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Asian Bankers Association To Be Hosted By Mumbai For The First Time

The Asian Bankers Association (ABA) 34th annual conference will be hosted in the nation’s financial capital, Mumbai, for the first time. This two-day conference, which will commence this week is based on the “Asia’s turn to transform” theme and will be held from November 16 at Megapolis, hosted by the State Bank of India.An SBI spokesperson informed that the event is anticipating the presence of more than 160 domestic and international bankers, the deputy governor of Reserve Bank, Viral V Acharya, will be addressing the special opening on the second day.To advance the cause of the banking industry and encourage the regional economic co-operation throughout the continent, ABA forum was founded in 1981. It currently consists around 80 members from 25 different countries.   The conferences are based on problems concerning the banking sector, training programmes, and policy advocacy discussions. The summit held this year will mainly focus on the impacts of the current global downturn on the Asian economies such as, the American policies under Trump administration, Brexit economic consequences in March 2019 on Asia and the implications of fintech on banks.Some of the important speakers at the event are Chikahisa Sumi of IMF, ADB’s Noritaka Akamatsu & Cheng Cheng-Mount of Financial Supervisory Commission of Taiwan. Kotak Bank’s Uday Kotak and the State Bank chairman Rajnish Kumar will also be addressing the meet.
Asian Bankers Association To Be  Hosted By Mumbai For The First Time
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Saurabh

Saurabh Jain

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One of the Co-founders, Saurabh serves as an active advisor to several SaveDesk’s portfolio companies and also works closely with them to improve business performance, select key management personnel, ensuring statutory and financial oversight and compliance supported by various agreements.Prior to SaveDesk, Saurabh spent seven years with Standard Chartered Bank commercial banking team as an associate director, where he was responsible for client management,financial analysis, portfolio management and large ticket deal’s execution in South India. Saurabh holds an MBA in Marketing from the Institute of Technology Management, and graduated with Honors degree in Electrical and Electronics Engineering from RGPV, Madhya Pradesh

 

Asian Bankers Association To Be Hosted By Mumbai For The First Time

The Asian Bankers Association (ABA) 34th annual conference will be hosted in the nation’s financial capital, Mumbai, for the first time. This two-day conference, which will commence this week is based on the “Asia’s turn to transform” theme and will be held from November 16 at Megapolis, hosted by the State Bank of India.An SBI spokesperson informed that the event is anticipating the presence of more than 160 domestic and international bankers, the deputy governor of Reserve Bank, Viral V Acharya, will be addressing the special opening on the second day.To advance the cause of the banking industry and encourage the regional economic co-operation throughout the continent, ABA forum was founded in 1981. It currently consists around 80 members from 25 different countries.   The conferences are based on problems concerning the banking sector, training programmes, and policy advocacy discussions. The summit held this year will mainly focus on the impacts of the current global downturn on the Asian economies such as, the American policies under Trump administration, Brexit economic consequences in March 2019 on Asia and the implications of fintech on banks.Some of the important speakers at the event are Chikahisa Sumi of IMF, ADB’s Noritaka Akamatsu & Cheng Cheng-Mount of Financial Supervisory Commission of Taiwan. Kotak Bank’s Uday Kotak and the State Bank chairman Rajnish Kumar will also be addressing the meet.
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Asian Bankers Association To Be  Hosted By Mumbai For The First Time

Asian Bankers Association To Be Hosted By Mumbai For The First Time

Saurabh Jain
The Asian Bankers Association (ABA) 34th annual conference will be hosted in the nation’s financial capital, Mumbai, for the first time. This two-day conference, which will commence this week is bas...
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Decline in Remittances into India Due to the Economic Shortfall in the Gulf States

