- 5 months ago
The GST Council Meeting will take place from September 2-4, with a lot of buzz about benefits to consumers with a reduction in tax on daily goods before the festive season begins.
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00:00Good morning and welcome to market opening on our brand new collab show between Business Today and India Today TV.
00:06It's 9am and we're here to get you ahead of the curve as markets kick off trading for the day.
00:11From the big overnight queues on Wall Street and global markets to the buzz around corporate earnings, policy moves and stock specific action.
00:19We break it all down so you know exactly what to watch out for.
00:23Stay tuned as we track the Sensex, the Nifty and the stories that will drive the market mood today.
00:28And catch us again at market closing with my colleague Sakshi Bhatra.
00:33First, let's take a look at what's hot in the corporate and the financial space.
00:37Let's kick off with the top stories.
00:40The 56th meeting of the GST Council begins today.
00:43The council, headed by Finance Minister Nirmala Sitaraman, has the finance ministers of all states as its members.
00:49The two-day meeting is expected to bring huge tax relief to the Aam Aadmi, something the Prime Minister had promised in his Independence Day speech.
00:58Gold jumps to fresh all-time highs in the global market, hits $3,547 to the ounce.
01:08That's its sixth straight day that the yellow metal has set a new record.
01:12Prospects of the interest rate cut in the U.S. and its safe haven status have pushed gold up more than a third this year.
01:19Gold was also the favorite of traders following a sell-off in equity in bond markets overnight.
01:29The Wall Street ended in red on Tuesday after a federal appeals court shot down Trump's tariffs last week.
01:35The ruling also sparked a sell-off in U.S. Treasuries and a big rise in bond yields in the U.S., U.K. and France.
01:42Google won a major legal victory with a judge sparing it from selling its Chrome browser and other harsh antitrust penalties.
01:54Judge Amit Mehta handed the big tech a rare win in its battle with the U.S. government,
01:59but ordered Google to share data with rivals to open up competition in online search.
02:05Alphabet shares shot up 8% after the ruling.
02:07Donald Trump has made it clear again he is not looking at lowering tariffs on India.
02:16It was a one-sided relationship for many years, he said, giving the example of Harley-Davidson again.
02:21The U.S. president also said he was seeking an expedited ruling from the Supreme Court
02:25on the illegal tariffs ruling by a federal court.
02:37Something interesting has been happening in the U.S. and European markets.
02:57Wall Street indices ended in red on Tuesday after a weekend on Monday.
03:01The S&P 500 fell 0.7%, NASDAQ Composite fell 0.8%, while the Dow Jones Industrial Average fell 0.6%.
03:09Now, the reason traders were nervous was after a federal appeals court ruled late last week
03:15that Trump's tariffs were actually illegal and should be suspended by the 14th of October.
03:20This also led to a big sell-off in government securities from Europe to the U.S. and now to Japan as well.
03:26Bond yields have risen sharply to near 5% in the U.S., 27-year highs in the U.K. and a 16-year high in France.
03:35Traders are nervous about several indicators from key economic data and the U.S. tariffs
03:40to Fed independents mounting debt and monetary policy and global fiscal prospects.
03:45So lots of factors that are playing into the sentiment here and really affecting what we're seeing on those global market ticks.
03:52Gold, meanwhile, extended a six-day rally to hit a fresh all-time high.
03:57We've all keenly been watching the move on the precious metal as the prospect of the U.S. interest rate cut
04:03boosted the metal's appeal and traders sought safety following a sell-off in equity and bond markets together.
04:09Gold for immediate delivery rose as much as 0.4% to hit $3,547 an ounce as markets opened in Asia on Wednesday,
04:19narrowly higher than Tuesday's record.
04:21Prices have advanced 5% over the past six sessions, underpinned by increased haven demand amid renewed concerns
04:28over the Fed Reserve's future and budget concerns in the developed world countries.
04:34Gold has also risen more than a third this year, making it one of the best-performing major commodities.
04:40Gold and silver, of course, continue to remain key investment picks right now.
04:47But let's move across to my colleague, Shailendra Bhatnagar, Chief Analyst and Editor Markets Business Today.
04:52Shail, on this move in gold, it's fantastic.
04:55But just break it down further for our viewers as to why it's shooting up.
04:59Good morning, Abha, and a very warm welcome on this wonderful show.
05:08In school, we read Shakespeare, Abha, and that wonderful line always comes back to me.
05:14All that glitters is gold.
05:16And this is exactly what is happening as far as markets are concerned.
05:22We'll see 1,06,000 rupees per tola maybe today.
05:27As you mentioned, it's a five-day rally.
05:29And both gold and silver are rising for two very sound reasons.
05:33This geopolitical issue between the U.S. at one side, China, Russia, India and other BRIC countries at the other.
05:41Plus, rising bond yields, as you mentioned, are the reasons why you have this wonderful rally in gold.
05:47And things are only going to get better and better as far as gold and silver is concerned.
05:52That's because it's safe haven't buying.
05:55Central banks are buying.
05:56You are buying.
05:57I am buying.
