New Delhi, March 4
The states have no objection to the central government widening its service tax net in the forthcoming budget, as long as 35 services like ambulance, beauty parlours, marriage halls, interest on bank deposits, leasing of vehicles and machines are kept out of the ambit of the levy.

With a broad consensus emerging between the state and central governments, Finance Minister Pranab Mukherjee may announce coverage of most of the services used by individuals and business in the budget for fiscal 2012-13 to be presented on March 16.

The central government has proposed introduction of a negative list service tax regime, meaning services out of the list would be taxed. A unanimous view to this effect emerged in the meeting of the empowered committee of state finance ministers. The panel, chaired by Bihar Deputy Chief Minister Sushil Modi, is examining the central-state government issues on the much delayed goods & services tax (GST).

"The committee is in favour of negative list. The central government can go ahead of with the negative list. It can be implemented from April 1, 2012, (but) 35 items approved by states (must) be kept in the negative list," Modi told reporters here.

He said the central government should not impose service tax on the items falling in schedule VII's list II of the Indian Constitution, on which states impose taxes.

The panel, Modi said, has finalized the list of 35 services which should be included in the negative list.

Earlier, the government had released a negative list containing 22 services. At present, tax at the rate of 10% is levied on 119 services. For the current fiscal, the government hopes to mop up Rs 82,000 crore from this levy. The negative list concept is practiced globally and is proposed to be introduced in India as part of the goods and services tax regime.

Services account for nearly 63% of India's GDP and widening of the net could yield an additional 20% in service tax. At current prices, the contribution from services during 2010-11 comes at about Rs 50 lakh crore. However, the total collection from service tax during 2010-11 was over Rs 70,000 crore. — PTI

Mumbai, March 4
Amid a sluggish broader market, the combined market capitalization (m-cap) of seven of top 10 bluechip companies dropped by Rs 29,174.16 crore, with IT major TCS taking the biggest hit.

TCS’ market value dropped by Rs 9,443 crore to Rs 2,38,957 crore. Shares of the company plunged by 4 per cent last week. Rival Infosys' m-cap also dipped by Rs 5,047 crore to Rs 1,64,192 crore during the week.

State-run NTPC lost Rs 4,948 crore from its market value which was at Rs 1,46,356 crore, while ITC's worth fell by Rs 3,432 crore to Rs 1,59,943 crore last week.

State-owned ONGC saw an erosion of Rs 2,909 crore from its value which stood at Rs 2,40,280 crore on Saturday last week. The government sold five per cent of its stake in ONGC last week through auction that received bids for 42.04 crore shares against an offer size of 42.77 crore shares.

Reliance Industries’ 's m-cap slipped by Rs 2,341 crore to Rs 2,66,284 crore, while HDFC Bank shed Rs 1,054.16 crore to Rs 1,21,701 crore. In contrast, Coal India, SBI and Bharti Airtel saw a rise in their market cap. CIL’s m-cap surged by Rs 2,684 crore to Rs 2,09,387 crore, while SBI’s m-cap rose to Rs 1,42,922 crore. — PTI

One has to be extremely careful in investing Provident Fund proceeds after his or her employment contract has been completed and is now retired, says Anil Chopra. In such a case, the funds should be invested in safe schemes. This is even more essential if the job from which you have just retired doesn't provide a pension

A provident fund is essentially a fund created during the working span of one's life by contributing a certain amount out of one's income on a regular basis. It is usually helpful to a person once he or she stops working. In other words, this fund is an integral part of retirement planning.

In this changing, dynamic and economically fast progressing world, retirement planning has today assumed greater significance than ever before. This is primarily due to the fact that longevity or life expectancy has dramatically improved in the last few decades. It is not uncommon to witness a person living up to the age of 85-90 years these days. So, even if somebody retires at the age of 60, he or she would still have 25 years or more of active life remaining for which one must plan in advance. Accumulation of savings through increased voluntary contribution to a provident fund therefore is a common and popular step being taken by financially literate Indian citizens.

Types of provident funds

There are three types of provident funds in India, namely, Employees' Provident Fund (EPF) for private sector employees, Government Provident Fund (GPF) for government employees and Public Provident Fund (PPF) for the general public, including the salaried class.

It has been witnessed that the new generation of salaried class changes jobs every three to five years, which makes the management of EPF balances very important in the current scenario from the point of view of long-term financial planning.

Transferring PPF accounts

In principle, when a private sector employee changes jobs it is advisable not to withdraw his accumulated PF balance. Rather, the amount should be carried forward and transferred to the new employer's records so that it continues to grow, as the same is a part of retirement kitty which may still be two to three decades away. At the time of transferring the PF, the employee must ensure that he gives all the necessary declarations so that the PF balance is seamlessly transferred to the next employer's records.

However, it has been noticed that many young people give false declarations of quitting their previous jobs, without any intention of taking up another job in the near future. Based upon such a declaration, they are able to redeem and encash their PF balances and end up consuming the same rather than saving it for future.