The customers from Qatar had decided to cancel orders a few months ago, which helped the eight long dhows worth of 6-9 crore each, to stay at the shores of Beypore, Kerala.“Qatar had plans to order some 100 wooden long boats. Some of the orders had come to us also… But these started getting cancelled after crude prices fell and Qatar-Saudi Arabia relations soured,” Abdulla Baramy of Baramy Ship Builders stated.Founded in 1954, Beypore-based Baramy Ship Builders have manufactured approximately 110 dhows for the customers in the UAE, Oman, Kuwait, and Qatar. But lately, their order books have recorded very little entries. “We make small boats for local fishermen these days. We also do odd repair jobs,” said Baramy.After the economic decline, there was an unusual fall in the price of crude oils and a slowly rising geopolitical tension in the Persian Gulf, which are sending shock waves to the other side of the Arabian Sea.India is the largest remittance receiving country in the world. The major NRI remittances to India are from the Gulf Cooperation Council countries (GCC) which comprises of Bahrain, Oman, Qatar, Kuwait, UAE, & Saudi Arabia. These remittances have seen a steep decline recently.As stated in the World Bank report, India has witnessed close to 9% fall in the NRI pay-in flows which nears to $62.7 billion in 2016. Inward remittances have declined by 12% to Rs 3.66 lakh crore (2016) from Rs 4.38 lakh crore in (2014-15), as per RBI scrolls. Most of this shortfall is said to result from the economic slump in GCC states“It is a case of an overall economic slowdown in the Gulf; lower oil prices have resulted in an economic slowdown in that region,” says Madan Sabnavis, chief economist at CARE Ratings. “The slowdown in that region has also resulted in paycuts and job losses. The IT slump may have impacted remittances from North America too.”Inward remittances form just 3% of the nation's GDP. But at the sub-national level, they have a significant role to play. For example, Kerala has Lion’s share of the remittances from the Gulf countries, here they form about 36% of the state domestic product. Economists say this is not a point of worry, but during the times of higher trade deficit, remittances play a crucial part. Trade deficit refers to the cost of a country’s imports exceeding the value of the country’s exports.“Remittances provide a cushion in times of higher trade deficit. The impact of lower remittances would have been higher had global commodity and raw material prices been higher,” says Devendra Pant, chief economist at India Ratings. “If there’s a slowdown in India, our current account deficit may creep up. Without adequate remittances, the rupee could come under pressure as well.”
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Decline in Remittances into India Due to the Economic Shortfall in the Gulf States

Decline in Remittances into India Due to the Economic Shortfall in the Gulf States

Saurabh Jain
The customers from Qatar had decided to cancel orders a few months ago, which helped the eight long dhows worth of 6-9 crore each, to stay at the shores of Beypore, Kerala.“Qatar had plans to order ...
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Remedy by the GST Council to the Exporters

The GST council has specified 0.1 percent tax rate on goods acquired for export purposes in a relief to merchant exporters.A senior ministry official said that the exporters would be permitted to procure 0.1 percent tax on export of goods. The Council consented two proposals, to put a stop to cash blockage of exporters caused by upfront payment of GST on inputs, stated an official statement.  "One for immediate relief and the other for providing long-term support to exporters. Immediate relief is being given by extending the advance authorization (AA)/ Export Promotion Capital Goods (EPCG)/100 per cent EOU schemes to sourcing inputs from abroad as well as domestic suppliers," the statement said.It was mentioned that there is no need to pay IGST and cess on imports for the holders of AA/ EPCG and EOUs."Also, domestic supplies to holders of AA / EPCG and EOUs would be treated as deemed exports and refund of tax paid on such supplies given to the supplier," it added.Furthermore, Public Sector Units and specified banks are also permitted to import gold without payment of IGST."This can then be supplied to exporters as per a scheme similar to AA," it added.The merchant exporters of India record for over 30 percent of the country’s exports that usually work on the margins of 2-4 percentage.Especially for those products having high GST imposition rates, the costing was disorganised as they got to pay GST and seek refund after a time lag, said FIEO in a statement. For the exporters, attempts would be made to initiate an e-wallet facility to provide liquidity from April 1.  The Directorate General of Foreign Trade (DGFT) will draw up norms, for the operation of e-wallet facility. FIEO had said earlier that, as most of the micro and small exporters borrow money to pay taxes, they are hit hard by GST. It is notified that based on the previous year’s exports and an average GST rate, under this facility e-currency is credited to exporter’s account. , When the duty paid supplies have to be undertaken, the money can be debited from e-wallet. When the proof of exports is made available, the amount can be credited to a running account, it said.Also Read GST's  Impact on Exports and Imports
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Remedy by the GST Council to the Exporters