05:59Everybody is out to buy and save themselves from inflation.
06:03So, these are the two major reasons why gold and silver are up.
06:07And they are the top performers as far as any asset class is concerned.
06:12Things are going to get better from here.
06:14All right.
06:14So, the outlook remains positive as well.
06:16Shell, how does that impact long-term bonds?
06:22Well, Abha, that's a very interesting question that you put up.
06:27And again, there is that lovely Wall Street dictum which says,
06:32gentlemen prefer bonds.
06:33And the reason is that there is fear in global bond markets that you will see slowing growth in especially the UK,
06:44especially large parts of Europe.
06:46And of course, to some extent, India as well because of the GST REGIC and the US too.
06:53And that's the reason bond markets are sort of edgy and they are pricing in that slowing growth.
07:00They are also pricing in a cut in interest rates, especially on Wall Street.
07:06And that's the reason, Abha, that you have higher bond yields coming into not only the US, UK and other European markets,
07:15but in India too.
07:17The GST REGIC which is about to take place today may result in a minor drop in GST collections
07:23that might force the government to borrow from the bond markets.
07:28And that is what is exactly being priced in.
07:31The Indian 10-year yield has also risen from August 18th, just a day after the Prime Minister made his Independent Day speech.
07:41So both bonds, gold and silver, are in a very super bull market as far as risky assets are concerned, Abha.
07:50All right, Shail, stay with me because of course, lots of action on Wall Street overnight.
07:54But talking about some of the queues for the bond markets, as you just mentioned,
07:58and with all eyes on the GST meet, we've opened, we're seeing a gap up on the Nifty and pre-open.
08:02I'm just going to pull up some of those opening ticks for you.
08:05A marginal uptick, but almost 0.2% there.
08:09You know, with the sectoral indices, banks are still soft.
08:12But it's really the Nifty to focus on this morning to see the kind of sentiment.
08:16See, as we're watching, in fact, the ticks are moving higher as we speak right now.
08:20So clearly, Shail, I'm going to get a quick take from you there
08:22because the sentiment impact is obviously immediately playing out.
08:30Absolutely, Abha.
08:31Abha, and the reason is very simple.
08:34GST reject means lower costs for two-wheelers, four-wheelers, you know, stocks such as Hero Motors,
08:42stocks such as Aisha Motors, Tractor Maker, M&M, all of them are benefiting.
08:47In fact, look at Maruti.
08:48Small cars will become much more attractive because GST prices will come down.
08:53And as you know, since February, the government has been giving lots of sobs.
08:58So first, we had an income tax rate cut in the budget.
09:02Then we had this rejig as far as corporate taxes are concerned.
09:06And now the GST rejig.
09:08In the background, you have good monsoons.
09:11You have lower interest rates.
09:13And that's the reason why Dalal Street is super excited.
09:16Mostly auto stocks, mostly FMCG stocks.
09:19And of course, consumer durables.
09:21Abha.
09:22All right.
09:22Shail, thanks so much for that.
09:24And Auto has seen a lot of news this week.
09:27We also got Amit Khurana joining us from Dolat Capital.
09:30We're counting down to market opening now.
09:32Amit, great to have you with us.
09:33And I'm going to dissect some of those newsmakers with you in just a moment.
09:36But right now, let's keep our eyes on the pre-open.
09:39And also quickly run you through some of those other newsmakers we'll be watching out for as markets kick off today.
09:44TCS has expanded its strategic partnership with Trig.
09:47That's a leading Scandinavian non-life insurer.
09:50We've got Indus Towers that has also cleared a foray into African markets.
09:56So that's another one in the news this morning.
09:59But really, auto.
10:00And I'm just going to come back to that as markets kick off.
10:02Because we're counting down to the GST meet.
10:04We're seeing that gap up on the Nifty.
10:07Opening with a green tick this morning.
10:08And we'll wait and see how it continues through the day.
10:10I want to pull up all of those auto stocks because that's really where a lot of the action will be.
10:14At least on the Nifty 50.
10:15And then we can, of course, look at the broader markets as well.
10:18But look at the auto index.
10:20It was up about 0.5% in pre-market.
10:22We'll bring it up right now.
10:23And also bring up Hero, Aisha, Maruti, M&M.
10:27Take a look at how some of those stocks are doing.
10:29Because a lot of the focus will continue to be there as we really dissect and watch out for the action.
10:34There you go.
10:35M&M is up 1.5% right now.
10:37We're also seeing a nice green tick on TCS post the news.
10:40Zomato continues to be a strong mover today.
10:42Has been actually pretty steadily gaining through the week.
10:45ONGC is back in the green today as well.
10:47Some of the top movers for you there on your screen.
10:50Few other news makers.
10:51Let's see if they're seeing any kind of action as well from the broader markets.
10:54Wari Energy is there.
10:56They are looking at an acquisition.
10:57A 200 crore acquisition coming in.
10:59So we'll pull that one up for you in a short while.
11:01And see if that's seen any kind of uptick.
