Buyer can retain AI arm’s ground-handling business across 76 airports for 7 years, instead of 3 years
In take-off mode: The attempt to privatise AIATSL was launched in February but has met with several delays. AP
The government has revised a contentious clause in the ground-handling regulations to enable the sale of Air India’s subsidiary, Air India Air Transport Services Limited (AIATSL), allowing the new buyer to retain its businesses across 76 airports for seven years.
The attempt to privatise AIATSL, one of the few profitable entities of the national carrier, was launched in February but met with several delays after interested bidders raised queries about the tenure of assured business from Air India, grandfather rights of the ground-handling company at 76 airports it provides services to, severance package for employees and the like.
As per the Airports Authority of India Ground (Handling Services) Regulation, 2018, the new buyer of AIATSL can enjoy grandfather rights for ‘thirty six’ months, which has been changed to ‘eighty four’ months, according to a senior official of the Ministry of Civil Aviation. The gazette notification is likely to be issued soon. “The issue of AIATSL’s grandfather rights was a deal-breaker and the government’s decision to change the ground-handling rules is a deal-maker,” one of the interested bidders said.
A senior representative of another ground-handling firm said the move was “definitely a good change.”
The Ministry has also revised the definition of ground-handling agency, which will now be an entity “with distinct and independent existence at the airport” providing ground-handling service. This is expected to discourage manpower suppliers from bidding for business, which was a practice until 2017.
Stumbling blocks remain
However, some stumbling blocks still remain.
Interested players would like some assurance from the Airports Authority of India (AAI), which owns more than 100 airports, on the terms of bidding for ground-handling operations at its airports as and when it floats a fresh tender as well as how many ground handlers it would allow at the same airport.
Ground-handling operators are wary after the AAI made an effort last year to award new contracts and shortlisted players who had promised steep royalties, making AIATSL unviable for private players as they would have to match quotes provided by their competitors at each airport.
AAI later cancelled the whole process.
‘Higher export credit limit is a positive’
The GST rate reduction and corporate tax rate cuts will enhance ease of doing business, boost exports and make India more competitive with respect to neighbouring countries and attractive as an investment destination, said Pramod Kumar Agrawal, Chairman, Gem and Jewellery Export Promotion Council (GJEPC).
More importantly, the stimulus will bring cheer to the trade constituents and industry on the eve of the festival season, he said.
“It is the right signal to send to the world especially on the eve of the Prime Minister’s visit to the U.S., which is the biggest export market for the gem & jewellery industry,” Mr. Agarwal said.
Silver, platinum to gain
Similar to gold, now silver and platinum will also get GST exemption when supplied by nominated agency for export purposes. The rate of GST on cut and polished semi-precious stones has been reduced from 3% to 0.25%.
“This move will reduce the burden of working capital blockage and enable exporters to compete in international markets,” Mr. Agarwal said.
The government has granted exemption from GST/IGST at the time of import on silver/platinum by specified nominated agencies; and supply of silver/platinum by specified nominated agency to exporters for export of jewellery.
Diamond India Ltd (DIL) has been included in the list of nominated agencies eligible for IGST exemption on imports of gold/ silver/platinum so as to supply at nil GST to jewellery exporters.
In terms of job work service, the GST Council has reduced the GST rate from 5% to 1.5% on supply of job work services in relation to diamonds.
“The measures will provide impetus to the sector, help upscale manufacturing and augment exports of gems & jewellery from India,” he said.
“The government has given a positive stimulus to the economy and the industry that are facing challenging times due to a slump in global demand and also due to low domestic consumption,” he added.
Mr. Agarwal said most MSMEs including those in the gem & jewellery sector would now be eligible for priority sector credit benefits and this was a very positive development for the industry.
Export credit limit has now been enhanced to ₹40 crore from the earlier ₹25 crore and this will have a positive impact, Mr. Agarwal added.