Remedy by the GST Council to the Exporters

Saurabh Jain
The GST council has specified 0.1 percent tax rate on goods acquired for export purposes in a relief to merchant exporters.A senior ministry official said that the exporters would be permitted to proc...
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Difference Between Letter of Credit and Bank Guarantee

As the name indicates Letter of Credit (L/C) is a financial instrument, which is issued by banker basis Buyers creditworthiness. Usually, the terms “L/C” and “Bank Guarantees” are used interchangeably by finance person as they share certain similarities. However, there is a difference in how banks look at these products in terms of liability on their book. Definition of Bank GuaranteeAs the name indicates, a guarantee given by a bank on behalf of his customer (account holder) to the beneficiary, for assurance of payment in the event of default by its applicant is called bank guarantee. Bank guarantee is the usual practice in public tenders/govt related works in domestic markets. Bankers charge commission up to 1.5% per annum on the issuance of bank guarantees.  There are two types of bank guarantees:Financial GuaranteePerformance GuaranteeDefinition of Letter of CreditA letter of credit is a financial instrument, which is issued by a buyer to the seller, confirming a payment. A typical LC will have certain clause/terms which have to be met by both buyer and seller for the successful execution of the transaction. Basically, for Buyers/Importers, it will clearly mention terms of payment by the seller.For the seller, it will contain terms like type/quantity & condition of goods & documentary evidence along with relevant shipment bills etc. Once all the terms and condition are met, the bank will transfer funds . This Product is availed by Exporter/Importer.Types of Letter of Credit Sight L/CUsance L/CRevolving L/CIrrevocable L/CStandby L/CConfirmed L/CRed Clause L/CTypical cost of LC can run up to 2% of transaction cost which can be collected under various heads like-LC Opening Charges LC retirement Charges Forex MarginsKey Differences Between Letter of Credit and Bank GuaranteeGuarantee is an instrument given by the applicant’s bank to the beneficiary, confirming payment in the event of default, whereas the Letter of Credit is a payment assurance given by the applicant’s bank, subject to certain terms and condition.Under Bank Guarantee, a bank takes responsibility for payment when the client fails to honor commitment. In Letter of credit, Primary Liability lies with the bank to collect payment from the seller.The number of parties involved in Bank Guarantees is restricted to the applicant, beneficiary and banker, whereas in case of LC, it can be more than three, i.e applicant, Applicant/issuing bank, beneficiary, advising bank, negotiating bank and confirming bank.Bank Guarantee is used for domestic transactions, whereas the letter of credit is used for import/export transactions.Under LC, payment is honoured under successful acceptance of terms and conditions. Under bank guarantee, payment is made under default of certain terms and conditions.More about Bank Guarantee & Letter of credit can be read on-https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=6523
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Difference Between Letter of Credit and Bank Guarantee

Difference Between Letter of Credit and Bank Guarantee

Saurabh Jain
As the name indicates Letter of Credit (L/C) is a financial instrument, which is issued by banker basis Buyers creditworthiness. Usually, the terms “L/C” and “Bank Guarantees” are used interch...
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Everything you need to know about Business Loan