11:03And PNC Infratech has also emerged as a bidder for the development of Varanasi's Lal Bahadur Shastri International Airport.
11:10So Wari 0.8% up there.
11:13And PNC 3%.
11:14So PNC in fact, they've emerged as a top bidder for the development of Varanasi's Lal Bahadur Shastri International Airport.
11:21It would obviously be a huge positive for the stock.
11:23So Adani Power has gotten the coal ministry not to begin operations at the Raleigh Mine.
11:28That's in Singrali.
11:29Madhya Pradesh.
11:30So let's bring that up for you as well.
11:32Take a look at how it's faring on open Adani Power.
11:34And 5% uptick there.
11:37So that's also for a new mine in Madhya Pradesh.
11:40So that's the tick.
11:41Okay, 1% on an Adani Power.
11:43Yes Bank.
11:44CCI has approved an SMBC stake acquisition.
11:48So Yes Bank in the news.
11:50Lemon Tree has signed three new properties as well.
11:52Ajmer, Pushkar and plus a Keyes Light as well.
11:56So that's a lot of action there for Lemon Tree this morning.
11:59Nice green ticks coming in across the board.
12:01And MOIL has also reported its highest ever August output.
12:05So that's another one that's buzzing this morning.
12:07We'll pull that up for you as well.
12:08Let me go straight across to Amit now on the opening trades.
12:12Amit, markets are at the moment now flat again after that uptick on opening.
12:18But everyone is counting down to the GST meet and expecting a huge fillip.
12:22On the back of that.
12:23What are you watching out for when it comes to trade over this week?
12:27Especially given all the news that's anticipated.
12:31Well yeah, GST will be one of the key announcements to work from the government.
12:35This is exactly what we were talking to our clients way back in May, June, that this is
12:41one last lever which the government will possibly play out over the next few months.
12:46And this is exactly how it is shaping up.
12:48Now the fine tuning of the rates I think will be watched very closely as to what moves from
12:5312 to 5, 18 to 5 and then accordingly you will sort of realign your expectations of earnings,
13:01demand buoyancy, potential loss on the revenue side of course and other aspects.
13:06So very important announcements but sentiment-wise much more supportive of the market valuations
13:13and hopefully the consumption starts behaving better.
13:17Not wanting to sound too bullish.
13:19Let us see how it shapes up and how the consumer reacts to that entire announcement as we go along.
13:25Okay, so remaining a little cautious.
13:27Wait and watch there.
13:28But Amit, I want to bring up those auto stocks.
13:30That's really where we're going to see a huge consumption boost.
13:32Remember we're also in festive season which is always the high point for some of these consumer names
13:37especially auto and two-wheelers.
13:39I also want to bring up Ola Electric.
13:41Let's bring that up for you.
13:42A couple of other news makers there as well.
13:44We're seeing two-wheelers overall of course gaining.
13:47There has been some news on easing off on rates on hybrids while increasing taxes on those higher-end EVs.
13:55But Ola Electric of course is up almost 2% this morning.
13:58I want to get a take from you on that particular counter.
14:00Well, we don't have an official stance on it but I think the major re-rating in the last few days
14:06has been triggered by the approval of the PLI and the potential unlocking of supply chain issues.
14:13Ola has had some challenges in terms of quality and consumer perception.
14:17And some of those issues seem to be getting addressed now and therefore the level of re-rating that you're seeing.
14:22I would reserve my take on the counter especially we have to see the new launches,
14:26how they perform and how the consumer perception changes.
14:29But the broader take I think on two-wheelers, Ola included and other names included,
14:35seems to be far more supportive given that we did not see a very strong demand since the last almost 7-8 months.
14:42And with the GST cuts, the way they play out should support the demand for the traditional two-wheelers.
14:48On the EVs part, I think we have to wait and see as to which category gets impacted in whatever fashion.
14:54There is a sense that some of the 350cc, below 350cc will possibly get an advantage but we have to wait and watch.
15:02Okay. There are a whole host of other segments and before I come to the stocks and news because we are tracking GST this morning,
15:08Amit, that are likely to be impacted from the broader markets.
15:12Are there any key pockets that you've got your eye on because the key beneficiary will range from dairy to of course textiles,
15:18footwear, you know, air conditioners, cement, even some of those telecom stocks.
15:23Are there any pockets particularly that you perhaps are tracking in light of what we're expecting from those GST reforms?
15:30Well, these are all the pockets. You said it all essentially.
15:33I think the whole, the playbook that the government is going in with that the consumption has really underperformed the broader economy in the last three years.
15:41And I think if there was one move to kickstart that consumption, it was with the tax cuts which happened in February,
15:47then the rate cuts started happening and GST is the last lever.
15:50So, so all the categories that you are looking at are essentially in our focus.
15:54We believe there will be some winners, some material winners.
15:57The broader, I think, sense is that it should hopefully start a structural tailwind for consumption at large in India.
16:03So, India, the challenge has been that the wages growth has not been very healthy, but it has turned positive now.
16:09Consumer has been very, very, you know, shall I say, muted in terms of behavior.
