Less than three months from now June 30, 2022 will be an important milestone under the national Goods and Services Tax (GST) regime that was launched on July 1, 2017. In the follow-up to The Constitution (One Hundred and First Amendment) Act, 2016, that introduced the GST, the Union government had also introduced The GST Compensation Act, 2017. It provides for compensation to the States for five years (2017-18 to 2021-22) for the loss of revenue to be calculated as the difference between their actual collection (including transfer of their share in indirect tax collected by the Centre) and the amount they would have got with annual growth at 14 percent over the 2015-16 level under the erstwhile dispensation (Central Excise...
More Comments are closed
Blog
Tax buoyancy – a good omen
For years, the tax receipts of Union government have consistently fallen short of the target set in the respective year which together with the expenditure exceeding the target has led to fiscal slippage – a glamorous term for the fiscal deficit or FD (excess of total expenditure over the total receipts). Against this dismal record in the past, 2021-22 will have the unique distinction of the tax collections – both direct and indirect – exceeding the target. The total direct tax collection (includes primarily personal income tax or PIT and corporate income tax or CIT) net of refund as on March 16, 2022 stood at around Rs 1363,000 crore which is higher the budget estimate (BE) of Rs 1100,000 crore...
More Comments are closed
Farm laws – time to revisit
While, staying implementation of the three contentious farm laws, the Supreme Court (SC) had set up a Committee to recommend the way forward. The committee submitted its report on March 19, 2021. Even as the SC action on the report was pending, on November 19, 2021 Prime Minister Narendra Modi announced repeal of the laws even while maintaining that these laws are beneficial to small and marginal farmers who are in majority. Now, in a startling revelation, Anil Ghanwat, a member of the committee has revealed that around 85.7 percent of the 73 farmer organizations, representing more than 33 million farmers supported the laws. This should prompt the government to revisit the laws. Meanwhile, let us look at Committee’s recommendations...
More Comments are closed
Gas shock – India’s vulnerabilities
The Ukraine war has exposed the vulnerabilities in India’s gas supply systems. Our demand for natural gas (NG) is around 54.6 billion cubic meter (bcm) of which nearly 50 percent is met from import as liquefied natural gas or LNG. Russia is the world’s second-largest producer of NG with a share of 10 percent. In total world export of gas, its contribution is even higher at 25 percent. Most of Russian gas goes to the European Union (EU) countries with the latter drawing 40 percent of their total NG supplies from the former. On the other hand, India’s gas supply sources are fairly diversified. Most of the imported gas for India comes from countries of middle east viz. Qatar, Oman,...
More Comments are closed
LPG subsidy – to resurrect or not
The recent spurt in the price of LPG (liquefied petroleum gas) in the wake of Ukraine crisis has triggered demand for resurrection of subsidy which Modi – government had stopped depositing in beneficiary’s account since June, 2020. Is the demand justified? By definition, subsidy on purchase of any given product is subvention or financial assistance provided by the state to a certain class of persons who cannot afford to pay the market-based or cost-plus price from their limited income. In case of LPG, the current price of a 14.2 kg cylinder is around Rs 2000/- (in Delhi). Assuming that the person can’t pay more than Rs 600/- the government will give her Rs 1400/- as subsidy so that she is...
More Comments are closed
Ukraine crisis – impact on Indian fertilizer industry
The crisis in Ukraine following invasion by Russia has sent shock waves through out the world economy. In India, even as the steep rise in energy import bill will affect almost all sectors of the economy, the impact on fertilizers will be more pronounced. At the outset, let us capture a few relevant facts. Despite prognostications by successive governments during the last four decades or so that India would become self-reliant in fertilizer availability and putting in place policies (in particular pricing and subsidy policies) aimed at achieving the goal, even today, the country remains preponderantly dependent on imports for meeting the requirements of its farmers. Three most popular fertilizers used by farmers are urea, di-ammonium phosphate (DAP) and muriate...
More Comments are closed
Corporate governance – Sebi’s volte face
Based on the recommendations of Uday Kotak committee on corporate governance (2018), the stock markets watchdog, Securities Exchange Board of India (SEBI) had asked listed companies to separate the positions of Chairperson and Managing Director (MD)/Chief Executive Officer (CEO). The requirement was mandatory. The companies were required to implement the order by April 2020. However, based on representations received from the industry, an additional two years was given for compliance. In April last year, SEBI chairman Ajay Tyagi goaded them to ensure that the April 2022 deadline is not missed. Now, that even this deadline is barely a month away, the regulator has done a volte face. On February 15, 2022, the SEBI has decided to implement the requirement on...
More Comments are closed
Rationalizing direct taxes
Ever since, the commencement of its second term, Modi Government has showered benevolence on the corporate sector by giving relief in income tax but when it comes to personal income tax (PIT), it has not matched the expectations. On September 20, 2019, Finance Minister (FM) Nirmala Sitharaman had announced steep reduction in the rate of corporate tax for “new entities” incorporated from October 1, 2019 in the manufacturing sector and start production by March 31, 2023 from the existing 25 percent to 15 percent. Such companies won’t have to pay minimum alternate tax (MAT) (levied on book profit of firms which have no taxable profit courtesy, exemptions and incentives). Furthermore, the tax rate on existing companies was reduced from 30...
More Comments are closed
Food subsidy – conundrum
In the Union Budget for 2022-23, Modi – government has allocated Rs 207,000 crore for food subsidy which is Rs 79,000 crore less than the actual expenditure of Rs 286,000 crore during 2021-22 as per the revised estimate (RE). Under the National Food Security Act (NFSA), 2013, the Union Government directs the Food Corporation of India (FCI) and other state agencies to procure food from the farmers at MSP (minimum support price) and organize its distribution to a mammoth population of 800 million people through an elaborate network of fair price shops (FPS) at the subsidized price (call it ‘issue price’) of Rs 2, Rs 3 and Rs 1 per kg for wheat, rice, and coarse cereals, respectively. Each person...
More Comments are closed
Tackling fertilizer subsidy – political will missing
In the Union Budget for 2022-23 presented by the Finance Minister, Nirmala Sitharaman on February 1, 2022, Modi – government has allocated Rs 105,000 crore for fertilizer subsidy which is Rs 35,000 crore less than the actual expenditure of Rs 140,000 crore during the current year as per the revised estimate (RE). Fertilizer subsidy arises because the Union Government wants manufacturers/imports to sell fertilizers to farmers at a low maximum retail price (MRP), unrelated to the cost of production and import and distribution, which is much higher. In case of urea, it exercises mandatory control on MRP and reimburses the manufacturers for the excess of cost over it as subsidy on a ‘unit-specific’ basis under the new pricing scheme. In...
More Comments are closed