Loans imparted to meet Short Term working capital gap arrangement are referred to as Business Loans or Business Installment Loans. Such loans can be availed by business houses from multiple loan providers such as Banks, NBFC, P2P lenders etc.While there are myriad options available in the market, businesses should be cautious to resort to such loans arrangements as they are the most expensive forms of financing available in market.Typical Business Loan cost includes the following- Loan Interest is charged between 16-18% Processing Fees can be charged upto 2% Preclosure Charges – Can run up to 4%.Before availing such loans from Financial Institutes, businesses should keep following 4 importants points- 1. Cost of Loan :- The first and foremost thing a business owner should be asking himself is - “Is this the right kind of product at right cost?” Since its non-collateralised product is available in the market, rate of interest is high as mentioned before and tends to eat away bottomline nos.2. No of Loans :- While applying for loans, businesses tend to resort to easiest and quickest ways of applying  loans with multiple lenders, which tends to affect credit score of the company. Bankers relate these Cibil checks with credit worthiness of company. More no. of Cibil checks performed generally indicates that customer loan has been turned down by those many no of Banks/NBFC  & attract hawkish eye from current lender’s credit team.Best approach is to take in principle letter from bankers/NBFC to confirm their intent on funding & apply strategically among shortlisted 2-3 lenders, as per ROI, Preclosure charges , Processing fees etc.3. Prepayment  Penalties:- During the testing times of businesses, many business tend to succumb, to accept all the terms & condition mentioned in the sanction letter.Prepayment penalty is a fee that lender charges if you settle your loan before the loan tenure/predefined tenure. Basically this penalty is imposed to discourage lender from early closure of loans, as it lead to loss of interest earning opportunity for lenders .The point here is that difficult times may last only for a few quarters, but your loan is going to stay with you for good 3-5 years of time. Always ensure that Prepayment penalty clause is discussed and negotiated before acceptance of offer letter.4. Alternate options of Funding:-There are various alternative loan options available in market which are economical and better options than conventional business loans.You should always ask your lender for various alternatives available for your current business needs. Few such alternate options can be- Equipment Finance Loan - In this type of funding, equipment/Machinery of company gets hypothecated to lender.CGTMSE - Government of India has come up with a credit guarantee fund scheme(CGTMSE) for micro and small enterprises in manufacturing sector, which extends up to 2 cr of loan by lending institutions against guarantee. This facility is available at cheapest cost of funds linked to base rate of lending institution.Line of credit Facility - Few banks/NBFC’s come up with tailored solutions to meet your short-term working capital requirement in the form of Credit facility. This facility gives you the flexibility to use funds as per your banking needs and you will be charged only on borrowing .With plethora of lenders available in the market, identifying a right lender, with right product mix at cheapest cost becomes of utmost importance for businesses. Any borrower should evaluate the above points before getting into any lending commitments.
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Everything you need to know about Business Loan

Everything you need to know about Business Loan

Saurabh Jain
Loans imparted to meet Short Term working capital gap arrangement are referred to as Business Loans or Business Installment Loans. Such loans can be availed by business houses from multiple loan provi...
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Forfaiting In Trade Finance

Forfaiting, the literal meaning is to give up (something) as a necessary consequence of something else. In Trade Finance, “Forfaiting” is a mechanism of financing short to medium terms post-shipment exports.  Capital goods exported usually come with credit terms from the importer , due to which exporter finds issues with his current cash flows. To address this issue, Forfaiting product was introduced in 1960. In simple words, it's a medium term foreign currency loan extended by foreign bank (also termed as forfaiter) against  shipped goods by exporter.Forfaiting is usually carried out by-a. Discounting export receivablesb. Bills of exchanges or promissory notes There are 5 parties involved in Forfaiting-i. Exporter ii. Importer iii. Exporter’s bank iv. Importer’s bank v. The ForfaiterModus operandi :-Post negotiating invoice (referred as sales contract), Exporter approaches Forfaiter ( foreign Bank ) to ascertain contract terms for funding.Forfaiter does due diligence about importer, supply and credit terms, documentation, country risk, credit risk etc.Forfaiter quotes the discounting rate usually quoted in LIBOR/EURIBOR.The Exporter quotes a contract price to the overseas buyer/Importer by adding cost of funds,commitment fee,arrangement fees etc. on the exported goods.Upon acceptance of the above  pricing, Exporter and Forfaiter sign a contract.Export takes place against documents guaranteed by the importer’s bank.Forfaiter discounts the bill and presents the same to the importer’s bank for the payment on due date or even sell it in secondary market. Costs of Forfaiting: Forfaiting typically involves below costsCommitment Fees :-  Ranges between 0.5% -1% PaDiscount Fees :- Interest cost charged in LIBOR/EUROArrangement Fees – Facilitator fees will be charged by Bank/Consultant in India.BENEFITS OF FORFAITING SERVICES The benefits to importer are abundant, some of them are listed here:1)  Seller receives immediate credit of funds in account, thus increasing liquidity position.2) Since risk is borne by the forfaiter, payment default from importer will not affect the Seller.3) Exporter is hedged against any interest rate risk and exchange rate risk since contract is executed at a fixed rate.4) 100 per cent of the invoice/contract value can be credited5) Cost of Forfaiting can be borne by Importer as well , depending on the credit terms.For more details on RBI policy, please refer https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7354#b23
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Forfaiting In Trade Finance