16:15You know, you always expect the festival season to do well, but the last three years has not been really up to the mark.
16:20So, hopefully, this move by the government should give the much-needed confidence for the consumer to open the wallet.
16:26Now, we had to figure it out as to how the overall metric at the ground works out.
16:30But most of these categories are run on our radar.
16:32And one category which we believe will relatively do better is FNCG staples, which took a major print of the mutual demand.
16:39It had a rheumatoid inflation challenge to navigate, which they have done successfully.
16:44And the price pass-throughs that we went through over the last three-odd quarters, all of that is now in the valuations, in the sentiment.
16:52So, that is one segment which we have recently upgraded from a neutral stance to positive.
16:57So, we believe that that is one staple as a broader category should do relatively better.
17:01And we like that as a space.
17:04All right.
17:05Let me just bring up gold.
17:06In fact, I'm just hearing that Manapuram is now at a record high.
17:11Remember, gold is at an all-time high.
17:13Let's just pull up Manapuram and take a look.
17:16And Muthut also is just about to hit.
17:19Remember, these are gold financiers.
17:20And they're anyway been climbing along with that to move in gold prices.
17:26They can, of course, continue to give out more loans given the kind of collateral value that's increased here.
17:31There you have it on your screen.
17:33Muthut, 1.7, 1.8% higher, almost at a record.
17:37And Manapuram, I'll just bring it up for you as well once again.
17:40And again, a record high coming in there.
17:42Great news for some of these counters.
17:44Amit, what's your take and what would you advise right now in terms of a strategy when it comes to the gold financiers?
17:51Well, we will like them well through.
17:53But the valuations have re-rated very significantly.
17:55Muthut was our preferred pegs when the stock was sub-1000.
17:58And our take was driven by the quality of the book, their underwriting standards.
18:02And, of course, the tailwinds of the gold pricing.
18:04That has largely played out.
18:07They are not cheap any longer.
18:08But I think the sentiment is going to be driven by the price behavior of gold.
18:13So, therefore, I would probably refrain from giving short-term calls.
18:17But structurally, I think gold financing remains very, very well-poised.
18:20And Muthut is one of the better franchises that we prefer.
18:24All right.
18:24Great.
18:25So, that's the view coming in on Muthut.
18:26We're keeping our eye on some of those precious commodities today given the kind of levels we're seeing gold and even silver trading at.
18:34So, keep an eye there.
18:35Let me also move on to some of the other newsmakers.
18:37We've got Indus Tower.
18:39A few brokerages have given in reports on that one.
18:42CLSA says, high conviction, outperformed rating on an Indus.
18:46They've cut their target a little bit.
18:48But they're very positive on the stock.
18:50And Citi has also maintained a buy coming in there.
18:53On Indus Tower, Amit, would you have a view or a comment as to why it's looking so positive?
18:59Yeah, I think the underlying metric remains pretty favorable.
19:02You're seeing a much more visibility, stronger visibility in the business.
19:05So, we liked it all through.
19:06Of course, the valuations are now much more elevated versus the previous regime wherein we thought the valuations were pretty attractive.
19:13So, I would not call it it's a negative view, but I would probably be slightly more cautious and buy it probably at the lower levels.
19:19But we are structurally positive on the balance sheet for the franchise.
19:23All right.
19:24Just before I move ahead, Hindus and Zinc, I just want to pull that one up as well.
19:28That's the top FNO gainer today.
19:30And clearly, we are seeing silver at a record high as well.
19:34Well, like I said, keep your eye on the precious metals.
19:36A lot of action happening there.
19:38Now, it's up for the third day in a row now, Hindus and Zinc.
19:41Let me pull that up for you.
19:421.76%, but 448 is where it's trading at.
19:45Pull up how it's moved for the week as well and you'll get a sense of the kind of moves that we're seeing in that counter.
19:50It's looking fantastic right now.
19:53Again, Amit, I've got to get your quick call on Hindus and Zinc.
19:57You know, where it's at in terms of valuation.
19:586% up just in a week.
20:01Well, yeah, it underperformed.
20:02I mean, it's been one of our preferred picks exactly on this hypothesis that the percentage contribution on EBITDA from the silver segment is going to be very meaningful and it is going to drive valuations.
20:12It did not work out, but fortunately, it seems to be working out right now.
20:14But I think our broader take is that the core business is also going to perform much better over the next 12 to 18 months.
20:21And given the dividend yield being very supportive, we'll like this name.
20:25But hopefully, it should perform better from here onwards is what I would say.
20:28Okay. All right.
20:31Let's also bring in some international news or the latest on the tariff front.
20:35Donald Trump has again fired the tariff artillery at India, making it clear that he's not lowering tariffs anytime soon.
20:42However, India is also sticking to its line that talks with the U.S. are continuing with Commerce and Industries Minister hinting at a deal by November.
20:49For many years, it was a one-sided relationship.
20:55Only now since I came along and because of the power that we have with tariffs, India was charging us tremendous tariffs, about the highest in the world.
21:03We, therefore, weren't doing much business with India, but they were doing business with us because we weren't charging them.
