by admin | May 25, 2021 | Economy, Markets, News
By Biswajit Choudhury,
New Delhi : The 70th year since Independence will go down in Indian history since the country switched over to the Goods and Services Tax (GST) regime, realising, thereby, the vision of a unified market in a federal system that guided the nationalist bourgeoisie in joining Mahatma Gandhis struggle to liberate India from the British.
Of course, the structural reform came accompanied with pain for trade and industry caught off-guard by the rigours of new compliance procedures. Queried by corporate leaders at industry chamber Ficci’s 90th AGM here earlier this month on how GST was impacting through lower tax collections, Finance Minister Arun Jaitley put the onus on them.
“It is you from industry, who have been calling for so long to bring GSTÂ… and no sooner do these initial problems in implementing a reform of such scale appear, then you want to go back to the system we’ve had for 70 years,” he said.
The earlier system was a myriad of central and state taxes where the movement of goods was slowed down by products being taxed multiple times and at different rates.
State level taxes replaced by the pan-India GST include state cesses and surcharges, luxury tax, state VAT, purchase tax, central sales tax, taxes on advertisements, entertainment tax, various forms of entry tax, and taxes on lotteries and betting.
Central taxes replaced by GST are service tax, special additional customs duties (SAD), additional excise duties on goods of special importance, central excise, additional customs duties, excise on medicinal and toilet preparations, additional excise duties on textiles and textile products, and cesses and surcharges.
The new indirect tax regime unifying the Indian market has four tax slabs of 5, 12, 18 and 28 per cent.
It has a novel feature whereby goods and services providers get the benefit of input tax credit for the goods used, effectively making the real incidence of taxation lower than the headline taxation rate.
The second half of the year saw a radical reworking of the items within the four-slab tax structure by the supremely federal institution of the GST Council, whereby all but 50 of over 1,200 items remained in the highest 28 per cent bracket. Those retained included luxury and sin items, the cess on which goes to fund the compensation to states for the loss of revenue arising from implementing GST.
With the Council’s decisions last month, GST has been cut on a host of consumer items such as chocolates, chewing gum, shampoos, deodorants, shoe polish, detergents, nutrition drinks, marble and cosmetics. Luxury goods such as washing machines and air conditioners have been retained at 28 per cent.
Eating out has become cheaper as all restaurants outside high-end hotels charging over Rs 7,500 per room will uniformly levy GST of five per cent. The facility of input tax credit for restaurants has, however, been withdrawn as they had not passed on this benefit to consumers.
Petroleum, including oil and gas, is a strategic sector that is still not under GST, while the industry has been pushing for its inclusion so as not to be deprived of the benefits of input credit.
Including real estate is another matter pending before the GST Council.
On the functioning of the Council, Jaitley who is its head, had this remarkable insight about the way in which it had effected such large-scale rationalisation of the item rates in a short span of “3-4 months”.
“Everything has been achieved by consensus in the best spirit of cooperative federalism. There has been no politics, even from states which are controlled by opposition parties,” he told a gathering of industry leaders here.
The other side of GST was revealed through what the International Monetary Fund described as “short-term disruptions”.
With businesses going into a “de-stocking” mode on inventories in anticipation of the GST rollout from July and sluggish manufacturing growth, among other factors, pulled down growth in the Indian economy during the first quarter of this fiscal to 5.7 per cent, clocking the lowest under the Narendra Modi dispensation. Breaking a five-quarter slump, a rise in manufacturing sector output, however, pushed the growth rate higher to 6.3 per cent during the second quarter (July-September) of 2017-18.
Besides, technical glitches appearing on the GST Network portal, often unable to take the load of last-minute rush to file returns, marred the filing of returns by traders, forcing the government to postpone filing deadlines several times. The glitches also led to export refunds piling up, resulting in a grave situation of cash crunch for exporters, whose working capital was getting blocked.
In the final analysis, the GST balance sheet is provided by Gita Gopinath, Professor of International Studies and Economies at Harvard University, who is also the economic adviser to the Kerala Chief Minister.
