Goods and Services Tax (GST)

Aug, 04, 2018

[pib] Introduction of E-way Bill System

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: e-way bill, GST

Mains level: Issues related to the implementation of GST


News

E-way Bill System

  1. The E-way Bill System has been introduced nation-wide for inter-State and intra-State movement of goods.
  2. The objectives of E-way bill system are as below:
  1. single and unified E-way bill for inter-State and intra-State movement of goods for the whole country in self-service mode,
  2. enabling paperless and fully online system to facilitate seamless movement of goods across all the States,
  3. improve service delivery with quick turnaround time for the entire supply chain and provide anytime anywhere access to data/services,
  4. to facilitate hassle free movement of goods by abolishing inter-State check posts across the country.
  1. The Government undertook various corrective steps in this regard viz., new Information Technology (IT) infrastructure including high end servers were installed to handle the increased load on the system.
  2. The upgraded system is capable of handling a peak load of 75 lakh E-way bills per day.

Back2Basics

E-way bill

  1. EWay Bill is an electronic way bill for movement of goods which can be generated on the eWay Bill Portal
  2. Transport of goods of more than Rs. 50,000 (Single Invoice/bill/delivery challan) in value in a vehicle cannot be made by a registered person without an eway bill
  3. When an eway bill is generated a unique eway bill number (EBN) is allocated and is available to the supplier, recipient, and the transporter
  4. An e-way bill is valid for 1 day for distance less Than 100 Kms and additional 1 day for every additional 100 Kms or part thereof
  5. The validity of Eway bill can be extended
Jun, 23, 2018

Anti-profiteering under GST: A leap of faith for consumers and industry

Note4students

Mains Paper 2: Polity | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Anti Profiteering Provisions under GST

Mains level:  Businesses in various sectors have received notices under anti-profiteering for non-compliance. This is due to unclear guidelines on records. The newscard suggests measures to counter such incidences.


News

Inflationary Effect of the GST

  1. Historically, many countries who introduced GST or value-added tax found to it to have an inflationary effect in the initial years.
  2. This inflationary effect has largely been attributed to the benefit accruing due to GST was not being passed on through the transaction chain to the ultimate customer.

GST anti-profiteering provisions

  1. Anti-profiteering provisions have been enacted under the GST regime to curb undue profiteering by businesses and ensure that the benefits by way of a reduction in the price of the goods/services are passed on to the consumer.
  2. The provisions require businesses to pass on the benefit arising on account of
  • reduction in the rate of GST
  • increase in input tax credit, to the consumer.

National Anti-Profiteering Authority

  1. A National Anti-Profiteering Authority has been constituted for the efficient administration of these provisions
  2. Any consumer can approach the Authority with documentary evidence against any supplier who has not passed on the specified benefit.
  3. The Authority is entrusted with the power to determine whether the benefit of GST is passed on:
  • to identify persons who have not passed on the benefit;
  • to order reduction of prices;
  • to repay the customer an amount which is not passed on along with interest/imposition of penalty on the supplier;
  • cancellation of registration etc.

Ambiguities in Anti Profiteering provisions

Various challenges are being faced by the business community in complying with anti-profiteering rules:

  1. The anti-profiteering provisions do not prescribe the specific guidelines on records or documentation to be maintained to prove compliance with the rules.
  2. A definite method for computing the benefit on implementing GST has also not been prescribed.
  3. Absence of clear guidelines could lead to ambiguity and businesses will be constrained in proving the compliance with these provisions.
  4. Absence of specific time limit with respect to operation makes it unclear for the industry as to how long the specified benefits need to be passed on.
  5. Businesses are very dynamic and pricing is determined based on the market forces in most of the cases.
  6. Even though the regular price increase does not come under the purview of anti-profiteering, justifying the same could become a difficult task for the businesses.

Dilemma of Business community

  1. Under the anti-profiteering provisions, businesses are required to pass on the benefit of reduction in tax rate and increase in input tax credit on any supply of goods or services.
  2. This implies that benefit needs to be passed on at each supply level and not at the entity level.
  3. If an entity is engaged in supplying more than one product or service then for each such supply the benefits, if any, needs to be computed and passed on to the recipient.
  4. There could be cases where losses are incurred in certain products, even in such cases the benefit may have to be passed on if applying GST has resulted in a reduction in losses.
  5. In the recent past, businesses in various sectors have received notices under anti-profiteering provisions.

The Way Forward

  1. Businesses should consider evaluating the likely impact of the anti-profiteering clause and review its pricing policy for the product and/or services.
  2. Even where there is no benefit accruing to the company, the same has to be properly documented so that it can be explained to the authorities if the need arises.
  3. Anti-profiteering provisions are a positive step towards protecting consumer interests and rein in undue profiteering so that GST does not add to inflation in the economy.
  4. However, GST is a new and evolving law, hence, there’s still a sense of confusion and lack of clarity on many aspects.
  5. One step may be to adopt a soft approach vis-à-vis the businesses where there is no prima facie mala fide intent. This would go a long way in building the confidence and trust among the businesses.
Jun, 20, 2018

[op-ed snap] GST, a buoyant force

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: GST

Mains level: Impact of GST implementation on economy


Context

Performance of GST

  1. One fiscal year into the implementation of the GST, it is worth asking how it has performed in terms of revenue generation both for the country and for individual states

Three important findings:

Aggregate revenues are highly buoyant

  • This year’s Economic Survey had argued that confusion reigns in understanding GST performance because of focusing on one or more of the bewildering sub-categories of the GST (CGST, SGST, IGST, cess etc)
  • A revenue growth of 11.9 percent has been observed, compared with the relevant pre-GST numbers
  • The implied tax buoyancy (responsiveness of tax growth to nominal GDP growth) is 1.2, which is high by the historical standards for indirect taxes

“True” compensation requirements are minimal

  • The government produces estimates which show that compensation, although financeable from within the GST, has been substantial
  • Nearly all the states have seen their revenues grow by at least 14 percent
  • There will be likely improvements in compliance with the introduction of e-way bills and invoice matching
  • There are very few states where there is a significant decline in the post-GST share compared to the pre-GST share

GST is boosting revenues of consuming states

  • Evidence from the first nine months suggests this
  • Many of the net consuming states, such as nearly all the North-eastern states as well as UP, Rajasthan, MP, Delhi, Kerala, and West Bengal, have indeed increased their post-GST shares
  • States that have seen a small decline in their shares are states that had special tax regimes in terms of incentives or in agriculture

Further reforms 

  1. Simplifying the rate structure
  2. Widening the base to include currently exempted sectors
  3. Streamlining procedures for filing and refunds

Way Forward

  1. From a revenue perspective, and especially considering the headwinds, the GST has been a positive development
  2. The GST appears to be a force for fiscal convergence
Jun, 11, 2018

[pib] Government introduces new scheme ‘Seva Bhoj Yojna’

Note4Students

From UPSC perspective, the following things are important:

Prelims level: Particulars of the Scheme

Mains level:  Not Much


News

Aim: Scheme seeks to reimburse Central Share of CGST and IGST on Food/Prasad/Langar/Bhandara offered by Religious and Charitable Institutions free of cost without any discrimination to Public/Devotees.

Nodal Ministry: The Ministry of Culture, Government of India

Total Outlay: Rs. 325.00 Crores for Financial Years 2018-19 and 2019-20.

Criteria for Charitable Religious Institutions

  1. These includes  Temples, Gurudwara, Mosque, Church, Dharmik Ashram, Dargah, Matth, Monasteries etc. which have been in existence for at least five years before applying for financial assistance/grant.
  2. These should serve free food to at least 5000 people  in a month and 
  3. Such institutions are covered under:
  • Section 10( 23BBA)  of the Income Tax Act  or
  • Institutions registered as Society  under Societies Registration Act ( XXI of 1860) or as a
  • Public Trust under any law for the time being in force of statuary religious bodies constituted under any Act  or
  • Institutions registered under Section 12AA of Income Tax Act shall be eligible for a grant under the scheme.

Execution of the Scheme

  1. Ministry of Culture will register the eligible charitable religious institutions for a time period ending with finance commission period and subsequently the registration may be renewed by the Ministry, subject to the performance evaluation of the institutions.
  2. The details of registered institutions will be available on an online portal for the viewership of public, GST authorities and entity / institution itself.
  3. The entity / institution will be permitted to submit the reimbursement claim of the GST and Central Government share of IGST to designated authority of GST Department at State level in the prescribed format during the validity of registration.
  4. All the eligible institutions should be registered with Darpan portal
Jun, 04, 2018

India flouting global laws by taxing international air tickets: IATA

Note4students

Mains Paper 2: IR | Important International institutions, agencies & fora, their structure, mandate

From UPSC perspective, the following things are important:

Prelims level: International Air Transport Association (IATA), International Civil Aviation Organisation (ICAO)

Mains level: GST implementation on various segments and its impact on international relations


News

ICAO resolutions prohibiting tax

  1. The International Air Transport Association (IATA) has castigated India for taxing international tickets
  2. India was taxing international tickets in contravention of the resolutions of the UN body International Civil Aviation Organisation (ICAO)
  3. India helped develop ICAO resolutions prohibiting a tax on international tickets

GST net on tickets

  1. The Indian government had announced the implementation of the GST from 1 July 2017
  2. The tax covers airline products and services including tickets, ancillary, change, refund and other products and fees

Back2Basics

International Civil Aviation Organisation (ICAO)

  1. The International Civil Aviation Organization is a specialized agency of the United Nations
  2. It codifies the principles and techniques of international air navigation and fosters the planning and development of international air transport to ensure safe and orderly growth
  3. Its headquarters are located in the Montreal, Canada
  4. ICAO defines the protocols for air accident investigation followed by transport safety authorities in countries signatory to the Chicago Convention on International Civil Aviation
  5. ICAO is distinct from other international air transport organizations, like the International Air Transport Association (IATA), a trade association representing airlines; the Civil Air Navigation Services Organization (CANSO), an organization for Air navigation service providers (ANSPs); and the Airports Council International, a trade association of airport authorities
  6. The Council of ICAO is elected by the Assembly every 3 years and consists of 36 members elected in 3 categories: PART I – (States of chief importance in air transport), PART II – (States which make the largest contribution to the provision of facilities for international civil air navigation), PART III– (States ensuring geographic representation)
May, 07, 2018

GST Network will soon become a 100% govt-owned company

Note4students

Mains Paper 2: Governance | Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential

From UPSC perspective, the following things are important:

Prelims level: Particulars of the GSTN

Mains level: The new proposal.


News

Proposal approved by the GST council

  1. The Goods and Services Tax Network – Special Purpose Vehicle (GSTN-SPV) will cease to be a private company and morph into a 100 per cent government owned entity
  2. The GST Council, headed by Union Finance Minister Arun Jaitley, approved a proposal for the conversion at its recent meeting

Particulars of the GSTN

  1. GSTN is the IT backbone of the unified indirect tax system
  2. GSTN was created as a private limited, not-for-profit company under Section 25 of the Companies Act, 1956, by the government on March 28, 2013
  3. to provide shared IT infrastructure and services to the Centre and the State governments, taxpayers and other stakeholders for the implementation of the GST
  4. Currently, the Centre and State Governments hold 24.5 per cent stake each in GSTN; non-governmental institutions hold the other 51 per cent
  5. These institutions include HDFC, HDFC Bank, ICICI Bank, NSE Strategic Investment Co and LIC Housing Finance Ltd.