Forfaiting In Trade Finance

Saurabh Jain
Forfaiting, the literal meaning is to give up (something) as a necessary consequence of something else. In Trade Finance, “Forfaiting” is a mechanism of financing short to medium terms post-shipme...
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Factoring

A financing method in which a Financier buys debt or invoice from another company, so basically seller surrenders accounts receivable at a discount to a factor (Financer) to raise capital. Upto 80% of account receivables can be discounted with factoring services. The biggest advantage of Factoring is that it is an out-of-balance sheet product and it does not create liability on balance sheet.So a Factor is :-A Financial Intermediary Buys invoice/book debts Take responsibility of collection of paymentsParties involvedSeller Debtor/Buyer Financial Institution ( Lender) Types of Factoring:Recourse Factoring:- Factoring with recourse, as the name suggests. In case of non payment of invoice, liability of paying of discounted amount from Factor will still be with the seller.Non Recourse Factoring :- Under this facility, Factor not only discounts bills, but also provides guaranteed credit protection. In case of non payment, Factor will bear the risk of bad debts.Maturity Factoring:- In Maturity Factoring, the Factor agrees to pay amount to exporter/seller on the agreed date.Cross Border Factoring: - Also referred to as two Factor system of factoring, it is almost similar to domestic factoring, except that 4 parties are involved. They are:Exporter Export Factor ImporterImport Factor Client (Exporter) enters into arrangement with Export factor in his country & delegates export receivables to him. Export Factors enters into arrangement with Import Factor & organises for credit evaluation & collection of payment for an agreed fee.Import factor collects payment from Importer and remits it to export factor , which in turn passes credit to exporter.Advantage of Factoring:1. Factoring helps to improve the current ratio,  which in turn adds liquidity to the company. This reduces working capital cycle gap.  Seller therefore can offer better credit terms and increase orders.2. Increase in the turnover of stocks. Since the cash recovery is fast, overall topline of company increases.3. It ensures prompt payment and reduction in debt.4. It helps with credit protection.5. Reduces work of collection/recovery department.Responsibility of collecting the dues solely lies with ‘Factor’/Financer.Cost involved:-Commission/Fees of 0.5-1.5% for rendering factoring services Interest Cost for discounting is charged for the specified tenor debt receivable usually varies between 10-12%.More can be read on associated links as below https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=10125
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Factoring

Factoring

Saurabh Jain
A financing method in which a Financier buys debt or invoice from another company, so basically seller surrenders accounts receivable at a discount to a factor (Financer) to raise capital. Upto 80% of...
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IDPMS ( Import Data Processing and Monitoring System)

This article is an extract of RBI circular relating to IDPMS. It carries important functionalities, steps involved and benefits . IDPMS refers to Import Data Processing and Monitoring System. RBI constituted a working group which included FED,DGFT,SEZ,FEDAI & selected authorized dealers, to frame a comprehensive IT system to facilitate efficient processing of all import transactions and effective monitoring thereof. The working group had recommended development of a robust and effective IT- based system “Import Data Processing and Monitoring System “(IDPMS) on the lines of “Export Data Processing and Monitoring System” (EDPMS) in consultation with the customs authorities and other stakeholders. Key functionalities of IDPMS: Paperless secure transmission of data relating to imports/exports through from customs, IDPMS to authorized dealers and vice versa Import Bill of entry(BoE) management by bank settlement, extension and adjust / closure Outward remittance management(ORM) by bank Outward Remittance Notification and adjust/closure Multiple ORMs against single BoE and vice versa Banks have direct access to download/upload BoE issued by customs or customers Steps involved: Based on the AD code declared by the importer, the banks shall download the Bill of Entry (BOE) issued by EDI ports from “BOE Master” in IDPMS. For non-EDI ports, AD banks of the importer shall upload the BoE data in IDPMS as per message format “Manual BoE reporting” on daily basis on receipt of BoE from the customer/customs office. AD banks will enter BOE details  and mark off ORMs as per the message format “BOE Settlement” In case of payment after receipt of BoE, the AD bank shall generate ORM for import payments made by the importer customer as per the message format “BOE Settlement” Multiple ORMs can be settled against single BoE and also multiple BoEs can be settled against one ORM. Benefits of the proposed System Ensure better import compliance Alternative to filing paper Easier tracking / generation of export transactions /data/ history Stop /minimize manual data entry work at AD banks Value addition in banking business For Buyers credit Services please Click here RBI Circulars on IDPMS: Report of the Working Group on Import Data Processing and Monitoring System Evidence of Import under Import Data Processing and Monitoring System (IDPMS)
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IDPMS ( Import Data Processing and Monitoring System)