These funds must hold 20% of net assets in liquid assets
Liquid assets shall include cash, government securities, T-bills and repo on government securities. Reuters
As part of its attempts to strengthen the risk management framework for liquid funds, the Securities and Exchange Board of India (SEBI) has made it mandatory for such funds to hold at least 20% of its net assets in liquid assets while mandating an exit load on investors that exit within seven days of making an investment.
“Liquid funds shall hold at least 20% of their net assets in liquid assets. For this purpose, liquid assets shall include cash, government securities, T-bills and repo on government securities,” stated a SEBI circular issued on Friday.
In case the exposure in such liquid assets falls below 20% of net assets of the scheme, the fund house will first have to meet the 20% norm before making any further investments.
The capital markets watchdog has also barred liquid funds and overnight funds from parking money, pending deployment, in short-term deposits of scheduled commercial banks and also debt securities having structured obligations (SO rating) and/or credit enhancements (CE rating).
Debt securities with government guarantee, however, have been excluded from such restriction.
While imposing an exit load on investors exiting the scheme within seven days of making an investment, the regulator has directed industry body Association of Mutual Funds in India (AMFI) to prescribe a minimum exit load on a graded basis.
The new norms will be effective from April 1, 2020.
Some States oppose the taxing of prize money
The Goods and Services Tax Council has referred the matter of horse racing and how it must be taxed to a Group of Ministers, even though the Fitment Committee had made its recommendations clear to the Council, said persons aware of the development .
The Fitment Committee had, in its meeting on September 7, recommended the GST on horse-racing should be payable only on commissions and not include the prize money.
“The States of Tamil Nadu, West Bengal, and Karnataka raised the issue at the Fitment Committee meeting and said that the fact that prize money was currently being taxed under GST was leading to much more illegal betting,” the persons said. “Karnataka recommended that only the commission should be taxed, in line with international standards, which the Fitment Committee agreed to.”
The GST Council’s meeting on Friday, however, was mostly spent deliberating rate changes on a variety of products, and so was running short of time by the time the agenda item of horse racing came up. Due to paucity of time, only two Ministers were able to speak on the issue.
“West Bengal’s Finance Minister Amit Mitra made the point that lotteries and casinos were different from horse racing,” the persons added.
“The Telangana Minister also spoke on the issue.”
Game of skill
The horse racing community has repeatedly made representations to the Finance Ministry saying that horse racing was a game of skill while lotteries and casinos were games of chance, and so the two should be taxed differently.
The GST Council, however, decided to refer both horse racing and lotteries/casinos to the GoM, and Union Finance Minister Nirmala Sitharaman instructed the GoM to come back to the Council with its recommendations as soon as possible.
Manufacturing, real estate sectors may witness ‘good’ times
Finance Minister Nirmala Sitharaman’s decision to bring down corporate tax rate from 30% to 22% [effective tax rate from 35% to 25.2%] will spur economic growth and lead to capital formation, according to industry captains.
“The sharp cut in corporate tax is one of the biggest reforms undertaken by the government. The measure will boost the manufacturing and real estate sectors as well. This will help in the growth of the economy.
“The saving in corporate tax will provide growth capital for the industry which will be a booster for the economy. Corporate sentiment-wise, it is positive,” said Kamal Khetan, chairman and managing director, Sunteck Realty Ltd.
Rajiv Agarwal, managing director and chief executive officer, Essar Ports Ltd., said the move is good for India and the corporate sector.
“It will help new investments to come in. It will enable companies to plough back the money for capital formation.
“The move shows that the government is keen to bring down taxation to international levels,” he said.
“This big bang reform will kick-start the economy. Surplus funds available to companies will be invested in capex and talent. In a climate of global slowdown, this reform will make India an attractive destination for FIIs (foreign institutional investors) and long-term investors.
“The announcement has brought parity to India’s corporate tax rate compared to that of advanced markets thus making it very competitive,” said Ajay Piramal, chairman and managing director, Piramal Enterprises.
“This will lead to improvement in profit margin and capital investment across sectors. This will also help manufacturing companies to make new capital investment.
“The overall demand scenario will improve,” said Vijay Mansukhani, managing director, MIRC Electronics which owns the Onida brand.