New proposal

  1. From now, the Centre will hold 50 per cent, and the remaining stake will be held by States governments on a pro rata basis
May, 07, 2018

[op-ed snap] GST’s complicated: The new compliance system

Note4students

Mains Paper 2: Governance | Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential

From UPSC perspective, the following things are important:

Prelims level: Read the attached story

Mains level: The new decisions taken by the GST Council and their possible effects on industry.


News

New compliance system

  1. The GST Council has recently decided to introduce a new compliance system under which a single monthly GST return will have to be submitted by firms, barring a few exceptions
  2. The new compliance system will be implemented in phased manner
  3. with the first of three transition stages to begin six months from now

There are some gaps in the new compliance system

  1. For instance, in the second stage of the transition to simpler returns, buyers will get provisional input credit even if the seller doesn’t upload the invoices
  2. While this could lead to disputes, in the third stage input credits will only be granted after sellers upload invoices
  3. But if a seller defaults on depositing GST dues collected from a buyer and remains evasive, the authorities can reverse the credit availed by the buyer for such outstanding taxes

Fresh uncertainty for businesses: Issue with the timeline

  1. In any case, the timelines for the transition are long and bring fresh uncertainty for businesses still recovering from the initial jitters and confusion around the tax regime
  2. Firms will again have to cope with significant changes in accounting software in the middle of the financial year

Imposition of new cess

  1. The most troubling is the Centre’s push for the imposition of a cess on sugar over and above the 5% GST levied on it
  2. A cess at the rate of Rs. 3 a kg is proposed to alleviate ‘deep distress’ among sugarcane farmers. Not surprisingly, this faces opposition from several States
  3. It has been rightly argued that this will burden consumers while favouring larger sugarcane-growing States like U.P. and Maharashtra

The decision to make the GSTN a 100% government-owned firm

  1. The decision explains neither how this will address data security concerns nor the impact on the Network’s functional efficiency, which was the original stated intent for giving private players an upper hand in operations
May, 05, 2018

Highlights of the 27th GST Council Meeting

Note4Students

Mains Paper 3 | Indian Economy and issues relating to planning, mobilization of resources, growth

From UPSC perspective, the following things are important:

Prelims level:  Composition and Working of GST Council, Highlights of the 27th Meeting

Mains level: Effective Implementation of GST


News

New Returns Design

  1. GST Council in its 27th meeting approved principles for the filing of new return design based on the recommendations of the Group of Ministers on IT simplification
  2. Government is keen to introduce the simplified return design at the earliest to reduce the compliance burden on the trade in keeping with the philosophy of ease of doing business

Single Monthly Return

  1. The GST Council approved a single, monthly return form that would become applicable in six months
  2. The current system of filing the GSTR-1 and GSTR-3B forms would continue till then

GST Network to become 100% govt. enterprise

  1. The Goods and Services Tax Network – Special Purpose Vehicle (GSTN-SPV) will cease to be a private company and morph into a 100 percent government-owned entity
  2. Currently, the Centre and State Governments hold 24.5 per cent stake each in GSTN; non-governmental institutions hold the other 51 percent
  3. These institutions include HDFC, HDFC Bank, ICICI Bank, NSE Strategic Investment Co and LIC Housing Finance Ltd.
  4. Following the decision, the Centre will hold 50 percent, and the remaining stake will be held by States governments on a pro rata basis

Back2Basics

GST Council

  1. The Constitution (101st  Amendment) Act, 2016 added Article 279A in the Constitution under which GST Council has to be constituted by the President within 60 days of the commencement of Article 279A(1).
  2. The GST Council shall consist:
  • Chairperson: Union Finance Minister
  • Member: The Union Minister of State (MoS) in-charge of Revenue of finance (Member)
  • Other Members from each State: The Minister In-charge of taxation or finance or any other Minister as nominated by each State Government

Functions:

  • Recommend Taxes, cesses, and surcharges to be subsumed under the GST
  • Goods and services which may be subject to, or exempt from GST
  • Threshold  limit of turnover for application of GST
  • Rates of GST
  • Special provisions with respect to the NE and Himalayan states
  • Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster
May, 03, 2018

[op-ed snap] Delivering the goods: GST revenue increase

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: E-way bills, etc.(read the attached story)

Mains level: GST revenue increase suggests the indirect tax regime is overcoming teething problems. The newscard discusses possible reasons behind this increase and suggests some solutions for further boost in the collection.


News

Highest(single month) collection from the GST

  1. Collections from the Goods and Services Tax crossed the Rs. 1 lakh crore mark in April
  2. To be precise, the total revenue from the new indirect tax in April was Rs. 1,03,458 crore, the highest recorded in a single month since its implementation in July 2017

The number of  GST-payers has increased

  1. Ddata released suggest the number of registered tax-payers filing GST returns by the specified deadline has risen from 57% for July to nearly 63% for March
  2. Suggestion: Further simplification of the returns must be expedited to improve compliance

Is it really the “confirmation of increased economic activity”?

  1. Though it referred to the record GST collections as a sign of an upswing in the economy
  2. But the government, to be fair, also stressed that this number may be driven by the human tendency to wrap up pending official dues at the last moment
    (which in this case is the last month of the financial year)
  3. Yet, even delayed compliance is a welcome ‘new normal’

The GST collection is satisying

  1. It is true that the revenue influx in April cannot be taken as a firm trend for the future
  2. But given the issues the GST caused in its initial months and the fear of high evasion levels that gripped officials when revenues tumbled after three months of Rs. 90,000 crore-plus collections,
  3. it is fair to say that the new tax system has ended its first three quarters on a robust note

The average monthly collection is also satisfying

  1. The average monthly collection has gone from Rs. 89,885 crore in the first eight months to over Rs. 91,300 crore
  2. This number is important, as the new regime needed to deliver about Rs. 91,000 crore a month to ensure that revenues lost by the Centre and the States under the earlier indirect tax system are covered

Efforts done to boost the GST collections

  1. Fresh anti-evasion measures introduced in the past few weeks, such as the e-way billing to track movement of goods, could plug leakages to some extent
  2. The government is keen to start matching tax credits claimed by businesses for inputs from suppliers
  3. These efforts should boost GST revenues in the new financial year
Apr, 24, 2018

Intra-State e-way bills: phase 3 to start Apr. 25

Note4students

Mains Paper 2: Governance | Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential

From UPSC perspective, the following things are important:

Prelims level: The e-way bill system

Mains level: The system is an important part of the GST initiative. Without this system, government can’t achieve its goal of a less complex tax regime.


News

Third phase of the e-way bill system

  1. The Goods and Services Tax (GST) Council has announced the third phase of the roll-out of the e-way bill system for intra-State movement of goods
  2. The system would become applicable for Arunachal Pradesh, Madhya Pradesh, Meghalaya, Sikkim and Puducherry from April 25
    (in the 3rd phase)
  3. While the system is applicable across the country for inter-State transport of goods, it is so far applicable for intra-State transport in:
    Andhra Pradesh, Bihar, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Telangana, Tripura, Uttarakhand and Uttar Pradesh

This phase will pave the way for a single e-way bill system

  1. With the roll-out of the e-way bill system in these(mentioned above) States/union territory,
  2. it is expected that trade and industry will be further facilitated insofar as the transport of goods is concerned, thereby eventually paving the way for a single e-way bill system

Back2basics

What is e-way bill?

  1. The E-way bill, short form for electronic way bill, is a document to be generated online under the GST system, when goods of the value of more than ₹50,000 are shipped inter-State or intra-State
  2. The E-way bill must be raised before the goods are shipped and should include details of the goods, their consignor, recipient and transporter
  3. For a comprehensive readClick here
Mar, 31, 2018

E-way bill mandatory for inter-state movement of goods from Sunday

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: e-way bill, GST

Mains level: Issues related to the implementation of GST


News

E-way bill system to be functional again

  1. Businesses and transporters moving goods worth over Rs50,000 from one state to another will have to carry an electronic or e-way bill from 1 April
  2. The e-way bill provision of the goods and services tax (GST) was first introduced on 1 February

Changes in the system

  1. With several states also starting to generate intra-state e-way bills on the portal, the system developed a snag
  2. The GSTN has now activated only that facility on its portal where an e-way bill can be generated when goods are transported from one state to another by either road, railways, airways or vessels
  3. The system has been designed and developed by National Informatics Centre (NIC)

Back2Basics

E-way bill

  1. EWay Bill is an electronic way bill for movement of goods which can be generated on the eWay Bill Portal
  2. Transport of goods of more than Rs. 50,000 (Single Invoice/bill/delivery challan) in value in a vehicle cannot be made by a registered person without an eway bill
  3. When an eway bill is generated a unique eway bill number (EBN) is allocated and is available to the supplier, recipient, and the transporter
  4. An e-way bill is valid for 1 day for distance less Than 100 Kms and additional 1 day for every additional 100 Kms or part thereof
  5. The validity of Eway bill can be extended
Mar, 13, 2018

[op-ed snap] Not by fear alone: GST e-way Bills

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The e-way bill system and related concerns.


News

Important decision taken by the GST council

  1. The council has decided to stick to the prescriptions of the group of ministers on the rollout of the e-way bills system
  2. So, starting April 1, all inter-State movement of goods above the value of Rs. 50,000 will require the generation of an e-way bill to help track their movement

Rolling out of the e-way bill plan

  1. As proposed by the ministerial group, the e-way bill system for tracking intra-State movement will be launched in a phased manner, with all States to be on board by June 1
  2. From April 1 onwards, every week a few States will start the system for internal trade

Why is this decision important?

  1. The government is keen to use the (e-way bill)system to foil tax evasion or non-filing of returns
  2. Issue: But this is a compliance nightmare in the making for taxpayers with operations in multiple locations

Agencies(The Central Board of Excise and Customs, together with the GST Network) have begun deploying data analytics on the vast repository of information collected from taxpayers

  1. Action is likely to begin soon on taxpayers, based on variances and data gaps that have been found in returns

Some related concerns

  1. While industry remains edgy about the capacity of the IT system to cope with e-way bills from April 1, new rules and forms for the generation of these transit challans have been issued
  2. Tax experts have voiced concern about some of these rules,
  3. including one that empowers commissioners to notify those officers who can intercept any mode of conveyance to carry out physical verification of e-way bills while goods are in transit, akin to the old physical checkpost system

Disappointment for taxpayers

  1. The  most disappointing for business is the failure of the GST Council to finalise a simplified tax form for assessees
  2. For now, taxpayers will have to stick to the current compliance system till June 2018
Feb, 12, 2018

GST will aggravate India’s huge tax litigation problem

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: Economic Survey, GST, Anti-profiteering

Mains level: Tax litigation problem in India


News

Tax litigation status

  1. Economic Survey points out that more than 200,000 tax cases, amounting to nearly 4.7% of India’s gross domestic product (GDP), are stuck in appellate litigation across all levels of the judiciary
  2. The introduction of a rather complex goods and services tax (GST) will aggravate the problem

How tax litigations rise?