“GST is a real reform. It is a way of formalising the economy. It is a very effective way of ensuring tax compliance, making it harder to earn black money. I mean, nothing ever goes away completely, but it just makes it harder to make it happen,” Gopinath said in Mumbai earlier this month.
The icing on the cake came with the World Bank announcing earlier this year that India had jumped 30 places in its Ease of Doing Business rankings to get among the top 100 countries on the list. Though reforms in India’s direct tax regime figured among the parameters considered in evaluation, GST had not been taken into account by the multilateral agency since their cut-off date was June 30.
(Biswajit Choudhury can be reached at biswajit.c@ians.in)
—IANS
by admin | May 25, 2021 | Opinions
By Amulya Ganguli,
The Bharatiya Janata Party (BJP) victory in Gujarat was largely based on the support it received in the urban areas. In rural areas, however, the Congress generally held sway. As a result, the urban-rural divide, or what has been called the gulf between “India” and “Bharat”, was quite prominent in the state.
What this division also highlighted was that the BJP was able to overcome the dissatisfaction among the people over the economic disruption caused by demonetisation and the GST more effectively in the towns than in the villages.
Not only that. It also meant that the city-dwellers were more forgiving towards the BJP not only for its economic missteps but also its authoritarian style of governance represented by Narendra Modi, who remained the foremost political figure in the state, completely overshadowing the unprepossessing Chief Minister, even though the Prime Minister has moved to Delhi.
His remote control over the state, therefore, via the party president, Amit Shah, has been operative. The fact that both are Gujaratis has helped. Gujarat in this respect is different from most of the other states because it is more urbanised than the rest with over 40 per cent of the population living in towns. The mercantile spirit, therefore, is not the state’s only distinguishing feature.
Since urban attitudes are known to be different from those common in rural areas — in the sense of the people being more impersonal and indifferent towards others — the electoral fallout of this dichotomy as the country becomes more urbanised will be of interest to both psephologists and sociologists.
Although urbanisation is a trend which is generally appreciated, as it is seen as a natural progression from farms to factories and a measure of advancement in terms of education and social mobility, it also has its pitfalls. The people of India had a stark reminder of these when it became clear that the Emergency of 1975-77 had more backers among city folk — because the trains ran on time, as the saying was at the time — than among villagers. Indeed, it was widely said after Indira Gandhi’s defeat in 1977 that “Bharat” had saved “India”.
If the “unwashed masses” had not come out in large numbers to use their only source of hope — the ballot paper — to vote out the Congress, India might have become a banana republic because Sanjay Gandhi, the enfant terrible of the Emergency, felt that his mother had made a mistake in calling for the elections. Moreover, there are still some people who have a word of praise for Sanjay Gandhi.
What their views underline is the continuing preference for a “strong” leader who will put everything right even if it means driving coach and horses through democratic norms. Not surprisingly, Indira Gandhi continues to be one of the popular Prime Ministers with few being bothered by the suspension of civil liberties for at least two years of her reign.
As is known, one of the reasons for Modi’s popularity is the perception that he is “strong” with not many caring about Manmohan Singh’s caveat that if such an image is acquired by presiding over the massacre of thousands of innocent people, as during the Gujarat riots of 2002, then he does not want to be that kind of a person.
If “strength” is more admired in urban areas, as the Gujarat election results suggest, the reason perhaps is that in the atomised social structure of the towns, all that is of importance is the prevalence of law and order even if it entails an element of high-handedness by the law-enforcing agencies. As long as one is not personally inconvenienced, he or she is not bothered about what is happening to others.
The social conscience is stifled and the so-called “NGO-types” who worry over instances of overt or covert injustice are derided as bleeding-heart liberals. This indifference of the average citizen towards transgressions of the law is one of the reasons why there is much approbation among urban residents of the police practice of “fake” encounters, which usually means that a suspect is killed in cold blood on the plea that the accused fired first.
It will be a mistake, however, to take an uncritical, romantic view of the pastoral scene. It is not as idyllic as is usually portrayed in feature films. As Ambedkar said, the countryside is “a sink of localism, a den of ignorance, narrow-mindedness and communalism”. In his denunciation of villages, Ambedkar reflected Marx’s view about the “idiocy of rural life”.
