Bombay Stock Exchange (BSE). File
| Photo Credit: Reuters

Equity benchmark indices Sensex and Nifty settled lower for the sixth straight session on Monday (October 7, 2024) due to heavy selling in bellwether stocks including HDFC Bank and Reliance Industries amid mixed trends in the global markets and outflow of foreign funds.

Falling for the sixth consecutive session, the BSE Sensex tumbled 638.45 points or 0.78% to settle at 81,050. During the day, it plummeted 962.39 points or 1.17% to 80,726.06.

The NSE Nifty slumped 218.85 points or 0.87% to end at 24,795.75.

From the 30 Sensex firms, Adani Ports & Special Economic Zones, NTPC, State Bank of India, PowerGrid, IndusInd Bank, Axis Bank, HDFC Bank, Titan and UltraTech Cement were the major laggards.

Mahindra & Mahindra, ITC, Bharti Airtel, Infosys, Bajaj Finance, Tata Consultancy Services and Tech Mahindra defied the trend.

“The Indian markets have entered a consolidation phase with high risk of underperforming to Asian peers. This phase is marked by significant corrections in the broader market due to premium valuations. There is notable global arbitrage activity, with Chinese markets attracting substantial inflows driven by its attractive valuations and stimulus measures,” Vinod Nair, Head of Research at Geojit Financial Services, said.

Global oil benchmark Brent crude surged 2.09% to $79.68 a barrel.

European markets were trading on a mixed note on Monday (October 7, 2024).

In Asian markets, Tokyo, Shanghai, Hong Kong and Seoul settled higher.

Wall Street ended with gains on Friday (October 4, 2024).

Investors are reassessing their portfolio positions and FIIs outflows are exacerbated. Amid escalating geopolitical tensions, the surging oil prices pose a further challenge to the domestic economy in the short term, Mr. Nair added.

Foreign Institutional Investors (FIIs) offloaded equities worth ₹9,896.95 crore on Friday (October 4, 2024), while Domestic Institutional Investors (DIIs) bought equities worth ₹8,905.08 crore, according to exchange data.

On Friday (October 4, 2024), the BSE Sensex tumbled 808.65 points to settle at a three-week low of 81,688.45, while NSE Nifty slumped 235.50 points to 25,014.60.

Last week, the BSE Sensex tanked 3,883.4 points, or 4.53%, and the Nifty slumped 1,164.35 points or 4.44%.

Finance Minister Nirmala Sitharaman. File
| Photo Credit: PTI

Amid the sustained slump in India’s exports, the Goods and Services Tax (GST) Council has cleared a few measures to boost foreign trade, including enabling tax credits for services exporters receiving payments in rupees, critical for trade with countries like Iran and Russia that face global sanctions.

The government has been pushing for rupee-based trading arrangements with several countries to reduce the dependency on the U.S. dollar, and banks from over 20 nations have opened special rupee (INR) Vostro accounts with Indian banks to remit payments for their imports from India. However, many exporters of such services were being denied input tax credits under the GST regime as the norms required foreign currency receipts to recognise the ‘export’ status.

“The Council has recommended to issue a circular to clarify the admissibility of export remittances received in Special INR Vostro account, as permitted by the Reserve Bank of India, for the purpose of consideration of supply of services to qualify as export of services under the Integrated GST [IGST] Act, 2017,” the Finance Ministry said in a statement after Saturday’s meeting of the GST Council.

There were disputes arising from refund applications, where the GST officers would seek to deny the benefit on the ground that receipt of consideration in INR did not meet the condition prescribed for the purpose of qualifying as ‘exports of services’, explained Sanjay Chhabria, director, indirect tax at Nexdigm.

“This clarification will bring respite to the exporters whose refunds of GST were stuck for a long time on account of the disputes in respect of this particular aspect, and they were also being subjected to GST demands,” said Saurabh Agarwal, tax partner at EY.

Shashi Mathews, partner at Induslaw, said the proposed clarification shall particularly help firms which are seeking to receive export proceeds from Iran or Russia, which have U.S. sanctions imposed on regular remittance routes.

Relief for SEZ suppliers

Separately, the Council also decided to undo the effects of a July 31 notification that had made it difficult for firms supplying goods or services to special economic zones (SEZs) to claim tax refunds.

Mr. Chhabria said this move seeks to rectify an anomaly arising out of an inadvertent omission of such category of supplies from the option of refund with payment of tax, after amendments were made to the IGST Act.

“With the explicit inclusion of such supplies for rebate, the ambiguity on this comes to a rest and helps prevent apprehended potential working capital concerns for domestic industry engaged in SEZ supplies,” remarked Abhishek Jain, indirect tax head and partner at KPMG.

The Council has also recommended issuance of a circular to clarify the place of supply treatment for services entailing transportation of goods, including by mail or courier, in cases where the location of supplier or the location of recipient of services is outside India. The communique is also expected to clarify issues relating to supply of advertising and co-location services.

Industry has been awaiting clarifications on the export of goods by mail or courier for some time now, but the fine print will have to be studied to assess the impact, said Mahesh Jaising, partner and leader, indirect tax, at Deloitte India. “It is unclear if clarifications on advertising and co-location are in relation to export or domestic place of supply,” he added.