  1. Tax officers consider issuing tax notices and leave it to the courts to finally take a call on the tax position
  2. This gets accentuated on matters where more than one interpretation is possible
  3. Also, once a tax demand had been issued for a particular year, recurring notices are issued for all subsequent years till the matter attains finality
  4. This increases litigation manifold

Taxpayers have an upper edge

  1. The Economic Survey says the department loses 65% of its cases and the success rate of the department has been declining
  2. Fire and forget behavior of tax officers is possibly one reason why the majority of the cases are finally decided in favor of the taxpayer

Measures announced for dispute resolution processes

  1. Some measures were announced in the Union budget to smooth the dispute resolution processes and to reduce litigation
  2. Improvements have been made in the advance rulings system, pre-notice consultations and in the rules for show cause notices

A user-friendly GST will help

  1. Global experience shows that during initial years of GST implementation, tax litigations dramatically shoot up
  2. India is unlikely to be an exception, especially given the controversial anti-profiteering clause
  3. A user-friendly GST would not only lower litigation but also boost compliance and consequently revenue collections
Feb, 02, 2018

Centre puts on hold e-way bill

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: E-way bill system, GST

Mains level: Implementation of reforms like GST and problems that arise during this


News

E-way bill implementation deferred

  1. The government has deferred the implementation of the e-way bill system
  2. It has been decided to extend the trial phase for generation of the e-way bill, both for inter- and intra-State movement of goods
  3. This is due to the “technological glitches” faced by the businesses and the transporter community on the first day of the rollout

Back2Basics

E-Way bill

  1. Under the GST regime, all consignments worth over ₹50,000 moving over 10 km from their origin will require prior registration and generation of an e-way bill
  2. This has to be done through the GST network
  3. It is not necessary to generate e-Way Bill if the mode of transport is non-motor vehicle
  4. The system is aimed at helping authorities keep track of all taxable goods and detect potential tax evasion
Jan, 30, 2018

Taxpayer count rises post GST

Image Source

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Increase in number of indirect taxpayers is a significant achievement of the GST.


News

Findings of the Economic survey

  1. According to the survey, the GST has resulted in a 50% increase in the number of indirect taxpayers
  2. Also, the tax regime has revealed new data on key aspects such as inter-State trade, State-wise exports, and the extent of formalisation in the economy

Voluntary compliance

  1. Data showed GST had resulted in a significant increase in voluntary compliance
  2. About 1.7 million registrants who were below the threshold annual turnover limit of Rs. 20 lakh choos to register for GST nevertheless

Other findings of the survey

  1.  GST data has showed that the formal sector in India was larger than earlier thought
  2. India’s internal trade is about 60% of GDP, even greater than estimated in last year’s Survey and comparing very favourably with other large countries
Dec, 22, 2017

[op-ed snap] GST, a work in progress

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: GST

Mains level: All aspects related to implementation and working of GST (A question was asked in Mains 2017 on it)


Context

Problems associated with GST

  1. The introduction of the Goods and Services Tax (GST) raised much hope that it would herald the emergence of a ‘good and simple tax’ with ‘one nation, one market, one tax’
  2. There has been considerable concern with the new tax, both in its structure and operational details, including the ease of paying the tax and filing returns
  3. Trade and industry have been grappling with the problem of payment, filing the returns and claiming input tax credit, and exporters have been facing liquidity crises

History of GST

  1. GST is a standard policy recommendation for every country going in for the structural adjustment programme of the International Monetary Fund
  2. The GST has taken centre-stage in many countries and is considered important in view of the competitive reduction in corporation tax rates due to high mobility of capital
  3. Of over 165 countries which have adopted GST in one form or another, only five have repealed it (Belize, Ghana, Grenada, Malta and Vietnam), but have reintroduced the tax later

Desirable features of GST

  1. It is important not to have too low thresholds
  • Reasonably high thresholds will reduce the compliance burden to a large number of small businesses without much impact on revenue
  • In developing countries, a threshold closer to $100,000 would eliminate 75% of the taxpayers with a revenue loss of less than 4%

2. GST should have fewer rates

  • Multiple rates create classification problems, are harder to administer and would require the general rate of tax to be higher
  • It would also invite a lot of lobbying by special interest groups

3. It is important to prepare well before the plunge

  • Most countries take at least two years to prepare for the introduction of reform to ensure a smooth transition
  • This is particularly necessary for developing and testing the technology platform, educating the tax collectors and taxpayers and to avoid any anomalies in the structure of the tax

Indian version of GST

  1. Given that the reform had to be evolved by taking into account the views of 29 States, two Union Territories with legislatures and the Union government, compromises are inevitable
  2. It is impossible to expect the structure of the tax to be ideal
  3. Some bad initial features may be an essential compromise to get the tax accepted in the first place
  4. Having four tax rates and three rates of cesses should have been avoided
  5. It enormously complicates the technology platform to ensure input tax credit mechanism

Way Forward

  1. Problems of transition to a major tax reform are unavoidable and most countries go through this
  2. All traders, in one way or the other, are being brought into the formal sector which would hurt some of them
  3. It appears desirable to move immediately towards three slabs with the final goal of reducing the slabs to two
    and to fix the threshold at ₹50 lakh
Dec, 20, 2017

[op-ed snap] Transit gambit

Image source

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: E-way bills

Mains level: Issues arising out of the e-way bill system


News

Anxiety of the Industries

  1. Businesses are anxious about how the roll-out of e-way bills will pan out
  2. Starting February 1, all inter-State movement of goods worth over Rs. 50,000 will be tracked with the introduction of the e-way bill system under the GST regime

What is an e-way Bill?

  1. It is an electronically generated document which is required to be generated for the movements of goods

Conditions under for e-way bill system

  1. All consignments moving more than 10 km from their origin will require prior registration and generation of an e-way bill through the GST Network
  2. It will be valid for varying durations depending on the distance travelled

Intra-state e-way bill system

  1. A few States have already imposed their own requirements for such bills since the GST roll-out in July
  2. And all States have to implement the bill system for capturing intra-State trade by June 1
  3. Therefore, a fully integrated tracking system for all taxable goods can be expected only then

What is the issue?

  1. This poses an interim headache for firms operating across States
  2. As they will now face differing compliance requirements for inter-State trade and intra-State trade, depending on when individual States launch their own e-way bill systems
    (Note: Inter-State movement of goods was also tracked under the VAT (value-added tax) regime, but intra-State transactions were not)

Relaxation for some products

  1. Over 150 items of common use, including LPG cylinders, vegetables, foodgrain and jewellery, will be exempt from such transport permits
  2. Goods moved on non-motorised conveyance, such as carts, have been left out

Issue related to low GST collection

  1. After a monthly Rs. 90,000 crore-plus inflow in the GST’s first three months, revenue in October plummeted to just over Rs. 83,000 crore
  2. With States claiming a revenue shortfall of about Rs. 40,000 crore so far under the GST, the Centre, which has to fill that gap, is also feeling the stress

The way forward

  1. Plugging revenue leakages is essential, and encouragingly, Karnataka’s e-way bill experience in the first month saw very few glitches
  2. Given industry’s nervousness, the government must simplify the onerous rules proposed for e-way bills
Dec, 18, 2017

GSTN plans data scan to detect tax evasion

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: GST, GSTN, Data mining, input tax credit

Mains level: Increasing use of data analytics in various government processes


News

Data mining to detect tax evasion

  1. Goods and services tax (GST) network, or GSTN, the information technology backbone of the new indirect tax regime is initiating the process of mining data to detect tax evasion and analyze taxpayer behavior
  2. GSTN will soon float a request for proposal (RFP) from data analytics companies to analyze data
  3. This will be done after meeting central and state government officials and understanding their requirements

Will data mining start immediately?

  1. GSTN will start data analytics when it has sufficient data spanning a year
  2. GST was rolled out in July this year and the tax returns started coming in August

Benefits of data mining

  1. The data can help tax authorities study region-wise patterns as well as user behavior
  2. This data could be linked to the direct tax database to see if the profitability and subsequent taxes paid are in line with the turnover

Is this a part of GSTN mandate?

  1. Along with registration, return and payment processes, business intelligence analytics is also part of the GSTN’s mandate

How will this be possible?

  1. The technology backbone of this tax requires all suppliers in the credit chain to upload their invoices onto GSTN for claiming input tax credit
  2.  This means that all suppliers are forced to document their sales and raise invoices
  3. Input tax credit is the tax paid at every sale in the supply chain that can be claimed as credit

Back2Basics

GST and GSTN

  1. GST is a destination-based tax that aims to remove barriers across states and integrate the country into a common market
  2. The Goods and Service Tax Network (or GSTN) is a non-profit, non-government organization
  3.  It will manage the entire IT system of the GST portal, which is the mother database for GST
  4.  This portal will be used by the government to track every financial transaction and will provide taxpayers with all services – from registration to filing taxes and maintaining all tax details
Dec, 06, 2017

The unfortunate consequences of GST anti-profiteering rules

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: Anti-profiteering, GST

Mains level: Aftereffects of GST


News

Anti-profiteering methodology

  1. India may adopt a product-specific approach similar to that of Australia to ensure that the full benefit of price reductions due to the goods and services tax (GST) is passed on to consumers
  2. This means that when the authority gets any complaint, it will examine the input tax credit flowing into a product and the resultant reduction in total tax

Anti-profiteering not been a success in most countries

  1. Enforcing this will be a tall order especially because anti-profiteering has not been a success in most countries where implemented
  2. Australia, Malaysia, Canada and New Zealand are some countries where anti-profiteering or similar provisions have been put in place
  3. It crimped corporate profitability and it could also result in tax terrorism

Why did this happen?

  1. Such provision can work only when things like raw material costs do not swing sharply
  2. There are many such variables and they would differ from one company to another, adding to the implementation challenge
  3. The movement in prices is also a function of the demand-supply scenario
Dec, 05, 2017

CBEC calls for reality check to boost GST mop-up 

Note4students

Mains Paper 3: Government Budgeting.
Prelims level: not much
Mains level: Issues in GST implementation and Steps Taken to resolve them

News

  1. The Central Board of Excise and Customs (CBEC) has sought detailed field reports with a special focus on the top taxpayers.
  2. Field officers have been asked to submit a detailed analysis comparing tax payments, before and after GST was imposed, of the top 100 taxpayers in their jurisdictions
Reasons:
  1. India’s GST collections in October fell to Rs 83,346 crore from a high of over Rs 92,000 crore in September.
  2. Moreover, the Centre’s share has been low after payment of compensation cess to states.
  3. The government is looking to avoid any revenue shortfall as it’s keen to stick to the fiscal deficit roadmap while nurturing an economic revival.
  4. The fiscal deficit was at 96% of its full-year target by the end of October.
Nov, 17, 2017

GST rate cut: Union Cabinet gives nod for body to guard against profiteering

Image source

Note4Students

Mains Paper 3 | Indian Economy and issues relating to planning, mobilization of resources, growth

From UPSC perspective, the following things are important:

Prelims level: GST, GST Council, National Anti-Profiteering Authority, Anti-Profiteering Framework

Mains level: The news card talks about Union cabinet’s approval to set up National Anti-Profiteering Authority, the composition of the authority and various concerns related to it


News

Context

  • The Union Cabinet on approved the setting up of a National Anti-Profiteering Authority, a body with an overarching mandate to ensure that the reduction in tax rates under the new Goods and Services Tax (GST) regime gets passed on to consumers by way of lower prices

The Anti-Profiteering Framework

  • The anti-profiteering framework under the new indirect tax regime consists of the National Anti-Profiteering Authority at the top, a standing committee, screening committees in every state and Directorate General of Safeguards in the Central Board of Excise & Customs (CBEC).