21:08Foolishly, we weren't charging them.
21:11So they would send in massive, you know, everything they made, they'd send it in, pour it into our country.
21:16Therefore, it wouldn't be made here, you know, which is a negative.
21:19But we would not send in anything because they were charging us 100 percent tariffs.
21:24In every sense, one can see an excitement across the world to expand trading and business relations with India.
21:35We've had a little bit of geopolitical issues, overtaking trade issues in our negotiations with the United States of America.
21:54I do hope things will get back to track soon and we'll conclude a bilateral trade agreement by fall, November or so.
22:04As was discussed by our two leaders in February.
22:11We recognize that there's tremendous global turbulence.
22:18All right, continuing to stay on top of all the developing news when it comes to the tariff war.
22:23But Amit, before we let you go this morning, the top two things you're going to be watching out for in trade today.
22:28Well, I think I see expectations on how the narrative works out on the global market.
22:34Because Trump's treatment is how they're absorbed.
22:36And second, of course, the buzz that we hear from the GST meeting, GST council meeting.
22:40I think that the market will react to it if there's any buzz which comes along.
22:43How the negotiations go on.
22:46All right, so top news.
22:47That's really what we continue to track to see how it impacts sentiment.
22:51Amit, thanks so much for joining us this morning.
22:53Amit Khurana from Dholat Capital.
22:54And we're tracking markets for you as well as all the major market moving news.
23:00Before we get to, of course, the next big development and that's GST, a deep dive on that.
23:05Let me quickly touch base on the index.
23:07It's flat right now after that immediate uptick based on, you know, anticipating, of course, that big GST meet.
23:14But certain pockets, that's really where you've got to keep your eye on.
23:16We've tracked precious metals and the impact on names like Manapura, Mutthut.
23:21We've tracked Hindustan zinc, you know, with silver being at a record as well.
23:24But also look at sugar.
23:26Let me just bring up some of those sugar stocks for you very quickly.
23:28Because all of them are trending right now.
23:30There's really no exception.
23:32Remember, government has freed up ethanol manufacturing for sugar companies.
23:36Earlier, there was a cap on some kind of raw materials that could be used for that.
23:40So easing up on those ethanol reforms have led to the spike in sugar stocks.
23:43And they've been running pretty much through the day.
23:45Yesterday and now today as well.
23:48All right, I'll continue to come back to some of those market movers.
23:51But we have an entire panel lined up for you to dive deep into what is expected from those GST reforms.
23:59A major shake-up is expected, is on the cards.
24:02And we've got a two-day GST council meet starting in around 90 minutes from now.
24:07Siddharth Rabhi joining us, Karishma Asudhani, we've got Subhash Garg with us as well.
24:11And Prateek Jain to really decode what could potentially be the impact on daily essentials to luxury goods.
24:19And really what will be the impact on the markets as well.
24:23So Siddharth Rabhi, group editor of business today.
24:25Karishma Asudhani, special correspondent with all the latest updates.
24:28We've got Subhash Garg, former economic affairs secretary as well.
24:31And we have with us Prateek Jain, partner at LEADER, indirect tax as well at PwC India.
24:38So looking forward to getting into the conversation.
24:40But first, the top news on the meet.
24:46The 56th meeting of the GST council kicking off today under the chairmanship of Finance Minister Nirmala Sitaraman
24:52with state finance ministers in attendance.
24:54The two-day deliberations are expected to pave the way for major tax relief for the common man.
24:59The move comes in line with Prime Minister Modi's Independence Day assurance of easing the burden on households.
25:14Reports say the fitment committee under the GST council has cleared a two-slab rate structure.
25:19This will include rates of 5% and an 18% and a special rate of 40% for sin goods and special luxury products.
25:26The proposal also includes ending compensation, cess on items in the 28% bracket.
25:36The Indian government's industry, which employs more than 1 crore people,
25:40has warned that a hike in GST on clothes priced at above Rs.2500 will spell a death knell for the sector.
25:47Currently, the premium wear is taxed at 12%, but this may change to 18%.
25:54As Business Today exclusively reported last week,
25:59high-end electric vehicles priced between Rs.20 lakhs and Rs.40 lakhs
26:03will be charged 18% GST instead of the current 5%.
26:07The concessional rate is likely to continue for electric buses.
26:10A report by the State Bank of India has rejected claims by states that they will lose out on revenue
26:18because of the proposed rationalization of GST rates.
26:22The report says that although there may be an immediate dip of 3-4% in revenue collection,
26:27the long-term benefits will go beyond simple revenue generation.
26:30Lots of track today. We're counting down to that meet kicking off.
26:43Let me go across to Karishma first.
26:45Karishma, what are you hearing in terms of what's on the anvil?
26:49What's on the agenda for the meet?
26:51How likely are we to see some results?
26:53What will be some of the major challenges to getting this through?
27:00Karishma, we've been exclusively reporting for the past one week
27:05about what could be on the expected line of discussion at the 56th GST Council meeting.
27:11Let's not forget that this is happening right after close to nine months.