Continue to build up your PF balance

My advice to investors is that it is prudent to continue to build up your PF balance and not encash it before the age of 60, so that your savings grow to a sizable corpus which can last you your life time. Don't forget the fund attracts a handsome taxfree interest at the rate of 8 to 9 per cent per annum (as declared by the finance ministry from year to year). Even if one has worked with an organization for 15 years without any surety of the timing to start the next job, it is still better not to claim the refund of your accumulated PF balance.

Similarly, if one has decided to quit his job and start his own business, it's again not a good idea to withdraw the PF balance and invest it in one's new business as it may or may not succeed. A better option would be to withdraw the PF balance and invest the same in a long-term debt mutual fund, which assures safety and you may also earn some dividends income which might help you to supplement your lifestyle. Also, in case if one secures a job abroad, the best way to deal with your PF proceeds will be to invest them in a well-diversified long-term equity mutual fund portfolio, which would continue to grow your corpus at a decent rate as part of your retirement planning.

Invest in safe schemes

Very importantly, one has to be extremely careful in investing the PF proceeds after one has completed the employment contract and is now retired. In such a case, PF proceeds should be invested in safe schemes like post office monthly income schemes, senior citizens saving schemes, bank deposits, secured bonds or long-term debt mutual funds, all of which assure a regular flow of monthly or quarterly income. This is even more essential if the job from which you have just retired doesn't provide a pension.

Another option is to buy a suitable annuity plan from a life insurance company, which assures a monthly regular pension for your lifetime and thereafter the corpus amount is passed on to your legal heirs.

According to the current income tax regime, all three types of provident funds enjoy EEE (exempt-exempt-exempt) benefits and, therefore, it's beneficial to even increase the allocation to one's PF account via additional voluntary contributions.

The author is group CEO of Bajaj Capital. The views expressed are his own

The stock markets were extremely choppy in the week gone by. There was a sharp fall on Monday followed by a revival on Tuesday and Wednesday, again a fall on Thursday and then some small gains on Friday. Within the day we saw sharp moves on every single day and, though the weekly loss on the Bombay Stock Exchange Sensex was a mere 286.77 points or 1.6% it doesn't convey the volatility witnessed.

The Sensex closed at 17,636.80 points for its second consecutive weekly loss. The National Stock Exchange Nifty lost 69.95 points or 1.29% to close at 5,359.35 points. The BSE 100, BSE 200 and BSE 500 all lost but significantly lower than the benchmark indices at 1.00%, 0.81% and 0.73% respectively. The BSE MidCap gained 0.72% and the BSE SmallCap lost 0.43%.

The BSE Realty was a big loser (down 4.28%) followed by the BSE IT (down 3.27%). The BSE PSU index gained 0.23%. In individual stocks Hero Honda was a big loser (down 6.42%), Sesa Goa lost 6.82% on merger woes, TCS was down 4.10%, Larsen & Toubro lost 3.78% and ICICI Bank was down 3.11%. Maruti Suzuki gained 3.04% while State Bank of India gained 1.77%.

There was a special trading session on Saturday which ended as flat as a doormat with the BSE Sensex gaining less than a quarter of a point while the NSE Nifty gained 0.05 points.

The week was eventful with a mega divestment by way of auction taking place in ONGC. The government which is the largest shareholder sold 5% of the equity or 42.77 crore shares at a floor price of Rs 290 which was at a premium to the closing price of Rs 283.55. One was shocked at their being a premium and the issue bombed badly but the face saving bailout was done by LIC who bought a staggering 40 crore plus shares. Not only did it bail out the issue but it paid a premium and the average price paid for the 42.04 crore shares was Rs 303.67. A simple comparison can be drawn with the sale of HDFC shares which was done in the previous week where Citibank sold its stake of just fewer than 10% at a discount to FIIs and some local funds. The weak justification put out by representatives of the buyer that you need to pay a premium to acquire large holding hold no water with this mega sale of Rs 9,600 crore in HDFC.

This fiasco in the divestment of ONGC may have brought the government a sum of close to Rs 13,000 crore but at what cost and damage cannot be quantified. It has alarmed market participants as well as the fall out of the same has put the government in damage control. One hopes that action is taken against the concerned persons for such a big goofup. A secondary offering at a premium to the current market price is simply unheard of.

The Indian rupee depreciated during the week to close at 49.50 to the US dollar. FIIs continued their buying spree while domestic institutions were sellers. The markets are very critically poised and are all set to either breakout or breakdown. The week ahead has all the ingredients for such a move.

The week sees election results for five states being declared on Tuesday. Thursday is a holiday for Holi and therefore Wednesday afternoon would see people reducing their exposure in the market. Friday in all probability would see the listing of MCX and this could provide a boost to future IPOs in the coming months. The critical levels to watch out for in the market are 17,900 on the Sensex. It's critical for this level to be broken on the upside with volumes and we need to sustain the level once broken. The similar level for the Nifty is 5,430. On the downside it is critical that the levels of 17,425 on the Sensex and 5,230 on the Nifty hold. These levels are critical for the markets and any sustained movement could be decided during the course of this week.

It needs to be remembered that the confirmation of trend and the breakout/breakdown would get confirmed during the budget week in the following week. Trade cautiously.

The author is founder of KRIS, an investment advisory firm. The views expressed are his own