At the same time, stereotyping the residents of the two areas may be unwise. While the villagers can be narrow-minded, they are generally less communal than those living in cities, notwithstanding the greater educational opportunities which supposedly broaden the mind and the chances of upward mobility available to the latter. Communal outbreaks, as in Gujarat in 2002, and the ghettoisation of Muslims in the metropolises tend to confirm such impressions.
India’s urbanisation, therefore, may not be an unmixed blessing, especially because of the increasing visibility of extreme right-wing forces.
(Amulya Ganguli is a political analyst. The views expressed are personal. He can be reached at amulyaganguli@gmail.com)
—IANS
by admin | May 25, 2021 | Corporate, Corporate finance, Corporate Governance, Economy, News, Politics
Amit Mitra
Kolkata : Raising concern on the mechanism for GST refund to exporters, West Bengal Finance Minister and GST Council’s member Amit Mitra said a parliamentary panel pointed out “no interface” among the GST Network (GSTN) and Directorate General of Foreign Trade (DGFT) electronic data interchange (EDI) systems.
He said delayed refund to exporters in GST regime would lead to job loss in the labour intensive export sectors.
Citing the parliamentary committee’s report, he said: “It has been noticed that there is no interface amongst GSTN and DGFT EDI systems. Even the training given to the officers on ground on issues like Letter of Undertaking (LUT) and related matters has not been adequate… it has been experienced that it is easy to pay tax but it is very difficult to get a refund.”
According to him, the problem lies in the refund delivery mechanism because of “manual” processing of refund application and the system becomes more “primitive”.
“I am deeply concerned on the GST matters vis-a-vis exports,” he said while addressing the Export Excellence Awards ceremony organised by the Federation of India Export Organisations on Thursday evening.
According to the report — Impact of Goods and Services Tax (GST) on Exports — by the parliamentary committee headed by Naresh Gujral, the refund of IGST paid on export goods and refund of Input Tax Credit (ITC) on goods exported under Letter of Undertaking (LUT)/ Bond in the month of July, August, and September, 2017 still remain pending.
As a result, huge amount of working capital has been reportedly locked up, thereby, severely hurting the businesses of exporters and affecting their ability to be competitive in international markets. The Committee notes that a sharp liquidity crunch has gripped the majority of exporters due to the blocking of funds, the report said.
“It (the delay in disbursing refund) means your capital is blocked. The committee’s report said the (quantum of) blocked capital (stuck up with the government for refunds) could be between 15-20 per cent of the working capital. Declining of the working capital would lead to losing of jobs by the workers,” he said.
Again, citing the report, Mitra said the Committee notes that in the month of October, there is an overall decline in the merchandise exports by negative 1.12 per cent vis-a-vis exports of October last year.
The Committee notes that during the period July-October there has been a drop in the exports in the sectors like readymade garments of all textiles, fruits and vegetables, carpets, handicrafts, gems and jewellery, and there has been some stagnation in the sectors like leather.
According to the report, the labour intensive sectors appear to have been adversely impacted in this brief period, he said.
Mitra said the GSTN is supposed to process 300 crore of invoices per month and the software system has to undergo a change.
—IANS
by admin | May 25, 2021 | Business, Corporate, Corporate Buzz, Corporate Governance, Economy, Large Enterprise, Markets, News
By Aparajita Gupta,
New Delhi : It was a year of turmoil for the hyper-competitive Indian telecom sector as the balance-sheets of many major players kept bleeding, prompting the government to form an panel to chalk out plans to bail out firms.
Reliance Industries’ Jio continued to disrupt the market with its free or low-priced offers while three or four majors fought for the telecom pie tooth and nail. Despite assurances to the sector, the central government’s policy did not help: the Goods and Services Tax (GST) hiked the tax on the sector from 15 per cent to 18 per cent.
Also, the Telecom Regulator Authority of India (TRAI) reduced the Interconnection Usage Charges (IUC) to 6 paise from 14 paise per minute from October 1, 2017, putting additional pressure on the incumbents.