IDPMS ( Import Data Processing and Monitoring System)

Saurabh Jain
This article is an extract of RBI circular relating to IDPMS. It carries important functionalities, steps involved and benefits . IDPMS refers to Import Data Processing and Monitoring System. RB...
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Pre and Post Shipment Finance/Export Financing

As the name indicates, this finance option is available for all exporters who have confirmed work/export order from reputed company. The scheme of export financing was first introduced by RBI in 1967. The scheme was introduced with an intention to make short-term working capital finance accessible to exporters at internationally comparable interest rates.In banking parlance, Pre-shipment finance is working-capital finance that is provided to an exporter, with-recourse basis against confirmed export order or against a LC (Letter of Credit) up to 270 days from advance. Post shipment finance is a short-term loan provided to exporter to manage working capital cycle gap till the realization of Export proceeds .Pre Shipment Finance: An Exporter would require capital to purchase goods, raw materials or manufacturing of goods. Technically, pre-shipment finance duration starts from the receipt of export order till shipment of goodsTypes of Pre-Shipment Finance:- Export Packing Credit. Advance against cheque/drafts representing advance payment Post-Shipment Finance: Post-Shipment Finance is a short-term loan provided to an exporter or seller against a shipment. Normally, the duration of this loan is from shipment to bill realization date. This type of finance is provided on basis concerning evidence of shipping documents. Types of Post-Shipment Finance Export Bills Purchased /Discounted (DA/DP)Export Bills Negotiated (Under LC) Advance against bills sent on collection basis Advance against receivables from GOI Following types of Pre-shipment and Post-shipment financing options are allowedPre-shipment Credit and Post shipment Credit in rupee Pre-shipment Credit in foreign currency (PCFC) & Post Shipment in INR Pre-shipment and Post shipment in Foreign currencyPre and Post shipment finance in foreign currency gives exporter an advantage to avail loan at much cheaper cost linked to LIBOR/EURIBOR. Thus helping him to reduce overall cost.For More details please refer:- https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?Id=8132&Mode=0#b
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Pre and Post Shipment Finance/Export Financing

Pre and Post Shipment Finance/Export Financing

Saurabh Jain
As the name indicates, this finance option is available for all exporters who have confirmed work/export order from reputed company. The scheme of export financing was first introduced by RBI in 1967...
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GST: The Revolutionary Move in Taxes