27:15The last one was in the month of December in Jaisal May,
27:19where key decisions, especially pertaining to health and life insurance of individuals,
27:25had to be taken up.
27:26The central government, of course, along with the state representatives,
27:30had then decided to put it on hold.
27:32But it is very likely that in this GST Council meeting,
27:36which is going to be convened today and tomorrow,
27:38the government is going to go for a nil GST on premiums,
27:42on health and life insurance for individuals.
27:45Besides this, definitely it is going to be the simplification of the tax slaps,
27:51which is 5% and 18% that government has now proposed.
27:56And most state ministers have, of course, supported this idea of simplifying it
28:03and bringing it to compact two rates with a special 40% rate,
28:07which will only be on sin goods.
28:09Now, a big challenge which has been highlighted by a couple of states in the last few days
28:15has been definitely on the revenue gap,
28:19which is going to come in because of this rationalisation exercise.
28:22In fact, 10,000 crores is the amount that has been flagged off
28:27in the Fitment Committee's report for just the rationalisation.
28:31Besides this, there could be more additions because of the compensation sets going away.
28:37A big decision will have to be taken by the Council in these two days
28:42on how are they going to fill this revenue gap
28:45and secondly, if there has to be an additional levy
28:48beyond the 40% special tax that they want to put.
28:53Thanks so much, Karishma, for bringing us all of those key details.
28:57Siddharth, let me set the tone for this conversation with our guests as well.
29:02You know, like Karishma mentioned,
29:03it's really where is that gap going to be filled from?
29:07How are they going to work out the compensation with states?
29:09Where are the additional levy is going to be?
29:11These are some of the key questions, really,
29:13that we're expecting to be thrashed out during this meet.
29:15Isn't that right?
29:17Absolutely, Abha.
29:18And to add to that,
29:20when will this GST rate cut come into effect?
29:24Because that's the big buzz on the street.
29:26We are already seeing signs of consumption slowdown
29:31where consumers are deferring their purchases
29:33on account of anticipated GST cuts lowering.
29:37But remember, it's a mixed bag.
29:39175 goods likely to fall as far as the rates are concerned.
29:45But a bunch of other items could move up.
29:48And in fact, if I can,
29:50let me take that question across to both Prateek and Mr. Subhashgarh.
29:54Prateek, very quickly, at this stage,
29:56your sense of what is the big key takeaway?
30:02We now understand that the government,
30:05the center is keen to push through this implementation
30:08by the first Navaratri, 21st of September.
30:12What is your own sense?
30:14Thanks, Siddharth.
30:17I think, look, this will happen soon.
30:19Now, whether it will happen on 21st of September,
30:22one is also hearing that it could happen midnight
30:24on September 5th itself.
30:28That, of course, the council will decide.
30:30But it's very clear that it will happen within next few days.
30:35In, let's say, next 10 days or so is expected.
30:39And I will not rule out the possibility of it happening
30:41from midnight on September 5th as well.
30:46Now, it's a big one because initially we were hearing
30:48that only 12% and 28% rate would be touched.
30:53On 28%, you have cement, which will go down to 18.
30:59And a lot of automobiles, particularly the smaller cars,
31:02will come down from 28 to 18.
31:04And that'll be a big one for the consumers.
31:06And, of course, 12% rate would come down to 5 on most products.
31:11You know, you have food product, fruit juices,
31:13numkines, and so many other products
31:15which will come down, healthcare equipment, and so on.
31:19But now what we're hearing is that even a lot of FMCG items
31:25under 18% could also come down to 5%.
31:30And that could mean toothpaste and shampoo
31:33and, you know, sort of hair oil and so on.
31:35And that's really the big one, right?
31:38I mean, for the common man.
31:40So, it seems like we are heading for a big bonanza
31:43for at least you and me.
31:46There will be a revenue impact, as was being mentioned earlier.
31:49And the estimates vary from 1 lakh crore to more.
31:54But the governments will have to see that, you know,
31:57how they recoup that money.
31:59Usually, when you reduce the tax rate,
32:03you know, it increases the tax base as well.
32:05So, some bit of that will come from increased demand.
32:07So, let's see how it goes.
32:09Absolutely.
32:10And, Mr. Garg, as I bring that question to you,
32:14it's clear, viewers, that we have a headline at this stage.
32:17There is some anticipation.
32:18And the latest buzz, not 21st, not the 1st Navaratra,
32:22could happen from the 5th of September midnight itself.
32:25And, Abha, clearly, let's keep an eye out
32:28for all those consumer stocks also that Prateek brought up.
32:31But, Mr. Garg, is it possible to do it 5th September midnight
32:35and sort of prevent some of the slowdown
32:38that we have been seeing in certain product categories?
32:41See, when the Prime Minister announced it from the Red Fort,
32:47he sort of touted it as a Diwali gift.
32:51Diwali is an October.
32:52So, he wanted a big gift, double Bunenja,
32:57double gift for Diwali.
32:59Now, as Prateek was also saying,
33:03that it was realized that this actually created a problem
33:06because anyone who expects the car prices to come down
33:11by 2 lakhs or 3 lakhs or something would postpone the purchases.