National Anti-Profiteering Authority

  1. The authority will have the power to cancel registration of any entity or business if it fails to pass on the benefit of lower taxes under the GST regime to consumers and empowers consumers to approach it in case of any complaint
  2. It enables consumers to file complaints in case the benefits are not transferred to them
  3. Section 171 of the CGST Act, which pertains to anti-profiteering provides for the establishment of such a authority

Composition of the Authority

  1. It will be a five-member committee
  2. It will be headed by Cabinet Secretary and comprising Revenue Secretary, CBEC Chairman and chief secretaries from two states, has been entrusted to finalize the chairman and members of the authority
  3. The chairman and the four members have to be less than 62 years
  4. The authority will have a sunset date of two years from the date on which the chairman assumes charge

What actions can National Profiteering Authority take in case of Profiteering by Companies?

  1. If the authority finds that a company has not passed on the benefits, it can direct the entity to pass on the benefits to consumers along with interest at the rate of 18 percent from the date of collection of the higher amount till the date of return of such amount.
  2. If the beneficiary cannot be identified, the authority can ask the company to transfer the amount to the ‘Consumer Welfare Fund’, as provided under Section 57 of CGST Act.
  3. According to the anti-profiteering rules, the authority can also order imposition of penalty if the registered GST assessee has not passed on the benefit to the recipient.

What was the need for this Authority?

  1. The move comes in the backdrop of the GST Council’s announcement last week of a cut in the rates of over 200 items, as well as a cut in the GST rate for all restaurants, barring those in starred hotels, to 5 percent
  2. It was reported that as per the internal estimates, although the big restaurants were claiming about 6-7 percent of the GST rate as input tax credit (ITC) on overheads such as rent but they were not transferring the benefits to consumers by way of lower prices

Concerns

  1. Meanwhile, tax experts and industry have expressed concern about the methodology to be followed by the investigating authority to determine the quantum of the “commensurate” reduction
  2. From an industry perspective, there are lot of implementation challenges and operational issues as to how to pass on the benefit
  3. Also, industry expects detailed guidelines providing guidance on the same must be issued at the earliest by the GST Council
Nov, 11, 2017

Only 50 items left in highest GST slab, list slashed three-quarters to ease tax burden

Image source

Note4Students

Mains Paper3 | Indian Economy and issues relating to planning, mobilization of resources, growth

Prelims level: GST, GST Council

Mains level: The news card highlights the changes made with respect to the GST in the 23rd GST council meeting


News

Context

GST Council 23rd Meeting: Key Takeaways

  1. The highest Goods and Services Tax (GST) bracket was slashed three-quarters with only 50 items being retained in the 28 percent slab.
  2. The GST Council, at its 23rd meeting, moved 178 items out from the list of 228
  3. It also decided to reduce the tax rate for all restaurants, barring those in luxury hotels, to 5 percent, without any input tax credit
  4. These measures are expected to cost the exchequer around Rs 20,000 crore
  5. The tax rate for manufacturers under the composition scheme was also reduced to 1 percent from the earlier rate of 2 percent, bringing it at par with the tax rate for traders
  6. The composition scheme for restaurants will continue unchanged with a tax rate of 5 percent
  7. The hike in the threshold for the composition scheme would require an amendment in the CGST Act, there was an agreement to increase it to Rs 2 crore from Rs 1 crore at present.
  8. Tanks and armored fighting vehicles have been now placed in the 12 percent tax slab instead of the earlier 28 percent
  9. The proposed rate changes will be effective from November 15 prospectively

Changes regarding GST for restaurants

  1. GST rate on takeaways have also been reduced to 5 percent without input tax credit, while the rate on outdoor catering will continue to be 18 percent with full input tax credit.
  2. Restaurants in hotels with room tariff of Rs 7,500 and above per day will attract 18 per cent GST with full input tax credit.

Changes regarding reduced compliance burden for businesses

  1. The Council also provided relief to businesses by easing requirements for return filing as well as lowering the penalty for late filing
  2. As many as 40 percent of the businesses filing returns on GST Network portal have nil tax.
  3. The Council lowered late return filing fees for businesses
Nov, 10, 2017

GST bonanza for firms, consumers on the anvil

Note4students

Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Composition of the GST council

Mains level: Concerns related the GST dilution


News

The GST council is likely to announce relief

  1. The GST Council is likely to announce relief for consumers and big and small businesses at its next meeting
  2. Small businesses and eateries will also get major relief as the flat GST rate they can pay under a special window called the composition scheme is likely to be cut

Proposals infront of the council

  1. (1) Permission for big businesses to file GST returns quarterly instead of monthly,
    (2) pruning the list of items in the highest tax slab of 28% and
    (3) raising the sales ceiling for small businesses from Rs1 crore to Rs1.5 crore to avail of the composition scheme are among the proposals before the GST Council
  2. Composition Scheme: It allows taxes to be paid at a concessional rate and makes compliance easy

Concerns

  1. Some on the GST Council believe that while change should be initiated to correct flaws, care should be taken not to dilute the tax reform
  2. This section of the council believes a logical approach should be adopted towards relaxations to be given to businesses

Example of Dilution of the GST reform

  1. In the original GST design, there was no place for tax exemptions—everyone pays tax and wherever legitimate tax incentives are needed, it is given as a refund
  2. But to help exporters tide over a liquidity crisis, the council at its last meeting on 6 October decided to continue two pre-GST schemes that allow duty-free sourcing of materials for export production till March 2018
Oct, 16, 2017

GST composition scheme: GoM consensus on providing relief to small restaurants

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: Composition scheme under GST

Mains level: Implementation of GST and its effect on overall economy


News

GoM provides relief to small and medium businesses

  1. Group of Ministers (GoM), constituted to make the composition scheme more attractive, agreed to provide more relief for small and medium businesses
  2. The five-member committee is learnt to have agreed upon the need to reduce the GST composition rate for dhabas/roadside eateries/small restaurants, from the existing 5 percent
  3. Also to have a differential GST rate for non-AC restaurants
  4. The GoM will also examine if inter-state outward supplies of goods can be a part of composition scheme and if input tax credit can be allowed to registered taxpayers receiving inward supplies from composition dealers

More representation

  1. GoM has agreed to invite representatives from the micro, small and medium enterprises (MSMEs) in the next GST Council meeting
  2. This is to incorporate their views while deciding on some more relief measures for the MSME sector

Measures already taken for MSME sector

  1. The measures taken for the MSME sector by the GST Council earlier this month include increase in the turnover threshold for Composition Scheme to Rs 1 crore as compared to the earlier turnover threshold of Rs 75 lakh
  2. Composition scheme dealers have to pay GST at the rate of 1 percent of the turnover, manufacturers at the rate of 2 percent and restaurants at the rate of 5 percent

Reliefs to other businesses 

  1. The GST Council had also allowed assesses with turnover less than Rs 1.5 crore to pay taxes and file returns on a quarterly basis instead of monthly basis, starting from October-December quarter
  2. The Council had also allowed small service providers to operate across multiple states without registering with the GST Network
  3. It has exempted service providers with annual aggregate turnover less than Rs 20 lakh from obtaining registration even if they are making inter-state taxable supplies of services

Back2Basics

Composition Scheme

  1. Under composition scheme, small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover
  2. This scheme can be opted by any taxpayer whose turnover is less than Rs. 1 crore
  3. No Input Tax Credit can be claimed by a dealer opting for composition scheme
  4. The dealer cannot supply GST exempted goods
  5. If a taxable person has different segments of businesses (such as textile, electronic accessories, groceries, etc.) under the same PAN, they must register all such businesses under the scheme collectively or opt out of the scheme
  6. A composition dealer cannot issue tax invoice. This is because a composition dealer cannot charge tax from their customers. They need to pay tax out of their own pocket

Read all about GST here- Click2read

Oct, 12, 2017

Centre cuts GST rates on oil exploration & production

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: GST- included and excluded items

Mains level: Implementation of GST and its aftereffects


News

Oil exploration and production under GST regime

  1. Setting the stage for inclusion of some of the petroleum products in the Goods and Services Tax (GST) regime, the government has reduced GST rates for exploration and production sector
  2. This is to reduce the cascading effect arising on account of non-inclusion of petrol, diesel, aviation turbine fuel, natural gas and crude oil

Why should petroleum products be brought under GST?

  1. The exclusion of petrol, diesel, crude, natural gas and ATF from GST increases the cost of these products
  2. This is because input GST not being creditable against the sale of these products adds to the cost of these products
  3. Further, excise duty / VAT payable on sale of these products is not available as credit to industries buying these products

Way forward

  1. GST Council should consider inclusion of some of the left out petroleum products for complete benefit for the sector than taking these ad-hoc relief measures

Back2Basics

Know all about GST here (Click2read)

Oct, 09, 2017

GST Council to rank companies on tax payment track record

Note4Students

Mains Paper3 | Indian Economy and issues relating to planning, mobilization of resources, growth

 

Prelims: GST and GST Council

Mains level: This article talks about the need of the envisaged ranking of businesses based on their track record of tax payments and what will be benefits and drawbacks of the same.


News

Context

  1. Federal indirect tax body, the goods and services tax (GST) Council is planning to implement from January a ranking of businesses based on their track record of tax payments.
  2. This ranking will enable businesses to judge how likely a material or service supplier will default on its tax payment obligations which could result in blockage of tax rebates if these items are sourced from them.

Why this ranking system?

  1. The ranking system is being worked out as a solution to complaints from companies that the tax rebates due to them are getting blocked for no fault of theirs because their suppliers who charged tax-inclusive prices have not remitted taxes to the government.
  2. Although tax authorities recognize that it is unfair to deny rebate to a company which has already paid indirect tax to its vendor, they are unable to grant the benefit as it will hurt the exchequer.
  3. The problem in giving rebate is that the tax which ought to have come in from one of the parties to a transaction is not received and the other party may claim refund from the government of what has been paid to its vendor.
  4. In the previous tax regime, there had also been many instances of fraud where fake invoices from vendors have been used to claim refund.

Flip side of the ranking system

  1. While it will facilitate a company to know the compliance level of its vendors, it is possible that businesses that have not paid certain taxes due to genuine alternative interpretation of law may get a poor score.
  2. It is unfair to place the responsibility of good behaviour of the supplier on the buyer, who unlike the government, has no enforcement powers other than approaching a court of law.
  3. It is been suggested that the ranking system should only capture defaults in payment of taxes that is collected from customers.

The GST compliance rating system, for which an enabling provision has been made in section 149 of the Central GST Act was not implemented at the time of launching the new tax system from 1 July as the cycle of tax return filing is yet to get stabilized.

