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Investors and GST Overall RATE RATE (5.00)

GST

A lot has been written on the impact of GST and reasons why it should be implemented, postponed, or modified. The inevitability is here. On the midnight of 30th June India will be liberated from multiple taxes as many as 15+ taxes will be combined into a single tax called Goods and services Tax or GST as it is popularly known. The brand ambassador of GST ace badminton player P.V Sindhu says we will break from the shackles of multiple taxes. However, little does she know that for the Indian investors are one of the worst affected class in the GST scheme of things. Let me elaborate this.

The first damage is increase in the rate or tax. The service tax was 15% it has now been increased to 18% GST. Investors do not get any setoff, hence being the end user this is a charge which will increase the cost of transaction. No setoff benefits are available to retail investors since they are not registered to pass on this service to any other entity.

The investor continues to pay Stamp duty and Securities transaction tax (STT). Different states have different rates of Stamp duty and there is huge discrimination amongst the investors. The stamp duty must be abolished or if at all it remains it should be standard across the country. As regards STT it is beneficial only if you have long term capital gain. There is no STT rebate available in income tax that you pay. Hence STT is an item of increased cost. Lot of investors trade in intraday and short term wherein STT is a big cost, in fact more than brokerage and transaction tax.

There are other charges like Depository maintenance and transaction charges which will also be subject to increase in tax from 15% to 18%. This is again an increase without any additional benefit.

Delayed payment charges, which were essentially an interest on using brokers money or money funded by NBFC will now be subject to GST. The cost of this charge will be an increase of 18% on the interest amount

Till now we just made available the client id to the exchange. Of course, the system had the details of the customer. Now with Aadhar being made mandatory for all financial transactions the transparency in the system will go up substantially. Good recording keeping of all your transactions will be the need of the hour.

The biggest benefit cited by government is it will benefit industry since multiple taxes will be eliminated. We expect increase in GDP by at least 2-3%. This should improve the bottom lines of companies listed on the stock markets. We have seen a big bull run and we hope to continue to see it going forward. The GST boost should improve your portfolio values. We hope this increase cost of 3% will be fully absorbed in the increase in share prices and we will not feel the pinch of upward revision

 

Happy investing!

Deena Mehta

Managing Director

Asit C Mehta Investment Interrmediates Ltd

 

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How to organize your financial goals? Overall RATE RATE (0.00)

Did you ever measure your dreams using a measuring tape before you actually started dreaming? The answer most certainly is no.That’s the best part. Be it of any size, you don’t and shouldn’t stop dreaming. Let’s take the example of this young guy from Mumbai who wanted to invest in an igloo in the Arctic region. Now, isn’t that a unique dream? That said, the main issue for him was not the bizarre nature of his dream. The fact that he didn’t think strategically about his dream couldn’t make ithappen. The two main problems were that he thought it was a far-fetched idea and financially non-viable given his current financial situation. Reality check suggested that he just didn’t know how much his dream would cost. He simply assumed that building an igloo was an unachievable dream and thus, let it die.

What we need to understand here is that nobody needs to give up his/her dreams even without reviewing its prospects. Be it of any nature, the only way you can achieve your dreams is by converting them into achievable goals. A dream can become a goal only if you put a price tag and a time frame on it. You can decide on a figure, for instance, Rs. 2 crore, that you need to spend to achieve you dream within 15 years. This would be a good starting point.

It is very crucial for you to note that it becomes much easier for you to achieve your goals when you create a good financial plan.This plan would act as a road map to help you monitor the progress of your goals. Modern financial planning is all about adopting a goal-based approach to managing your financial resources effectively. However, you must remember that the goals you set must be SMART – Specific, Measurable, Achievable, Realistic, Timebound, for you to achieve them.

Going back to the example of the young lad from Mumbai, let’s now see whether his dream of buying an igloo is an achievable one or not. Let’s assume that the lad’s post-tax income is Rs. 30 lakhs, and that he has saved~ Rs. 60 lakhs as of today owing to good savings culture. Now, on conducting a Google search, heestablished the fact that an igloo in the Arctic region would cost him around Rs. 45-50 lakhs, which maynot be as expensive an investment proposition as envisaged earlier. Let’s assume he gives himself a time horizonof around 5 years to buy the igloo, which means the pricecould increaseto around Rs.65-70 lakhs. Once he would purchase the igloo, he has planned to rent it to a timeshare company. Therefore, his dream to buy an igloo was not as unrealistic as he felt at first, once he followed a SMART goal-based approach towards investment.

No matter how big your dream is, a goal-based approach towards investing would help you geta clear target to aim with stronger precision. Once you combine well-defined goalswith a financial plan, you would have most certainly found the key to unlock all your major dreamsin this life successfully. Please note that you may have the financial resources, it is just that you need to plan the way you use them optimally.

Read our article to know more about effective savings tips, investments, and financial planning

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