33:15And that, I think, gave a kind of shock to the government
33:19that this has had an unintended consequence.
33:23And therefore, I think it makes sense,
33:27absolute sense for the government to notify it as soon as possible.
33:32Now, depending upon what comes out,
33:34we are all assuming that the GST Council will have a smooth sailing
33:39and it can because the government of India
33:43and the BJP states had overwhelming majority.
33:46If they decide to go by the majority,
33:49they can stream roll and the GST Council can decide.
33:52But GST Council has been deciding based on the consensus so far.
33:57And the opposition states have made it very clear
34:00that unless they have a path forward for covering their losses,
34:04which are going to be substantial,
34:06if it comes from the Prime Minister,
34:08it can't be less than 2 lakh crores in my judgment.
34:12Nirbhala Sitaraman gave 1 lakh crore of Bunanyaanja
34:14or give away for the income tax.
34:16Prime Minister can't give you less than that.
34:19So if there is 2 lakh crore kind of hit coming to the states,
34:24states need to be covered.
34:25Now, how does it play?
34:26I expect this meeting not to be very smooth.
34:30There would be fireworks and how ultimately the government decides to go.
34:37It had happened earlier in the case of not paying the compensation
34:42or paying it by the loan.
34:44There was a big tug of war in 20 for this account.
34:48Here it can also be.
34:49So depending upon how it technically,
34:51it requires notifications by all the states and the center.
34:57I don't think it requires the amendment in the law.
35:00If the amendment in the law is required,
35:03then you have to go through the ordinance route.
35:04It might take longer.
35:06Absolutely.
35:07But since the rates are out of the main bill,
35:10Mr. Garg, you are absolutely right.
35:12And the big headline and key takeaway at this stage,
35:16apart from the possibility of a 5th September midnight bonanza,
35:21is also the number that you mentioned.
35:22Pratik, does this mean the quantum of giveaways,
35:27revenue giveaways,
35:28I won't term them as revenue losses,
35:30because if consumption goes up,
35:31it will perhaps neutralize to some extent.
35:34But how do you think the GST council will want to make up this 2 lakh crore gap
35:41or 1 lakh 50,000 crore gap?
35:44Clearly, items at the upper end,
35:46the so-called upper class consumption,
35:48are going to become pricier from a tax point of view.
35:51I think, Siddharth, they have limited revenues to increase the tax rates at this point in time.
35:57So, I think this revenue giveaway,
36:01I mean, of course, on some products, it could go up,
36:03but that will not be very material.
36:05I mean, it will not offset the revenue loss per se to a large extent.
36:11And therefore, it has to be seen as a long-term reform.
36:17Just bear in mind that when we started GST,
36:19we thought that 15% was a revenue neutral rate.
36:22We actually started with 11.5%.
36:24Now, with these giveaways,
36:25the rate could come down to below 10%,
36:28the revenue neutral rate or the average rate,
36:32which is one of the best amongst all the developed economies.
36:36Forget about developing, right?
36:37So, it has to be seen as a long-term thing.
36:41So, over a longer period, what happens is the tax rate is moderate.
36:44The tax base increases.
36:46And that's what you have to bank on.
36:48I personally don't see a lot of revenues to increase the tax rates.
36:54Might be a few products here and there,
36:55but it will not materially offset the revenue giveaway
37:00that we're talking about at this point.
37:03All right.
37:04Well, yesterday in Chennai,
37:06the finance minister spoke about the next-gen GST reforms,
37:09highlighting how they'll simplify compliance
37:12and help small businesses thrive.
37:13Let's also listen in to her take.
37:18Complementing this,
37:20the planned rollout of the next-generation GST reforms
37:25with a council meeting tomorrow and day after,
37:28in the coming months,
37:29it will set an economy
37:31absolutely open and transparent
37:34with further reduction in compliance burden,
37:39making it easier for small businesses to thrive.
37:43All right.
37:47Let me get back to that conversation
37:49and a couple of the points that both Pratik and Subhash mentioned.
37:52Now, ruling party and allies do control about 80% of those votes, Mr. Garg.
37:57And, you know, of course,
37:59the prime minister had earlier suggested a rollout,
38:01as you mentioned before Diwali,
38:03even though Pratik is saying
38:04we could hear the news sooner than that.
38:07Now, you know,
38:08if we take a look at what the states tend to lose as well,
38:12about 33% of the, you know,
38:15centre's gross stack revenues
38:16is budgeted to be transferred to states,
38:18and states would ultimately bear
38:19two-thirds of the revenue loss as well
38:21due to those lower rates.
38:22So, given the kind of numbers we're looking at
38:25and that you also described earlier,
38:27I just want to push to understand really
38:29the kind of combinations and permutations
38:32they may look at here.
38:33Because if the avenues are limited,
38:36clearly there's consensus in wanting this to go through.
38:39But if the avenues are limited,
38:40it could be a huge disappointment for the market.
38:42So, what is the best case scenario?