BENGALURU: A 17-year-old dream, the Goods and Services Tax (GST), finally became a reality on July 1. The move, as claimed, will be a great push for Prime Minister Narendra Modi’s reform for development.GST is said to be the mother of all taxes as it looks at replacing all the indirect taxes making way for a smooth economy. Before one seeks to understand this new system and its functionality, one needs to comprehend what is taxation and how it works.INDIAN TAX SYSTEMA tax is a contribution by an individual or organization to state revenue which is imposed by the government. There are two types of taxes, direct and indirect. Direct tax is something that a person pays directly from his pocket. For example, you earn some income and the government imposes a certain percentage to be deducted directly from your salary. In case of indirect tax, this is something an individual pays through a medium or channel, which means taxes are imposed on goods and services here. For example, you go to a restaurant and you pay a certain amount of tax called, ‘service tax’, ‘VAT’, or ‘sales tax’. Here, the customer ends up paying the tax for the goods or service that has been rendered.Income tax is the most known form of direct tax. This type of tax is applicable to both an organization and an individual. There are various tax slabs that the government decides for various groups. Anyone earning There is no need to get into direct tax, as GST has been implemented for smooth functioning of indirect taxes. It is also expected that GST will improve transparency in taxation and help build a corruption-free economy.HISTORICAL MILESTONES OF GSTThe BJP-led Atal Behari Vajpayee government in the year 2000 introduced the idea of GST which was overlooked by the finance minister of West Bengal, Asim Dasgupta. Later, Mr Vajpayee made a special request to the Chief Minister of West Bengal to let the Finance Minister to design the GST model.In 2006, P Chidambaram, Union Finance Minister, of the Congress, announced that GST would roll out in April 2010. In 2008, the Empowered Committee made a report on the structure and the recommendations that GST required.In 2009, the empowered committee suggested dual GST module, under which there would be two components Central GST and State GST and taxes like excise, state, VAT, entertainment tax, service tax, entry tax, etc,  would be absorbed under the broad umbrella of GST.The empowered committee had to ensure there was development in IT system and infrastructure for smooth functioning of GST, which was overlooked by Nandan Nilekani.GST was officially passed in 2016 by Rajya Sabha with the required amendments.WHY GST?The question now arises, why was GST implemented or even thought of? The rational approach by the central government to implement GST was to streamline all the indirect tax regime which means the tax levied on goods (central and state level) will be streamlined creating a common market for all. So if you look at it, a certain tax is levied on value added goods and services at every stage (sale to purchase). This means, a consumer will bear the GST charged by the last service provider and will not pay anything that has to go to the manufacturer. GST here is breaking the barrier between states and it integrates one single rate throughout. Thus, a great boost for Indian economy.With the introduction of GST, bills now carry ‘CGST’ and ‘SGST’ on our bills now. Here both the central and state government have been assigned with certain fiscal responsibilities and thus had their own tax rates that they levied, but now considering the Indian federalism, both central and state government shall impose 9% tax under GST. WHAT EXACTLY IS CGST AND SGST?One needs to know what CGST and SGST currently means. ‘CGST’ would mean the tax levied on supply of any good and service which is the revenue for the Central Government, the tax that comprise this structure are excise, service, additional tax. The collection of ‘SGST’ means, tax levied on supply of goods which is revenue for the State Government. Tax like VAT, entertainment, luxury and entry tax are merged under this tax.There is another tax, the ‘IGST; which is abbreviated as integrated goods and service tax, while SGST and CGST are essentially the Intra state movement tax under GST. For the supply of goods and services that happens between two states tax is levied at 18 percent.HOW IS IT A BOOST TO THE INDIAN ECONOMY?The implementation of GST it is claimed to boost the Indian economy and create a common market for all taxpayers. THE AREA OF CONCERNGST has affected many sectors in various ways, and while prices have shot up for things like home appliances, charges like school fees, mobile bills, wifi services have become an expensive affair. Also, the bright side of GST being that luxury cars will be cheaper, movie tickets are few of the things that are said to becoming economic.GST has made its impact in many sectors in India. Previously there were different tax rates allotted in each state making it difficult for the flow of foreign investments. Now, it has eased the process of trade or supply by implementing uniform rates. The main concern behind GST was to boost the economy. Petrol, diesel and alcohol were few of the components that the states agreed not to add under the bill of GST because they generate close to 40% revenue for the state. With the implementation of GST, which means no entry tax, the state saw a steep fall in the price of petrol by Rs 3 right after the bill was passed (prices varied from state to state).Every legislation contains its own pros and cons. But, GST weigh with pros higher than cons. it is addressed as a beneficial taxation because ultimately the impact is prices are going to go down.To know about GST Impact on basic expenses  
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GST: The Revolutionary Move in Taxes

GST: The Revolutionary Move in Taxes

Saurabh Jain
BENGALURU: A 17-year-old dream, the Goods and Services Tax (GST), finally became a reality on July 1. The move, as claimed, will be a great push for Prime Minister Narendra Modi’s reform for develop...
Continue reading

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