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Sensex Trades in Green; Metal Stocks Lead Gains
Thu, 12 Oct 11:30 am | Prasheel Vartak, TM Team

After opening the day in green, Share markets in India have continued the momentum and are presently trading above the dotted line. Sectoral indices are trading on a positive note, with stocks in the metals sector and stocks in the FMCG sector witnessing maximum buying interest.

The BSE Sensex is trading up by 103 points (up 0.3%) and the NSE Nifty is trading up 40 points (up 0.4%). Meanwhile, the BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index is trading up by 0.7%. The rupee is trading at 65.11 to the US$.

In news from stocks in the capital goods sector. Larsen & Toubro (L&T) share price is in focus today after the company announced the sale of unlisted subsidiary EWAC Alloys Ltd as part of its strategy to exit non-core businesses.

The engineering major said that it has entered into an agreement with ESAB Holdings Ltd, an UK based company, to sell EWAC Alloys for a consideration of Rs 5.2 billion.

EWAC Alloys is a wholly owned subsidiary of L&T and the company is divesting its entire stake in the company.

EWAC makes welding products and provides related services. The company, which began as a joint venture of Larsen & Toubro and Germany-based Messer Eutectic Castolin Group, became a wholly owned subsidiary of L&T in 2011.

L&T said EWAC had a revenue of Rs 2.1 billion in fiscal 2017, representing around 0.2% of the L&T group's consolidated revenue.

The sale is in line with L&T's strategy to exit non-core businesses to improve efficiency. In August, L&T sold its entire stake in another unlisted subsidiary, L&T Cutting Tools Ltd to IMC International Metalworking Companies BV, owned by Berkshire Hathaway, for Rs 1.7 billion.

At the time of writing, L&T share price was trading up by 0.6%.

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Moving on to news from the economy. Direct tax collections for the six months from April - September rose over 16% year on year (yoy).

Net direct tax receipts in the first half of 2017-18 jumped to Rs 3.9 trillion, a 15.8% growth from a year ago, adding up to about two-fifths of the targeted direct tax collection for the full year, data from the Central Board of Direct Taxes (CBDT) showed.

With this, net direct tax collections have reached 39.4% of the total budget estimates for the current fiscal year 2017-18.

In the 2017-18 budget, the finance ministry had set a direct tax collection target of Rs 9.8 trillion.

Prior to adjusting for refunds, gross direct tax receipts during the April-September period stood at Rs 4.6 trillion, showing a growth of 10.3% from a year ago. The tax department has issued refunds of Rs 796 billion so far this financial year.

Of the total, Rs 1.77 lakh crore belonged to advance tax up to September 2017 - showcasing growth of 11.5% yoy.

Both corporate income tax and personal income tax of advance tax reflected growth of 8.1% yoy and 30.1% yoy respectively.

Indian Corporate Tax Rate Amongst Highest in the World

Note that, India's corporate tax rate stands at almost 35%, which is the second highest in the world.

That said, one must also note companies get a whole raft of exemptions that - as per government claims - brings the aggregate effective tax rate of India Inc. down to just 23%.

This being the case, as we look towards the upcoming Union Budget for 2017-18, what is the need of the hour is to get rid of the complicated layers of exemptions and to have a simple and uniform tax rate much lower than the current one. This will not only make for better tax compliance by companies, it will also make it easier for the tax department to administer appropriate tax collections as well as reduce tax litigation. Now wouldn't that be a huge shot in the arm for the 'ease of doing business' in India?

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