Oct, 07, 2017

GST relief for small firms, rates cut for many groups

Note4Students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: Composition scheme

Mains level: Recent concerns related to slowdown in Indian economy and impact of GST in this regard


News

Key decisions of GST council

  1. The Goods and Services Tax Council allowed small companies to file quarterly returns instead of monthly submissions.
  2. Council also expanded the scope of the Composition Scheme for paying GST and making it easier for exporters to claim tax refund.
  3. The government also allowed small service providers to operate across multiple states without registering with the GST Network.
  4. To ease transportation problems of small unregistered businesses, the Council exempted Goods Transport Agencies from paying GST on services provided to an unregistered person.

Impact

  1. The decisions announced will ease compliance burden on nearly 90 percent of the tax assesses.

Composition Scheme

  1. The Composition Scheme has been made available to taxpayers having annual aggregate turnover of up to Rs 1 crore (previously 75 lakhs)
  2. This scheme is currently available to traders, manufacturers, and restaurants
  3. Traders have to pay tax at the rate of 1 percent of the turnover, manufacturers at the rate of 2 percent and restaurants at the rate of 5 percent
  4. Under the scheme, the assesses are not allowed to avail input tax credit

Back2Basics

Read all about GST here- Click2read

Sep, 29, 2017

EPFO gets notice under GST

Image Source

Note4students

Mains Paper 2: Polity | Statutory, regulatory and various quasi-judicial bodies.

From UPSC perspective, the following things are important:

Prelims level: Read the attached story

Mains level: The article shows working and powers of the GST intelligence unit.


News

Notice To Employees’ Provident Fund Organisation (EPFO)

  1. GST Intelligence unit has slapped a notice on the EPFO for defaulting on payment of service tax
  2. Also, the unit has sought to examine the PF department’s records till 2016-17
  3. It had sought for overall records of all its regional and zonal offices and issued separate notices to EPFO’s different offices.

EPFO’s argument over the notice

  1. The EPFO has told Revenue authorities that the PF office was exempted from paying service tax from April 2016
  2. And hence, its services were exempt from any levy under the new indirect tax system
  3. The EPFO cited an order dated April 13 from the Customs, Excise and Service Tax Appellate Tribunal
  4. The order said that it was not liable to pay service tax on the statutory activities performed under the Employees’ Provident Fund and Miscellaneous Provisions Act 1952
Sep, 28, 2017

[op-ed snap] A GST good and simple

Note4students

Mains Paper 3: Economy | Indian Economy Issues relating to planning

From UPSC perspective, the following things are important:

Prelims level: Read the attached story

Mains level: Due to low growth rate forecasts, the GST has become a hot topic of discussion, again.


News

Context

  1. The article talks about issues related to the implementation of the GST.

Suggested “Not-to-do list” for the implementation of the GST
(1) e-way bills

  1. The implementation of e-way bills should be postponed for at least a year
  2. The existing electronic system is inadequate
  3. Most transport operators have only a few trucks and it will be cruel to inflict this system on them when the Centre and states are ill prepared

(2) Monthly returns

  1. The proposed system of filing GSTR-1, GSTR-2 and GSTR-3, three returns per month, proved to be unworkable and necessitated the GSTR-3B return which is a monthly summary
  2. This monthly return should be continued for a year till the electronic infrastructure is improved
  3. It is also worth reconsidering the need to file 36 monthly returns per year per state
  4. These provisions are ill-advised and need to be dropped

(3) Matching of invoices

  1. This system does not exist anywhere in the world and there is not a single logical reason why this should be implemented in India
  2. It will place an intolerable burden on the electronic infrastructure

(4) Exports

  1. Under the earlier system, non excise exporters, merchant exporters and service exporters could simply export goods and services
  2. In the GST regime, an exporter has to execute a letter of undertaking subject to eligibility or a bond with bank guarantee just to export
  3. The government promised instant refunds but this has not happened
  4. Merchant exporters who could earlier procure goods without tax are required to pay the GST which is a cash outflow
  5. Unless the earlier system is restored, Indian exports will be seriously affected

Suggestions for the better implementation of the GST

  1. It is necessary to seriously consider a flat-tax GST rate of, say, 10 per cent, on all businesses with a turnover of upto Rs 2 crore regardless of the product or service
  2. Such a reduction will be a terrific boost to the growth of goods and services, while eliminating huge paper work and electronic overload
  3. It is also necessary to stop making changes in procedure and adding new requirements
  4. Seven amendments to the CGST rules in a span of less than three months and multiple amendments to notifications have only increased the confusion

The way forward

  1.  The multiple rates of taxation and an elaborate classification system are bound to lead to classification disputes
  2. A lower rate of GST will stimulate demand and spur economic growth because high taxes are always counter-productive
  3. Even the most ardent supporter of the GST cannot deny that the new system has not been as beneficial as expected
  4. It is dangerous to proceed with the hope that things will eventually settle down
  5. Immediate steps are necessary to counter the above discussed issues
Sep, 23, 2017

[op-ed snap] Tax trauma — On GST Network

Related image

Image source

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: Particulars of GST

Mains level: GST -Challenges


News

Context

  • Glitches in the GST regime are increasing the anxiety among Indian businesses

What are the issues?

  1. GST Network, is struggling to keep pace with the millions of invoices and returns being filed electronically by businesses across the country.
  2. It is clear that the network had not been fully tested for chinks before July
  3. Implication of these stumbles for 85 lakh taxpayers now registered for GST.
  4. For Exporters, because of delayed timelines for filing GST returns, no refunds can be expected before mid-November on input taxes paid in advance and the integrated GST levied on goods they imported.
    • ₹65,000 crore of working capital will get blocked, cramping their ability to ramp up capacity and raw material procurement in time for festive season orders from around the world.
  5. A ministerial group formed by the GST Council to resolve the GSTN’s glitches gave an assurance that 80% of the problems would be fixed by the end of October.
  6. Several revisions in deadlines, tax and cess rates, rules, clarifications and tweaks later, the GST regime is turning out to be neither simple nor friendly for taxpayers.

Back2basics

Goods and Services Tax (GST)

 

Sep, 15, 2017

[op-ed snap] Good and simple tax: on the GST regime

Image result for gst

Image source

Note4students

Mains Paper 3: Economy | Mobilization of resources

Once you are done reading this op-ed, you will be able to attempt the below.

“A course correction is essential to fix the glitches in the GST regime” Discuss

From UPSC perspective, the following things are important:

Prelims level: Particulars of GST

Mains level: Glitches in the GST regime


News

Context

  1. India’s GST regime is nearing the end of its first full quarter since roll-out this July
  2. Revenue collections from the first month appear robust, with just 70% of eligible taxpayers bringing in ₹95,000 crore.
  3.  If revenues remain healthy, the government would get the necessary fiscal room to rationalise multiple GST rates into fewer slabs and possibly lower levies as a stimulus

Glitches in the GST regime

  1.  Firms of all sizes across sectors struggling to file their first set of returns under the GST
  2. This is due to significant glitches in the GST Network, its information technology backbone, and issues of connectivity.
  3. To inspire confidence, this group must act not only expeditiously but also transparently — especially with regard to the GSTN’s operational capacity.

Problems with delay in filing returns

  1. Delay in filing returns, means that taxpayers expecting a refund from the authorities on taxes already paid will end up waiting for months
  2. This is bound to crimp their working capital availability and create an unjust burden on their finances, impacting their ability to scale up production 
  3. The problem is most acute for exporters, for whom the Council has now formed a special committee under the Revenue Secretary.
  4. These procedural problems need to be resolved as soon as possible for industry to be comfortable with this switch-over. 

Policy changes

  1. GST Council has already changed the announced tax rates on over 100 products and services within about 75 days of the roll-out.
  2. An ever-changing policy landscape is hardly conducive for attracting investment.

 

Sep, 15, 2017

GST to hit informal sector; GDP growth to moderate: UN report

Image Source

Note4students

Mains Paper 3: Economy | Growth

From UPSC perspective, the following things are important:

Prelims level: Particulars of the UNCTAD

Mains level: One can mention this report as a proof of how demonetisation and GST are the reasons behind low Growth rate.


News

UN Report on Indian Growth

  1. According to a UN report, India’s informal sector got badly affected by demonetisation and may take further hit due to GST
  2. India’s “output growth” is likely to slowdown to 6.7 per cent in 2017 from 7 per cent in the previous year
  3. Report Name: UNCTAD’s Trade and Development 2017

Contribution of Indian Banking System in India’s Growth

  1. According to the report, India’s growth performance depends to a large extent on reforms to its banking sector
  2. And it is burdened with large volumes of stressed and non-performing assets, and there are already signs of a reduction in the pace of credit creation
  3. Indian banks are saddled with NPAs of about Rs 8 lakh crore
  4. Since debt-financed private investment and consumption have been important drivers of growth in India, the easing of the credit boom is likely to slow GDP growth
    (A credit boom or “lending spree” is the rapid expansion of lending by financial institutions)
Aug, 28, 2017

GST intelligence arm to be regulator for gems & jewellery sector under PMLA

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Note4students

Mains Paper 2: Polity | Statutory, regulatory and various quasi-judicial bodies.

From UPSC perspective, the following things are important:

Prelims level: DGGSTI, PMLA

Mains level: These kind of government agencies are specially mentioned in the UPSC Mains syllabus. Hence, very important for the exam.


News

Directorate General of Goods and Service Tax Intelligence(DGGSTI)

  1. DGGSTI has been named the “Regulator” for dealing with money laundering cases in the gems and jewellery sector
  2. It is a newly created GST intelligence arm
  3. The Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 was amended to make the DGGSTI as the regulator with respect to the gems and jewellery sector
  4. After the amendment, the DGGSTI would now keep a track of transactions in the gems and jewellery sector to see if they are conformity with law
  5. The DG GSTI is the new name given to the Directorate General of Central Excise Intelligence (DGCEI), which was mandated to check service tax and central excise duty evasion

Powers of regulator, under the PMLA

  1. The regulator under PMLA issues guidelines and prescribes measures to establish client identity in different transactions
  2. Under PMLA, every reporting entity is required to maintain record of
    (1) all transactions of value exceeding Rs 10 lakh
    (2) all cross border wire transfers of more than Rs 5 lakh and all purchase
    (3) sale of immovable property of Rs 50 lakh or more

Definition of a Regulator, under the PMLA

  1. Under the PMLA, ‘Regulator‘ is defined as an authority or a Government which is vested with the power to license, authorise, register, regulate or supervise the activity of reporting entities or the Director as may be notified by the Government for a specific reporting entity or a class of reporting entities or for a specific purpose

Back2basics

PMLA

  1. Prevention of Money Laundering Act, 2002 is an Act of the Parliament of India enacted to prevent money-laundering and to provide for confiscation of property derived from money-laundering
  2. PMLA and the Rules notified there under came into force with effect from July 1, 2005
  3. The Act and Rules notified there under impose obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information in prescribed form to Financial Intelligence Unit – India (FIU-IND)
  4. The act was amended in the year 2005, 2009 and 2012 and now in 2017(as mentioned above)
Aug, 23, 2017

Finance Ministry modifies cash management system to include post-GST changes

Image Source

Note4students

Mains Paper 3: Economy | Indian Economy Issues relating to planning

From UPSC perspective, the following things are important:

Prelims level: Read the attached stroy

Mains level: It is important to note Post-GST steps of the central government


News

Modification of the Cash Management System

  1. The finance ministry has modified the cash management system of the Central government
  2. Why: to incorporate the change in date of tax receipts arising out of the new indirect tax regime of the Goods and Services Tax (GST)

Direction to all Departments and Ministries

  1. The finance ministry has asked all financial advisers of all departments and ministries to send a monthly/quarterly expenditure plan to the Budget division of the ministry
  2. This has to be done in within two weeks of passage of their detailed demand for grants in Parliament

Reasons behind the modification

  1. Monthly/quarterly expenditure plan form the basis of cash forecast and preparation of indicative calendar for government borrowing
  2. The monthly expenditure plan would form the basis of quarterly expenditure plan
  3. And departments/ministries will not be allowed to release payment beyond quarterly expenditure plan without prior consent of the Budget division
Aug, 16, 2017

Common use items exempt from e-way bill provision under GST

Image result for E-way bills

Image source

Note4students

Mains Paper 3: Economy | Mobilization of resources

 

From UPSC perspective, the following things are important:

Prelims level: GST, E-way bills

Mains level: Goods and Services Tax (GST) regime


News

Context

  • LPG, kerosene, jewellery and currency are among the common use items that have been exempted from the requirement of obtaining electronic permits for transportation under the GST regime.

