Billed as a ‘transformative’ reform of post-independent India, the Goods and Services Tax (GST) has completed three years since it was launched by Prime Minister, Narendra Modi on July 1, 2017. It is time to take stock and see whether there has been any tangible progress in terms of achieving its underlying objectives. GST is a single nation-wide tax that subsumes within it more than a dozen taxes of the erstwhile dispensation prior to July 1, 2017 viz. central excise duty (CED), service tax, sales tax/value added tax (VAT) besides a host of local taxes such as octroi, purchase tax, turnover tax and so on. At the outset, let us take a look at major anomalies afflicting the old regime....
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GST shortfall – bailing out states
Faced with dwindling tax revenue since last financial year 2019-20, the issue of ‘full’ and ‘timely’ compensation for the shortfall in states’ tax revenue (their own collection plus the amount received as their share in indirect tax collected by the Centre as per Finance Commission devolution formula) vis-à-vis a given benchmark has been a bone of contention between the central government and the states. It has acquired gargantuan dimensions during the current year with Corona pandemic forcing collapse of businesses cutting across almost all sectors (barring essential items) in turn, leading to steep fall in tax collection of both the Centre and states. The compensation to states is intertwined with the Goods and Services Tax (GST) in vogue since July...
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AGR dues – let the rider pay
The turbulence in the telecommunication sector in India refuses to subside. First, it was the mayhem triggered by Reliance Jio (RJio) which in a brazen display of ‘predatory’ pricing offered ‘free’ and ‘unlimited’ voice calls and rock bottom data tariff from the word go (its services were launched in September 2016). This forced incumbent operators viz. to reduce tariff to match RJio pushing majority of them into red. Many downed shutters while others were bought over. Next was an order of the Supreme Court (SC) on October 24, 2019 directing telecom firms to pay ‘unpaid’ dues towards license fee and spectrum usage charges (SUC). The license fee and SUC is charged as a percentage of service provider’s adjusted gross revenue...
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For Atmanirbhar Bharat, go for open trade policy
The ‘Make in India’ reverberated all through the speech of Prime Minister Narendra Modi during his Independence Day address on August 15, 2020. Even before the Corona pandemic, in the Union Budget for 2020-21, Finance Minister, Nirmala Sitharaman proclaimed the commitment of Modi government to this laudable goal. This is the most crucial component of the strategy to make India a US$ 5 trillion economy by 2024-25. Faced with a whopping contraction in GDP (gross domestic product) by close to 25% during the first quarter, continuing slide during the second quarter and projected decline for the whole of current year by 5% – 6.5%, US$ 5 trillion target may have lost much of its sheen for now. Nonetheless, the government...
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Honoring the honest
Dubbed as a transformative tax reform, on August 13, 2020, Prime Minister Narendra Modi launched a ‘Transparent Taxation – Honouring The Honest’ platform via video conferencing. The main aim of this reform is best captured in the following statement by Modi during his address while launching the platform:- “The honest taxpayers play a crucial role in national development. When, the life of an honest taxpayer is simplified, he progresses which leads to progress of the nation too.” The resources garnered by collecting tax from the people who regularly pay tax due from them as per the laws of the land (call them honest tax payers) are the bedrock of any country’s development. This is more so for India where the...
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PSBs – give charge to a holding company
Reportedly, the Reserve Bank of India (RBI) has recommended to the Government of India (GOI) reduction in the shareholding of the latter in six top public sector banks (PSBs) viz. State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, Union Bank of India (UBI) and Bank of India (BOI) to 51% in the next 12-18 months. In a recent meeting, the RBI had suggested reduction in GOI stake to 26% in PSBs. But, for now, its recommendation is to cut the stake to 51%. Given its precarious financial position (courtesy, Covid – 19), the union government is exploring all possible avenues for increasing revenue. In this larger perspective, it is looking to monetize its...
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Privatization – unshackle the process
The finance minister, Nirmala Sitharaman has recently announced the broad contours of Modi government’s plans on privatization of the Central public sector undertakings (CPSUs). A CPSU is defined as an undertaking in which the Government of India (GOI) has shareholding of more than 50% and by virtue of this exercises majority ownership and control (currently, there were 249 operating Central PSUs as on March 31, 2019). Its privatization means the shareholding of GOI will be brought down to below 50%. Which of the CPSUs will be privatized? To determine this, the undertakings will be divided in to two broad categories viz. ‘strategic sector’ and ‘non-strategic’. Whereas, all undertakings in the non-strategic sector will be privatized, in the strategic sector too, the...
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Is India ready to tame global tech giants
Global technology companies such as Google, Facebook, Amazon, and Apple have been under the radar of governments in many countries for trying to steamroll competition by either buying their competitors (even if that meant spending mammoth sums) or pushing other vendors to avoid working with them. In June 2019, the US Congress and an antitrust panel of the House Judiciary Committee began a probe into the nature and working of the aforementioned big 4 who together have market capitalization of US$ 5 trillion. Based on collected documents and testimonies from workers of these firms and from rivals (it collected 1.3 million documents), prima facie the panel inferred that they had tried to push them out of the market using unfair...
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Policy rate – stop its downward march
Unlike his predecessors (read: Raghuram Rajan: 2013 – 2016 and Urjit Patel: 2016 – 2018) who used changes in the policy rate – interest rate charged by the Reserve Bank of India (RBI) on loans it gives to banks – primarily as an instrument of targeting inflation, the incumbent governor, Shaktikanta Das has used it mainly for spurring economic growth but without much success. Das – a former economic affairs secretary – who took charge in December 2018 after untimely exit of Urjit Patel handed out a cumulative reduction of 1.35% during 2019. As a consequence, the rate was down to 5.15%. In the wake of deadly Corona virus, just after the first phase of lockdown announced by Prime Minister,...
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High power tariff – no respite for consumers
For almost two decades now, the successive governments have made exhortation about reforming the fledgling power sector with the three-fold objective of (i) supplying electricity at affordable rates; (ii) reducing the burden of subsidy and (iii) make power distribution companies (discoms) viable. Whether, it is the provision for reform the power purchase agreements (PPAs), ‘open access’ under the amended Electricity Act (2003), reducing cross-subsidy so as lower tariff to industries and businesses, increasing the share of renewals in total supply, opening of power exchanges for trading of electricity, direct benefit transfer (DBT) of subsidy to the target beneficiaries and so on, the aforementioned objectives resonate in each of these reforms. Yet, it is ironical that when it comes to developing...
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