However, a few mergers and acquisitions in the sector sparked hopes of a better tomorrow as consolidation would help the majors to cope with challenges better, even as the cumulative debt of telcos rose to around Rs 4.6 lakh crore and the revenues fell. The sector’s adjusted gross revenue fell to Rs 30,759 crore for the quarter ending September 2017 — a year-on-year decrease of 18.1 per cent.
“This is a consequence of a number of developments over the years, including the entry of new operators in 2009 and the voice tariff war. This was followed by expensive auctions for spectrum (2016), needed by the telcos to offer communications services,” Rajan S. Mathews, Director General, Cellular Operators’ Association of India (COAI), told IANS.
“In 2018, consolidation in the sector is likely to take shape and the telcos will get the benefit of synergy in operations and the overall costs are likely to come down. Eventually, pricing power could also return, enabling longer-term sustainability overall,” he added.
However, Mahesh Uppal, Director of consultancy firm Com First, feels competition from Reliance Jio would continue to hurt margins of the incumbents.
“With Jio guaranteeing free calls to its subscribers, other players will find it difficult to sustain revenues from voice calls. They will be forced to do the same. They will then compete aggressively in the market for data services, especially by providing larger data packs at even cheaper prices. It is not clear whether players will compete more vigorously on quality of service. This might take more time,” Uppal told IANS.
But Amresh Nandan, Research Director, Gartner, said Jio’s disruption with free voice and data offers would eventually subside and become normal.
“Beyond a point, quality and reliability of service matter most. As that takes centre-stage, which has started to happen, free or even discounted services won’t help. If Jio comes up with products beyond connectivity — that enables greater interaction and transactions for consumers with necessary quality and reliability, then the competitive scenario may change,” he said.
Talking about mergers and acquisitions, Uppal said the sector was in the process of reaching an optimal number of players. “I expect the eventual survivors to be Airtel, Jio, the combination of Idea and Vodafone and the government-owned MTNL-BSNL,” Uppal said.
Nandan said mergers and acquisitions were good for the market from the economic perspective.
“Four telcos are dominant in the market and it should lead to a better scenario. However, real value from these deals will take time. These M&As are yet to reach operational culmination, which in itself will shake-up things a bit more,” he added.
“As far as consolidation is concerned, no market in the world has more than five telecom operators, but in India, there were more than 10. In 2018, the Bharti Airtel-Tata Teleservices-Telenor combine and the Idea Cellular-Vodafone combine would take shape,” said Mathews.
The country saw almost 40 per cent jump in 10 months in the number of wireless broadband users from 217.95 million at the end of December 2016 to 322.18 million users at the end of October 2017.
The regulator also came up with recommendations on net neutrality during the year, largely in agreement with suggestions made by the industry on “no blocking, no throttling, no fast lanes”, while allowing reasonable traffic management.
However, according to Mathews, the industry was disappointed that the authority did not adopt their recommendation “to have a wider approach to net neutrality, where issues of OTT (over-the-top) players, definition of net neutrality to include issues around connecting the next one billion unconnected users and national development priorities.”
The industry is now awaiting norms for in-flight connectivity, which is scheduled to come from the regulator by the year end.
The highlights of the year were:
** Announcement of merger of Vodafone India and Idea Cellular
** Airtel’s MoU with Tata Teleservices & Tata Teleservices Maharashtra to merge their Consumer Mobile Businesses
** JioPhone’s digital empowerment of 50 crore feature phone users at an effective price of zero
** Reliance Communications completion of merger with MTS
The telecom buzzword for 2018 appears to be 5G — smarter, faster communication. But that’s going to take around two to three years for full deployment.
(Aparajita Gupta can be contacted at aparajita.g@ians.in)
—IANS
by admin | May 25, 2021 | Corporate, Corporate Governance
Photo of GST Council in session.
New Delhi : The Goods and Services Tax (GST) Council on Saturday approved mandatory compliance of e-Way Bill for inter-state movement of goods from February 1, sources said here.
Some states might roll out both inter-state and intra-state e-Way Bill from February 1 on a voluntary basis. The system for e-Way Bill will be available from January 15.
E-way bill for intra-state will be compulsory from June 1, the source added. However, implementation of e-Way Bill for intra-state movement will done in a staggered manner from February.
—IANS