E-way bills?

  1. GST regime, mandates obtaining permits called e-way bills for transporting goods consignment of more than Rs 50,000 in value with a view to checking tax evasion.
  2. E-way bill is also not required if goods are transported by non-motorised conveyances. Goods transported from international ports to hinterland ports for clearance by customs have been exempted from the requirement.
  3. The electronic permit would have to be generated when consignment value exceeds Rs 50,000 and is optional if the value is less than that.
  4. The e-way bills, which can be checked by designated tax officials by intercepting a transporting vehicle, are aimed at helping authorities keep track of goods and inter-state commerce.
  5. GST Council in its last meeting approved a list of 153 items that have been exempted from the requirement of obtaining e- way bills.

Exemptions

  1. These include domesticated animals like live bovine animals, swine and fish, fruits and vegetables, fresh milk, honey, seeds, cereals and flour.
  2. Also exempted is movement of betel leaves, non-alcoholic toddy, raw silk, khadi, earthen pot and clay lamps, puja samagri and hearing aids.
  3. Human hair, semen including frozen semen and condoms and contraceptives have also been exempted.
Aug, 10, 2017

[op-ed snap] GST impact on the logistics sector

Related image
Image source

Note4students

Mains Paper 3:Economy ] Infrastructure: Energy, Ports, Roads, Airports, Railways, etc.

Op-ed discusses about the impact of GST in logistic sector.

Once you are done reading this op-ed, you will be able to attempt the below.

Discusses the impact of GST in logistic sector in India?

From UPSC perspective, the following things are important:

Prelims level: GST

 Mains level: Prepare the effect of GST on different sectors of the economy.


News

Context:

  • Goods and services tax (GST), could affect profitability of the logistics sector in the short run, but operational efficiency is bound to improve in the long run.

Logistic sector?

  • The logistics sector broadly comprises the road transport sector, the storage and warehousing sector and finally third-party logistics (3PL).

Logistic performance

  1. Two key performance measuresprofit after tax (PAT) as percentage of income and profit before interest, taxes, depreciation and amortization (PBITDA) as percentage of income
  2. Between 2010 and 2015, PAT has declined for all sub sectors and shows volatility for the logistics and the storage sector
  3. PBITDA is an important measure that reflects operating efficiency ranges between a low of 7% for the road transport sector to a high of 20% for the storage sector.

What ails logistics?

Operational efficiency could have been falling for a variety of reasons.

This includes

  1. Complicated networks
  2. Increasing coordination costs across the supply chain coupled with deficient infrastructure
  3. Entry taxes and poor vehicle-load-carrying capacities, resulting in delays and damages.
  4. Myriad number of taxes had made logistics a cumbersome and costly process.

GST impact on Logistics

  1. For manufacturers, GST has now replaced the multiple state VATs and the need to have a hub across all states will cease to exist.
  2. Allow firms to redesign supply chains and centralize hub operations to take advantage of scale economies. It will also allow firms to employ efficient practices such as bulk-breaking and cross-docking from a central location
  3. For transport services, the “reverse charge mechanism” can be levied as before but the taxpayer will not be able to claim input tax credit, as the main input cost is fuel which is outside the purview of GST
  4. Under GST, the tax on warehouse, storage and other labour services has increased from 15% to 18%. So a third-party logistics provider will now have more incentive.
  5. Ease of entry across states will reduce transportation delays with measures such as the e-way bill
  6. GST will bring a lot of alignment of value-added services in the logistics sector. This will make way for cutting-edge investments and mergers and can see a phenomenal increase in asset utilization and increase in operational efficiency
  7. There will be new investment opportunities for technology-enabled mini warehouses along the highways and technology enabled start-ups.”
  8. This will result in uncertainties and affect the profitability of the sector in the short run. In the long run, operational efficiency is bound to improve
Aug, 04, 2017

Services sector PMI falls most in 4 years on GST

Image result for GST cess surcharge

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Note4students

Mains Paper 3: Economy | Growth

From UPSC perspective, the following things are important:

Prelims level: The Nikkei India Services Purchasing Managers’ Index (PMI)

Mains level: GST impact on different sectors of the economy


News

Context:

  1. After the manufacturing sector, India’s services sector also plunged into the contraction mode in July which is caused by the GST rollout.
  2. GST rollout triggered a dip in new business orders.

The Nikkei India Services Purchasing Managers’ Index (PMI)

  1. Measure of services sector output on a monthly basis, plunged to 45.9 in July, the lowest since September 2013.
  2. A reading above 50 indicates expansion, while a score below this mark means contraction.
  3. This is the first time in six months that the services index has slipped into contraction territory
  4. Private sector activity dipped for the first time since the demonetisation shock and to the greatest extent since early 2009, mirroring the sales trend

Way forward

  1. The PMI data for manufacturing and services sector will also bolster calls for further rate cuts by the Reserve Bank, which lowered its key lending rate by 0.25 per cent
  2. This move is likely to translate into lower interest rates for home, auto and other loans as also boost economic activity.

Back2basics

what is Purchasing Managers’ Index – PMI?

  1. The Purchasing Managers’ Index (PMI) is an indicator of the economic health of the manufacturing sector.
  2. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
  3. The purpose of the PMI is to provide information about current business conditions to company decision makers, analysts and purchasing managers.

 

Aug, 02, 2017

Post GST Launch: Manufacturing PMI slumps to the lowest since 2009

Image result for impact of gst on manufacturing sector

Image source

Note4students

Mains Paper 3: Economy | Growth

From UPSC perspective, the following things are important:

Prelims level: GST, Purchasing Managers’ Index

Mains level: Effects of GST on different sectors of the economy


News

  1. India’s manufacturing activity in July slumped to its lowest level since February 2009, dragged down by disruptions to business activity following the introduction of Goods and Services Tax (GST)
  2. The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) stood at 47.9 in July, down from 50.9 in June, and highlighted the first deterioration in business conditions in 2017 so far
  3. July also marked the biggest month-on-month decline since November 2008, just after the collapse of Lehman Brothers triggered the global financial crisis
  4. This contraction is likely to put pressure on the Reserve Bank of India to lower interest rate at its policy meet.

GST Effect

  1. The GST launch, the survey said, affected demand.
  2. The reductions in output, new orders and purchasing activity were all the steepest since early 2009.
  3. However, foreign demand for India-manufactured goods improved in July as new export orders continued to rise.
  4. While some business segments have protested against the GST, many are struggling with the new compliance requirements that require them to file at least three returns every month.

Back2basics

What is the ‘Purchasing Managers’ Index – PMI’

  1. The Purchasing Managers’ Index (PMI) is an indicator of the economic health of the manufacturing sector.
  2. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
  3. The purpose of the PMI is to provide information about current business conditions to company decision makers, analysts and purchasing managers.

 

 

May, 05, 2017

[op-ed snap] Who’ll audit GSTN?

Context:
• If the GST Council is going to be the most powerful body in the GST era, the GST Network (GSTN) would be the most critical one

• GSTN is a not-for-profit company set up primarily to provide IT infrastructure and services to the Centre and States, tax payers and other stakeholders for implementing the GST
Objective:
• The objective of GSTN is to ensure that there is a strong IT infrastructure and service back bone

• It enables capture, processing and exchange of information among the stakeholders, which would include tax payers, States and the Centre, Accounting Offices, banks and the RBI
Headlines on GSTN:
• First, it was in the news for its shareholding pattern — the Centre and States each hold 24.5% in GSTN; LIC Housing Finance holds 11%; while HDFC, HDFC Bank, ICICI Bank and NSE Strategic Investment Company hold 10% each

• Questions are already being asked as to what business private companies have with an organisation mainly supporting the Government in managing a large tax database

• Principally, it centers around a concern over data security

• The Government says the data would be confidential but
right  now it is nothing more than an assurance

• Another question is whether the CAG can audit the GSTN

• The CAG feels it has all the powers to do so; while the GSTN says it is best audited by a third party
Choose your auditor:
• Sections 139 and 143 of the Companies Act, 2013 categorically mention that the CAG can audit a company which is either owned or controlled by the state

• The GSTN website is full of facts as to how several measures of strategic control of the Government over GSTN have been envisaged and included in the Articles of Association of GSTN

• Technically, the CAG can audit all receipts and expenditures of a body or an authority if it receives substantial grants and loans from the governments’

Revenue model:
• In its startup phase, the GSTN has funded itself with grants from the Government as well as some bank borrowing

• Once the GST is rolled out, GSTN has a revenue model in place and would not depend on the Government

• On the contentious issue of tax data, the GSTN says it holds the data in fiduciary capacity and that the CAG can gather the data from the States and the Centre or the Central Board of Excise and Customs

• However, past experience in terms of accuracy of tax data from State governments has not been good

• The Centre had to get into long and protracted negotiations with States to settle their promise of compensating them loss of revenue due to reduction of Central Sales Tax — primarily due to lack of authentic data with both on the quantum of revenue loss
Note4Students:

Since the CAG mostly do proprietary audits, it is necessary that the tax data and infrastructure be audited by the government auditor. Focus on the role and powers of CAG in this regard.