38:45So, see, this is the trickiest part.
38:48Yeah.
38:48I would set it in the context of what is happening
38:52to the fiscal revenues of the government.
38:54I don't know whether you looked at carefully
38:55the July numbers which CGA put out.
39:01There is a gross tax reduction by 11%.
39:05This has not happened.
39:08Income tax reduction is about 30-35% in that month.
39:12This kind of fiscal situation
39:15coupled with whatever losses
39:17will come on the GST front now
39:20makes it very difficult for the centre
39:22to also compensate these states.
39:26Now, in that situation,
39:28the different kind of combinations,
39:30of course, you can continue with
39:32the GST says for some time,
39:35but that's anti-reform,
39:37that is anti-market.
39:39So, I don't think the government
39:40would go through that route.
39:43Can centre pay from its own resources?
39:46As I said, this looks highly unlikely.
39:50It is difficult for centre to manage its own finances.
39:54In that situation,
39:56I think this gift,
39:58idea of gift actually,
40:00is going to be a hit on the fisk.
40:03So, gift,
40:04a hit on the fisk is the way ahead I see.
40:07The long-term consumption boost, etc.,
40:12is too woolly.
40:14I don't think we should put any store by that.
40:18That also depends upon a very larger story.
40:21What is happening to the incomes in the economy?
40:24What is happening into the labour side of growth?
40:28Is the growth, whatever,
40:306 or 7 or 7.8% happening,
40:32is it going to the labour which consumes or not?
40:37I think they have very, very disturbing
40:39or different signals there.
40:41So, I wouldn't at this moment put it
40:43that it can be managed.
40:45Let's treat that the centre willingly has
40:48agreed to take hit on its finances
40:50and the states will suffer the collateral damage.
40:53Okay, I think we need to dive into those numbers
40:57a little deeper
40:57and I'm also going to come back
40:58on the impact on the bond yield.
41:00But just to mention exclusively
41:02that the new lower GST rates
41:04could potentially be announced
41:06from September 5th, midnight.
41:09That's actually right after the meeting
41:11according to our conversation just now
41:13with Pratik PwC in India
41:15saying that the GST council decision
41:16may actually be implemented as soon as possible,
41:20not waiting in fact till that Navratri period.
41:22And that would be a huge impact for the markets
41:25that we're currently waiting for
41:27some kind of signal in September
41:29with a rollout in October.
41:30So, this would actually mean
41:31that things would escalate
41:32and we'd start to see that boost in consumption
41:34a lot faster as well.
41:36But let me come back to you as well.
41:39Mr. Gharag, is the hit on the FISC
41:41getting translated into a higher
41:43Indian 10-year bond yield?
41:45That's the question
41:46because will that mean higher government borrowings
41:48from the market?
41:50Absolutely.
41:50You see it written all over
41:53in the bond yields.
41:54For the last couple of weeks,
41:57the bond yields are only going one way up.
42:00I don't speculate,
42:02but I see if the strain continues,
42:057% on 10-year yield is not far away.
42:08So, that is the way the economy reflect on
42:14what kind of changes you are making,
42:17what kind of gifting away of the taxes you are making.
42:19You have no cushion on the expenditure side.
42:23The expenditures are bound to go up further,
42:25look at whatever the fertilizer price is
42:27and otherwise.
42:28So, there is very little flexibility
42:33with the government
42:34now cutting both on the income tax side
42:37as well as on the GST
42:39to sort of manage the expenditure on that.
42:42So, bond yields are headed.
42:44Okay.
42:45Mr. Gharag, I'm just, yeah,
42:46I'm out of time,
42:47but Prateek,
42:48I have to get one last comment from you.
42:49I literally have 30 seconds.
42:51You know, the impact of, of course,
42:53that move on yields,
42:54will that mean higher inflation?
42:55And Mr. Gharag is saying
42:56that the impact on consumption
42:58and the resulting impact
42:59on the government's balance sheet
43:00will be woolly.
43:02You know, just to sum it up,
43:03what's your key takeaway
43:04in terms of the impact
43:05that we're going to see,
43:06whether it's on consumption
43:07or whether it's on bond yields?
43:09See, look, I'm optimistic.
43:11That's not my subject.
43:12I will only say that
43:13consumption would increase substantially.
43:15It's good for tax reforms.
43:17I think the medium-term
43:18to long-term impact of the rate
43:19that would be much better.
43:21And what we are anticipating as of now.
43:23So I'm, I'm quite positive on this.
43:25Okay.
43:25So super positive from Prateek.
43:27Still a little apprehensive
43:28from Mr. Gharag.
43:30And clearly the headline, Siddharth,
43:32is that we may see the news
43:33a lot faster than anticipated.
43:35September 5th,
43:36waiting for midnight,
43:37waiting for that meeting
43:38and to see the results
43:39come through on that.
43:41Gentlemen, thank you so much
43:42for joining us
43:42on that special show
43:44around GST meeting,
43:46what's anticipated,
43:47what's in store
43:47and what's likely to be the impact.
43:49Thanks so much for joining us.
44:05You
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