fluctuating price lines depending on the season/discounts during a year,” said Menon of KPMG India. “Though boards want to adhere to anti-profiteering norms, the costing is turning out to be a nightmare for most companies as there are no parameters as to how such a complex calculation–for example, product level or entity level–could be carried out.”

As it stands today, anti-profiteering mostly mandates companies to pass on benefits derived from input tax credits or output tax due to GST to consumers. The focus of the exercise is currently on companies that directly impact consumers and not passing on benefits of GST, which could trigger inflation going ahead.

Source : https://economictimes.indiatimes.com/news/economy/policy/gst-anti-profiteering-becomes-a-board-issue/articleshow/61874451.cms

Manufacturing back in business, shrugs off GST, demonetisation blues

Stunning. That was the only word to describe the number flashing on television screens on the evening of August 31 this year. The first-quarter GDP numbers had just been released and growth had slipped to 5.7%, a three-year low.

While that in itself was shocking, what was even more stupefying was the collapse of manufacturing. Quarterly gross value added (GVA) growth for the sector slipped to 1.2% compared with 10.7% in the previous year. 1.2%!, that’s it.

Private sector growth, deduced from the data available from listed companies on the stock exchanges was even more stunning.

A negative 0.9% compared with a 10.2% growth in year-ago period! It took some time for the numbers to sink in. But when it did, the full extent of the problems in manufacturing induced by GST rollout became apparent. Businesses had stopped or sharply cut back production of goods in May-June ahead of the GST rollout on July 1. Small businesses still facing demonetisation after-effects suffered even more and that was fully reflected in the data captured by government’s statisticians.

Cut to November and the picture has changed. On Thursday, the second quarter GDP estimates were released showing a smart bounce in GDP and manufacturing. GVA for manufacturing rose 7% in the quarter compared with 1.2% in April-June, while private sector corporate growth was a healthy 11.4%. Of course, the numbers were still lower than 7.7% manufacturing growth in second-quarter of 2016/17 when the economy was humming along before the demonetisation shock in November last year. So there is a lot of room to do more. This is obviously not the best performance and one should refrain from celebrating too much or calling this a spectacular turnaround. But there is no doubt that the woes caused by GST and demonetisation, at least for big and medium manufacturers, have ebbed and that they are on the cusp of faster growth.

Consider the following: GVA for mining and quarrying grew 5.5%, the highest growth rate the sector has posted in the first-half of the fiscal year since 2015/16. Electricity, gas water supply and utilities recorded a growth of 7.6% in GVA compared with 5.1% in the year-ago quarter.

The star performer here was electricity which grew by 6.1% in July-September compared with 3.1% last year.

Commercial vehicle sales jumped 21% in the second-quarter, while cargo handled by civil aviation grew by 18.9%; railway freight growth measured by net tonne kilometres was up 5.0%. Construction has been having a bad time but second-quarter numbers show that it has actually held up quite well. Now, construction here covers cement production, consumption of finished steel. These haven’t grown as much as the previous year but the category has grown 2.6%, which is up from 2.0% growth in the first-quarter.

An interesting anomaly needs to be mentioned here and that is the discrepancy between the cement production data and the actual volume growth reported by major cement companies in the three-months ended September 30.

Almost all the big cement firms reported double-digit volume growth in the second-quarter with ACC and UltraTech volumes rising 18% followed by Gujarat Ambuja’s 12% growth. Smaller JK Lakshmi Cement too reported 10% volume growth. New capacities through mergers helped support this growth but still this is surprising as the second-quarter is generally weak for cement companies due to monsoon and dull construction activity across the country. So one shouldn’t read too much into the dip in cement production and I think a fuller analysis is needed to understand the demand conditions for cement companies.

On Thursday, we had another interesting data release and that was the performance of core industries. The eight core industries, that is cement, steel, fertiliser, natural gas, crude oil, refinery products, coal and electricity grew by 4.7%, compared with 7.1% last year. The figure was the same as previous month and the joint highest growth for this fiscal year. Once again, it shows a revival in manufacturing led by steel, refinery products, coal and electricity.

Source : https://economictimes.indiatimes.com/news/economy/policy/manufacturing-back-in-business-shrugs-off-gst-demonetisation-blues/articleshow/61871901.cms