Nov, 21, 2016

Centre-state stalemate over GST jurisdiction continues I

  1. Issue: Stalemate between the Centre and states over administrative control under the proposed GST regime continues
  2. Mr. Jaitley’s and state finance ministers failed to arrive at a common ground on how Centre and states will control assessees under the new regime
  3. States view: They want the right to control all assessees with up to Rs 1.5 crore annual turnover
  4. The issue has remained a contentious one during the previous two GST Council meetings
  5. Any disagreement at the next meet holds potential of derailing rollout of the GST from the targeted April 1, 2017
Nov, 21, 2016

Centre-state stalemate over GST jurisdiction continues II

  1. The GST Council in the last meeting on Nov 4, arrived at two options — horizontal division and vertical division
  2. Horizontal Division would mean taxpayers would be divided both for administrative and audit purposes based on a cut off turnover
  3. Those with a turnover over Rs 1.5 crore would be administered both by the Centre and states, while those with below Rs 1.5 crore would be administered solely by the state
  4. Vertical Division, based on ratios, assigns taxpayers to a tax administration, Centre or state, for a period of 3 years for all purposes including audit
  5. Taxpayers could be divided in a ratio which would balance the interest of the Centre and the states, both with respect to revenue and spread of numbers
Nov, 21, 2016

Centre-state stalemate over GST jurisdiction continues III

  1. States feel they have infrastructure deployment at grassroot level and small taxpayers are familiar with state authorities
  2. Centre, on the other hand is unagreeable to the states’ demand of exclusive control over small entities which earn less than Rs 1.5 crore in annual revenue
  3. Reason: It wants single registration mechanism for ease to service taxpayers
  4. Instead of horizontally splitting the taxpayers, it has proposed to divide entire taxpayer base vertically
  5. As a compromise, it is willing to give states administrative power over 2/3rd of taxpayer base, with service tax continuing to be administered by Centre
Nov, 11, 2016

GST to take effect from April 1: Jaitley

  1. Finance Minister Arun Jaitley said on Wednesday that major issues on the Goods and Services Tax have been resolved
  2. The new regime will be implemented from April 1, 2017
Nov, 05, 2016

GST Council undecided over authority for tax assessment

  1. Source: Finance Minister Arun Jaitley
  2. What: The fourth round of meetings of the GST Council was inconclusive regarding the key issue of how to divide the authority to assess tax between the Centre and the States
  3. The FM said that the preparation of the drafts of the Central GST, State GST, Inter-state GST, and Compensation Law will be completed by November 14-15
  4. The draft laws will then be sent to the States, which will have one week to respond with any recommendations
Nov, 04, 2016

Council fixes 4-level GST rate structure II

  1. There would be two standard rates of 12% and 18%, which would fall on the bulk of the goods and services
  2. Most services are expected to become costlier as the ones being taxed currently at the rate of 15% are likely to be put in the 18% slab
  3. The GST will subsume the multitude of cesses currently in place, including the Swachh Bharat Cess, the Krishi Kalyan Cess and the Education Cess
  4. Only the Clean Environment Cess is being retained
Nov, 04, 2016

Council fixes 4-level GST rate structure I

  1. The GST Council finalised on Thursday a multiple-slab rate structure, including the cess, for the new indirect tax
  2. It will be levied at multiple rates ranging from 0% to 28%
  3. Ultra luxuries, demerit and sin goods, will attract a cess for a period of five years on top of the 28% GST
  4. On nearly half of the consumer inflation basket, including food grains, the GST will be at 0%
  5. The lowest slab of 5% will be for items of common consumption
Nov, 03, 2016

Industry bodies call for eventual streamlining of multiple GST rates

  1. Industry bodies have raised concerns over the government’s proposed multiple rate structure for the GST regime
  2. Their view: The four proposed rates should eventually be collapsed into fewer rates
  3. Industry was cognisant of the fact that a single GST rate could not apply in a country like India and so a beginning must be made with multiple rates
  4. But the bulk of goods and services should fall within the standard rate of 18 per cent and only a few exceptions should be taxed at the higher rate of 26 per cent
  5. The govt should also roll out a clear roadmap for the early withdrawal of cess once the buoyancy in tax collection becomes adequate
Nov, 02, 2016

‘Cess plan could mean 10 different GST rates’

  1. Proposal: The Finance Ministry has proposed differential cess rates under the GST regime to be levied over and above the highest tax rate of 26 per cent for such products
  2. Reason: To ensure that the tax incidence on products like cigarettes, tobacco products and luxury commodities doesn’t decline under the GST regime
  3. This could further complicate the GST tax structure
  4. The government has already proposed six different tax rates ranging from zero to 26 per cent, including a four per cent tax on gold, to the GST Council
  5. The GST Council is tasked with finalising the rates and other modalities for the new indirect tax regime
Oct, 24, 2016

MP to become India’s supply hub post GST roll out: Jaitley

  1. Source: FM Arun Jaitley at the two-day 5th Global Investors Summit (GIS) organised by the Madhya Pradesh (MP) Government
  2. MP would become the country’s supply hub post the roll out of GST due to its central location in India
  3. MP which has been reporting over 10 per cent growth in the past few years is no more BIMARU as it has achieved all round growth in the past 13 years
  4. The acronym BIMARU was coined by economist Ashish Bose to give a distinct identity to poverty stricken states
  5. These states were – Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh
Oct, 24, 2016

[op-ed snap] India is moving towards a flawed GST. Why?

  1. There were 2 underlying assumptions for a truly successful GST
  2. The new indirect tax would be levied at a single rate so as to reduce distortions based on rent-seeking behaviour
  3. And the tax rate would be low so as to minimize the regressive character of such indirect taxes
  4. Concern: It seems that India is moving to a multiplicity of rates, with a cess thrown in for good measure
  5. The stalemate in GST council regarding one single GST rate is worrisome
  6. Alternate: Need to relook at direct tax system. Lower direct tax collections mean there is pressure to collect more indirect taxes
  7. The year 2009 was an important milestone, when direct taxes overtook indirect taxes in the central kitty
  8. Higher direct tax collections will create fiscal space for India to experiment with a lower GST rate
Oct, 20, 2016

[op-ed snap] GST's implementation & philosophical fundas

  1. Context: The op-ed deliberates on the importance of keeping end goal in mind while hastening the process of GST implementation
  2. Augustus Caesar, a roman emperor credited with far fetching reforms used to have a motto – Festina Lente – Make Haste Slowly
  3. As management guru Stephen Covey insists, we must begin with the end in mind. What is the end we seek with GST’s implementation?
  4. What is the efficient GST structure? A One India framework comprising One Indirect Tax, One Rate, and One Registration.
  5. One issue on the levy of one rate which could possibly cause concern is the impact on inflation.
  6. This is because hitherto exempt items would now be subject to a significant tax burden, thus upwardly biasing inflation!
  7. The ongoing debate on a single rate is important because of government’s concern about the impact of GST on the poor
  8. What then should that one rate be? It is extremely difficult to compute the RNR for states given the lack of state-wise service tax data.
  9. RNR: Revenue neutral rate
  10. Conclusion: Let’s go with a rate of 12% and a provision for a review of these provisions after a specified period of time. Let us make haste slowly while implementing the GST
Oct, 19, 2016

Centre moots 4 GST slabs

  1. The Centre has proposed a four-slab rate structure for the GST, ranging from zero to 26%, at a meeting of the GST Council
  2. The 26% tax will be on luxury items and 0% tax on items such as food, health and education services
  3. The rates will be finalised keeping in the mind the need to prevent inflation in consumer prices and protecting the revenues of both the Centre and the States
  4. Other decisions: The base year for calculating the revenue of a State would be 2015-16 and a rate of growth of 14% will be assumed
  5. The Centre would compensate States whose revenue collections fall lower than these levels
Sep, 28, 2016

[op-ed snap] Positive Signals from the GST Council

  1. Theme: Positive take-aways from the first meeting of GST Council (September 22-23).
  2. Decisions taken at the meeting: Going by the following outcomes, achieving the challenging April 1, 2017 deadline for ringing in the GST, appears doable.
  3. First, the threshold turnover for a business to be covered by the GST has been fixed at Rs.20 lakh;
  4. Second, industry’s rationale to subsume cess levies in the GST has been accepted.
  5. Third, an agreement on the draft compensation formula for States’ revenue losses has been reached.
  6. Also, the meeting’s proceedings have demonstrated the accommodative spirit of cooperative federalism as:
  7. First, all decisions were arrived at by consensus.
  8. Second, the States participated in the discussions with an open mind rather than getting divided along regional or party lines.
  9. Third, the Finance Minister accepted the states’ demands on the contentious issue of administrative control over the assessment of businesses with an annual turnover of up to Rs.1.5 crore. This has sent a welcome message of give-and-take between the centre and the states.
Sep, 14, 2016

Centre, states to share talent pool in tax evasion fight

  1. News: The Central Board of Excise and Customs (CBEC) is planning a first-of-its-kind manpower-sharing exercise with states under the GST regime
  2. The blueprint drawn up by CBEC envisages employing state GST officials in central tax evasion and intelligence wings on deputation
  3. Similarly, it also proposes to send central tax officials to the state GST administration, subject to the latter’s approval
  4. If implemented successfully, it will further aid the move towards cooperative federalism
  5. However, it may prove to be a challenging task, given the current distrust between the tax authorities
Sep, 02, 2016

Meet on SEZs to address tax concerns under GST regime

  1. Context: Concerns expressed by the SEZ sector about the lack of clarity in the proposed GST regime regarding upfront exemptions of taxes and duties for SEZ developers and units
  2. There is also diminished investor interest in SEZs
  3. Why? Concerns including those on the tax burden due to the FY’12 Union Budget imposing a 20.5% Minimum Alternate Tax (including cess) on SEZ developers and units as well as Dividend Distribution Tax (DDT) on developers
  4. The Commerce Ministry and the SEZ sector had sought exemption or at least reduction of MAT and DDT on SEZs
Aug, 31, 2016

Industry pitches for GST rate of 18%

  1. The companies also sought time to switch over to the new regime
  2. States, which are seeking a higher tax rate of 20 per cent, asked companies if they would pass on low rates to consumers
Aug, 17, 2016

GST platform to become analytics powerhouse

  1. News: The Goods and Services Tax Network (GSTN) will become a data analytics powerhouse in the months after the roll-out
  2. GSTN: It is the information technology backbone that will implement the new GST regime
  3. Once sufficient amount of data is generated, it will be able to generate analytics based on the requirements of various stakeholders
Aug, 12, 2016

Benefits to hill, N-E states to continue under GST

  1. The 10-year tax holiday given in the form of area-based excise breaks for hill and northeast states will continue under the coming GST regime until the sunset date
  2. Two types of such schemes in operation: 1- Manufacturing units in J&K and the N-E get excise benefit by way of refunds; 2- those in Himachal and Uttarakhand get outright exemption
  3. J&K and NE scheme: Will continue till 2020 & 2017 respectively
  4. Himachal & Uttarakhand: Will continue till 2020 in many cases
Aug, 09, 2016

Amended GST Bill gets Parliament green signal

  1. All 443 members present in the Lok Sabha (which had earlier passed it in May 2015) voted in favour of the bill as amended by the Rajya Sabha recently
  2. The amendment will have to be ratified by at least 16 States
Aug, 08, 2016

Govt mulls pruning tax exemption list

  1. Context: Developments around the goods and services tax (GST)
  2. News: The Union government is planning to prune the list of excise duty exemptions from the current 300 to the states’ list of 90 items that are exempted from value added tax (VAT)
  3. About 200 items, including premium tea and coffee, ready-to-eat food and branded biscuits, could lose tax exemptions
  4. After the Rajya Sabha passed The GST Constitution (Amendment) Bill, the Centre and the states are working to make a uniform list of items that would exempt from the unified indirect tax
Aug, 04, 2016

Happy birthday GST!

