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Tax on alcohol: More states to follow Delhi's 70% special corona fee on liquor

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Taxes on liquor are the low hanging fruits for states battling with revenue constraints on the back of a nationwide lockdown due to coronavirus.

After the Delhi government levied a Corona fee of 70% on the MRP of the liquor sold, the Andhra Pradesh government has also increased taxes on liquor by 50% to 75%. Earlier, Rajasthan government increased the taxes on liquor and beer by 10 percentage point. The maximum tax on liquor in Rajasthan is 45%.

Others might follow suit given the state governments face tremendous scarcity of resources owing to outbreak of coronavirus and the resultant lockdown. Since taxes on liquor are outside GST, the states have the authority to change the rates without seeking permission from a central authority like GST Council.

Revenue from taxes on liquor accounts for 15-25% of states' own tax revenue. In case of Delhi, the state expects to mop up Rs 6,300 crore from taxes on liquor out of its estimated own tax revenue of Rs 44,100 crore in 2020-21. In the previous year, Delhi is likely to have collected Rs 5,500 crore from liquor alone.

The 70% corona fee will be big boost for Delhi government tax collection. It is still not known if the special Corona fee is just a short-term levy or it will be extended for the whole year.

In case of Andhra Pradesh, the state raised around Rs 8,300 crore in the previous financial year through taxes on liquor sale.

Rajat Bose, Partner, Shardul Amarchand Mangaldas and Co, says "Tax on liquor is a low hanging fruit at the moment for state governments to garner revenue, which has otherwise dried up in light of the economic lockdown. Given the massive queues in front of liquor shops since yesterday, the state government can hope for a robust collection of taxes in the immediate future which can be channelised for funding the growing demand for testing and health care services during these times."

Tax on liquor, which is also called state excise, helped states mop up close to Rs 1.7 lakh crore in the previous financial year. This year, total collection through state excise could cross Rs 2 lakh crore. Alcohol is not part of the Goods and Services Tax (GST), and hence states have authority to decide the rate of tax to be levied on alcohol.

Any rate changes under GST have to be approved by the governing body -- the GST Council -- and the rates under GST are uniform across states

Amul eyes 15% growth in FY20 despite coronavirus pandemic

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GCMMF, which markets dairy products under Amul brand, expects its turnover to grow 15 per cent this fiscal year from Rs 38,550 crore in 2019-20 despite economic slowdown caused by the nationwide lockdown to control coronavirus outbreak.

The household consumption of milk and other dairy products is expected to rise and will compensate any temporary loss of sales caused by closure of hotels, restaurants and cafeterias (HoReCA segment) during the ongoing lockdown period, said R S Sodhi, the managing director of Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF).

Coronavirus effect: Air passenger traffic likely to log 30% negative growth in FY21

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Air passenger traffic is expected to log a 30 per cent negative growth during this fiscal from earlier estimate of a 20-25 per cent negative growth amid coronavirus pandemic, ratings agency CARE Ratings said on Tuesday. The agency also expects the airfare to rise in the wake of the social distancing norms.

All domestic and international commercial passenger flights are suspended since March 25 for the lockdown till May 3, as of now. "CARE Ratings earlier had given a call of negative 20-25 per cent growth during FY21 in terms of airlines passenger growth rate, but given the increase in cases, its rapid spread and with more undetected clusters getting converted into corona hotspots, the tenacity of the end of the pandemic is uncertain and is showing no signs of abating," the agency said in a note.

Noting that even as a vaccine is yet to be found, lockdowns remain the only way to slow its spread, CARE Ratings said, "we would be revising our earlier estimate and bringing it further down to a negative 30 per cent growth in air passenger traffic during FY21." The passenger volume growth stood at 13.7 per cent in the fiscal ended March 31, 2019, while it spiked 3.7 per cent during the April-February period of the last fiscal, it said.

Metros, which are the worst-affected and account for more than half of the passengers handled, the note stated, adding that Delhi Mumbai, Bangalore, Chennai, Kolkata and Hyderabad airports accounted for 63 per cent of the passengers handled in the April-January period of the previous fiscal. Airfares are also expected to increase as aircrafts may accommodate only one passenger per row in order to maintain social distancing, the note stated.

With the extension of the lockdown, the government has directed domestic airlines, most of whom had announced resumption of services in phased manner from May 4 and also started bookings, not to take any booking for domestic or international flights until further notice.

"The lockdown which is supposed to end by May 4, is most likely to get extended as the number of cases is on the rise and certain states are unable to flatten the curve of transmission. "Even post the lifting of lockdown, passenger growth will face a sharp contraction considering the inhibitions of travelling anywhere till the pandemic scare has been settled fully in the domestic regions and internationally especially on certain routes," CARE Ratings said in the note.

Moreover, with the containment of the virus in the near future, countries including India will not be issuing visas soon fearing the rise of any exigency with the entry of foreign nationals, it said, adding the Covid-19 has put a halt on major business operations which means there will be a considerable fall in income which will also discourage incurring of discretionary expenses like travelling for leisure and tourism.