  1. The Goods and Services Tax (GST) bill passed by an overwhelming majority
  2. The GST is the greatest tax reform ever attempted by India
  3. Started by AB Vajpayee, pursued by Manmohan Singh, and now brought to fruition by Narendra Modi
  4. We have written so much on GST that each of you reader must have become a domain authority of sorts. by now!
  5. Please go back and click and scroll down on the GST story to understand it in full
Aug, 03, 2016

GST bill likely to be passed by RS. What's next?

  1. Since the Bill was passed in the Lok Sabha last year, there have been major amendments to it
  2. So it will go back to the LS for approval
  3. Post that, the final draft will go to the state assemblies where the government needs at least 50% of the 29 states
  4. Once the Bill is ratified by the states, it will pave the way for the establishment of a GST council
  5. GST council is going to finalise the GST rate, extent of indirect taxes under subsumption etc.
Jul, 28, 2016

GST: Two major hurdles cleared

  1. 1st hurdle: The Cabinet removed the contentious provision for a 1% additional tax levy by manufacturing States
  2. 2nd hurdle: A guarantee of 100% compensation to States for 5 years to make good any revenue loss incurred by them due to the introduction of GST
  3. Earlier the revenue loss was to be phased out in milestones of 100, 75 and 50%
  4. Concern: We still have to come to an agreement on what the GST rate should be and whether it should be made a part of the bill or not!
Jul, 27, 2016

States reject GST rate proposed by Arvind Subramanian panel

  1. News: No consensus over the revenue-neutral rate (RNR), or the tax rate at which there will be no revenue loss to the states under a GST regime
  2. Funda of RNR? An accepted RNR will reduce the effective tax burden on the common man and also protect the existing revenues of the Union and the states
  3. The standard rates proposed by the Subramanian panel are below 18%
  4. States commissioned report by National Institute of Public Finance and Policy (NIPFP) suggests 26%
  5. Effective rate on consumer products today is about 30%
Jul, 12, 2016

Government reaches out to Congress on GST Bill

  1. News: The government has reached out to the Congress for passage of the long-pending GST Bill in the Rajya Sabha where it does not have a majority
  2. Context: The GST, the most significant reform in indirect tax since Independence, is being held up in the Rajya Sabha because of stiff opposition by the Congress
  3. Congress demands: Ring fencing the GST rate so as not to burden the common man
  4. A constitutional cap on the GST rate
  5. Clarification from the government on taxability of various goods like petroleum, alcohol, tobacco and electricity
  6. Clarity on whether the GST would subsume various cesses including the Swachch Bharat cess
Feb, 20, 2016

Amit Mitra named chairman of GST Committee

  1. News: West Bengal Finance Minister Amit Mitra is named the new chairman of the Empowered Committee of State Finance Ministers on GST
  2. Mr. Mitra is an economist, who has served as Secretary General of FICCI before joining politics in 2011
  3. Objective: The panel is tasked with framing rules for roll out of the ambitious GST regime
Dec, 04, 2015

GST Bill: government may go for compromise

Instead of one fixed GST rate, govt. may go for a tax band of 18 to 24%.

  1. Of the 3 objections, Congress has on the GST Bill, it is becoming increasingly clear that government is prepared to address it.
  2. It is willing to scrap the 1 per cent additional origin tax proposed to help manufacturing states, to make up the losses they may incur due to GST.
  3. By promising to make up those losses for 5 years and set up a grievance redressal mechanism.
  4. On third issue, capping the GST, a committee headed by CEA Arvind Subramanian is preparing a report that could be out this week.
  5. Government feels that if there is a fixed rate in the constitutional amendment, any change in future will be difficult.
Oct, 19, 2015

India still waiting for Economic Union?

  1. Finance minister Arun Jaitley has once again reiterated the need for free movement of goods across the country.
  2. The checkposts at state borders are an insult to united India.
  3. The best way to pull them down is through a flat goods and services tax (GST), as most economists realize.
  4. The technical issues are more or less settled.
  5. It is high time that the fractious political class closes a deal that all agree to but have been blocking for tactical reasons.

 

A slew of free-trade agreements are being signed across the world. The Indian government too is busy in a few negotiations of this type. That is needed as it will help India take advantage of global opportunities.

But even more important is the need for India to strike a free-trade deal with itself.

Aug, 14, 2015

[op-ed snap] Circumventing the Rajya Sabha

  1. The govt is in policy paralysis right now because of the Opposition’s obstructionist approach in the Rajya Sabha.
  2. Govt does not have a majority in RS.
  3. So, the Finance Minister has indicated that most of the crucial bills which go to the Rajya Sabha be branded as money bills.
  4. Why? Rajya Sabha has little authority to prevent money bills from being rejected.
  5. But the Rajya Sabha should not be deprived of its legitimate rights through legislative stratagems.

What do you think? What are the moral and ethical dilemmas and what could be the political consequences of this manoeuvre?

Aug, 10, 2015

Godrej for smooth passage of GST Bill

  1. Business community asks political parties to act with a sense of purpose in Parliament.
  2. He said that, though the current draft of the GST Bill was not perfect, it was very important to pass it.
  3. The trading community hopes to get a simplified cohesive business environment.
  4. The GST will support ease of doing business in the country and hopes to abolish colonial working of tax administration system.
Jul, 31, 2015

Cabinet approves legislation for GST - So what changes now?

The NDA cabinet has accepted most of the amendments to the GST legislation proposed by a Rajya Sabha select committee.


 

  1. GST bill will be amended to say that states will be compensated ‘for 5 years’ rather than up to five years. Will the center compensate the states in full?
  2. The government has also accepted the panel’s recommendation that the additional 1% tax on supply of goods proposed in the bill be restricted to the inter-state sale of goods and not stock transfers by a company from one warehouse to another.
  3. It will now pass officially if there is support from two-thirds of the members in Lok Sabha and Rajya Sabha.
  4. Once this is done – a GST council—with representation from the centre and the states—will be constituted to help in drafting the GST law.
Jul, 23, 2015

GST Bill proposals get approval from RS Select Committee

  1. Panel supported the compensation of states’ revenue losses for all 5 years and suggested that GST rate should not go beyond 20% as standard and 14% as reduced rates.
  2. It rejected the demand for decreasing Centre’s representation from 1/3rd to 1/4th in GST council.
Jul, 22, 2015

New proposal in GST is highly ambiguous. Let us find out!

  1. Proposal of 1% interstate GST for manufacturing state has raised many questions – there is ambiguity whether it will be levied at the final consumption point or at every border that the product crosses.
  2. The new proposal says that the interstate movement of goods won’t be taxable if it is without a consideration. What does ‘consideration’ mean?
  3. It means that if stocks are transferred from say a plant in a state to a depot of the same company in another state, these would not invite tax.
Jul, 21, 2015

Can GST pass in the Monsoon session?

  1. The Select Panel of Rajya Sabha accepted the demand of most of the states that they should be completely compensated for first five years.
  2. They also suggested that the GST rates should be moderate with as many goods under it as possible.
  3. GST council will decide on the applicability of GST on petroleum products and the GST zero net revenue rate.
Jul, 18, 2015

Govt. firm on 1% additional tax over the GST. What for?

  1. 1% additional tax over the GST is to compensate for the revenue loss of manufacturing states who have made investments. It will be levied for 2 years.
  2. Remember – GST is a destination based tax system unlike origin based tax systems like VAT.
Jul, 17, 2015

[cd explains] GST: Good for business, snag for federalism?

 


The GST is a tax reform that has been on the cards for more than a decade. In principle, it is the same as the Value-added Tax (VAT) — already adopted by all Indian States — but with a wider base. While the VAT — which replaced the sales tax — was imposed only on goods, the GST will be a VAT on goods and services.


  1. In the current tax regime, States tax sale of goods but not services.
  2. The Centre taxes manufacturing and services but not wholesale/retail trade.
  3. The GST is expected to usher in a uniform tax regime across India.

    Two Arguments given in favour of GST: 

  4. GST, by subsuming an array of indirect taxes under one rubric will –
    • simplify tax administration
    • improve compliance
    • eliminate economic distortions in production, trade, and consumption
  5. If we are giving credit for taxes paid on inputs at every stage of the supply chain and taxing only the final consumer – we will help control production costs.

According to the Finance Minister Arun Jaitley, the GST will add 2% to the national GDP.


A losing proposition for the States?

“All goods and services will be divided into certain categories. The rates will be fixed by category, and if I am a state, I cannot shift a commodity from a lower to a higher rate, or put it in the exempt category.”

According to the Constitution, the States have complete autonomy over levy of sales taxes, which, on average, accounted for 80% of their revenue. Now, the rates for both, the CGST and the SGST, will be fixed by the GST Council, where the chairman will be Fin Min!

Now, even though the Central GST will compensate the state’s fund, this will erode their autonomy to do things (cater to the interest groups themselves).

These & a few more, are some of the lingering questions.

Jun, 24, 2015

Opposition defines a list of ‘5 non-negotiables’ on GST

  1. Opposition wants the government to write into the Bill that the GST rate will not exceed 18%
  2. The international norm is in the vicinity of 16%
  3. The additional 1% tax that has been allowed to manufacturing States “should go” as this would defeat the entire purpose of GST.
  4. Bring back the clause for an independent disputes settlement mechanism that was part of the UPA’s GST Bill introduced in 2011.
  5. Greater clarity on the compensation formula besides including duty on tobacco and electricity in GST.
Jun, 05, 2015

New demand by States could hit the GST rollout

  1. With GST bill already being referred to Select Committee of Rajya Sabha, additional demands by states have added more worries for the government.
  2. Government had accepted 14th Finance Commission’s proposal and agreed to completely compensate states for any loss in revenue in first 3 years, 75% in fourth and by 50% in fifth.
  3. But the states want complete compensation for all 5 years.
  4. States also want to levy additional sales tax over and above GST for tobacco and its products.
May, 12, 2015

After Oppn uproar, GST bill referred to Rajya Sabha's Select Committee

Looks like this is not going to be that easy!


  1. Once passed by Parliament, the Bill will then need ratification of more than half of 29 states before scheduled roll out in April next year.
  2. GST was first mooted 12 years ago but couldn’t be approved as states feared curbs on their fiscal powers.
  3. The NDA government, which is woefully short of numbers in the Upper House, did not want to take any risk.
May, 09, 2015

GST will economically integrate India: Jaitley

Citing agriculture as the weak link for India to achieve growth of 7-8%, he said agriculture and irrigation will get more resources.

May, 07, 2015

GST Bill sails through Lok Sabha, Congress walkout helps

  1. Lok Sabha passed the 122nd Constitutional Amendment Bill seeking to replace the current tax structure with GST.
  2. However, the major challenge is in getting the bill passed in Rajya Sabha where the NDA lacks in adequate numbers.
  3. This Constitutional Amendment Bills need to be passed with 2/3rd majority.
May, 06, 2015

Opposition stalls GST Bill, insists on relook by panel

  1. With several opposition parties raising concerns on a number of clauses, it is highly unlikely that the 122nd Constitutional Amendment Bill, which aims to give effect to GST, will get passed in this budget session of 2015.
  2. Major contention? Since GST is a destination based tax, it will result in loss of revenue for the producing states.
  3. Tamil Nadu’s ruling party – AIADMK – has a specific demand that since petroleum products constitute ~21% of state revenue, they should be taken out of the proposed GST ambit.
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