Coronavirus impact: Steel demand to drop first time in 16 years in 2020; 7.7% dip expected

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Demand for steel in India is forecast to decline by 7.7 per cent at 93.7 million tonnes in 2020 as the fallout of the coronavirus pandemic will see a contraction in demand in a range of sectors including infrastructure and real estate, automobiles, heavy machinery and railways, industry body Indian Steel Association has said. This would be the first time since 2004 that steel demand would contract in a year in India.

At the start of the year, ISA had projected a demand growth of 5.1 per cent for the industry but the revision was necessitated due to the extent of the pandemic that has forced India to go into a total lockdown for 40 days.

"Economic activities have come to a standstill but are expected to restart in a staggered manner after April 20, 2020. It is expected that any kind of demand recovery will take at least another month as overcoming challenges in the form of getting migrant labourers back into manufacturing / construction zones, resetting disrupted supply chains and overcoming liquidity constraints particularly towards working capital needs, cannot be accomplished overnight," ISA said in a statement.

The forecast for almost every sector that uses steel is downcast for this year. Construction, both infrastructure development and real estate development, accounts for the major chunk of steel use, is at a dead halt and recovery is expected to be weak due to the lesser availability of migrant construction workers. Similarly the automotive sector is grappling with supply chain disruptions, both abroad and within

the country and a recovery there is not expected before the beginning of the festive season in the last quarter of the year.

The heavy machinery sector is expected to see continued decline due to weaker private investment, fragile export demand and halted projects in renewable energy, construction and mining.  The railways sector, one of the few bright spots in the last few years, is also likely to see deferment of its capex expenditures this year which will negatively affect growth in steel use.

"We expect growth in all the steel using sectors to remain in negative territory during 2020, before registering a smart recovery aided by a low base, in calendar year 2021," ISA said. "We estimate that the spread of the pandemic and subsequent lockdown will lead to steel demand declining by 13 million tons or by 12.2 percent from a business as usual scenario."

India is one of the few countries that has consistently registered a growth in demand for steel even as other economies have faltered. In the last 15 years, the country has jumped from ninth to second spot in the list of largest steel producing countries in the world. Even in this time of crisis, the decline in demand in India is likely to be much less than other nations and the recovery is likely to be faster. India is one of the only two countries along-with China that is expected to buck the trend and post a growth in GDP this year among all major economies of the world.

Industries In Rural Areas, E-Commerce Can Start On April 20

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Some industries in rural areas, e-commerce, IT and farming will be allowed after April 20, the government said today in new guidelines a day after Prime Minister Narendra Modi extended the nationwide coronavirus lockdown till May 3 and said restrictions would be relaxed after a week in the least infected parts of India. The government says it will also allow the construction of roads and buildings in rural areas and the manufacture of IT hardware to reduce the distress of millions during a prolonged lockdown to slow the spread of coronavirus. States will be responsible for ensuring that all safety and social distancing protocols are in place, the home ministry guidelines say. The exemptions won't apply to hotspots -- areas with a large number of COVID-19 cases or showing a rapid rise in infection. PM Modi extended the restrictions as India crossed 10,000 coronavirus cases despite a 21-day lockdown.

Here's your 10-point cheatsheet on New Government Guidelines for lockdown:

1. Agricultural and related activities will resume fully to generate jobs for daily wagers and others. Industries operating in rural areas will be allowed with strict social distancing norms.

2. The inter-state transport of goods, essential and non-essential items, will be allowed after April 20. Highway ''dhabas'', truck repair shops and call centres for government activities can reopen from April 20. So can manufacturing units of pharmaceuticals and medical equipment.

3. "To provide an impetus to the rural economy, industries operating in rural areas, including food processing industries; construction of roads, irrigation projects, buildings and industrial projects in rural areas; works under MNREGA, with priority to irrigation and water conservation works; and operation of rural Common Service Centres have all been allowed. These activities will create job opportunities for rural labor, including the migrant labor force," the guidelines say.

4. Manufacturing and other industrial establishments with access control will be allowed in SEZs, EoUs, industrial estates and industrial townships after implementation of SOP for social distancing. Manufacture of IT hardware and of essential goods and packaging can resume.

5. Coal, mineral and oil production will be allowed.

6. The Reserve Bank of India, banks, ATMs, capital and debt markets as notified by SEBI and insurance companies will also remain functional, to provide liquidity and credit support to the industrial sectors.

7. The supply of milk, milk products, poultry and livestock farming and tea, coffee and rubber plantations will resume.

8. The government said the digital economy is critical to the services sector and national growth, so e-commerce, IT and IT-enabled services, data and call centres for government activities, and online teaching and distance learning are all permitted activities.

9. Important offices of Central and State Governments and local bodies will remain open with required strength.

10. All air, train and road travel, educational institutions; non-essential industrial and commercial activities, hotels, cinema halls, shopping complexes, theatres stay closed. Social, political and other events, religious centres and gatherings will also not be allowed.

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