GST: A system of negatives and positives to roll out tonight

Newsroom24x7 Staff

New Delhi: Goods and Services Tax (GST), being described as an historic tax reform, will come into effect from midnight on 1 July, 2017.

GST will completely transform the Indirect Taxation landscape in the country involving both the Central and State levies. In a departure from the normal practice, GST will be administered together by the Centre and States.

To commemorate the historic occasion, a function will be held in the Central Hall of Parliament on the mid-night of 30th June and 1 July, 2017. The event will be attended by the President, Vice President, Prime Minister, Speaker of Lok Sabha and Union Finance Minister among other dignitaries.

GST has two sides – the positive and the negative

Positive side

GST will subsume all taxes, widen the tax base, prevent the cascading effect of taxes and capture most commercial transactions.

Negative side or imperfections

The GST demerits concessional and standard rate. Instead there are more than half a dozen rates. It brings in a diarchy in tax administration – with one set of tax payees under the State and one under the Central Government. Under the federal system, who or which government – Centre or the State – will be assigned what task will be like a lottery. The number of returns to be filed would be 3 per month, which sums up to 12 x 3 = 36. Then there will be 1 annual return taking the total to 37. If one has business in multiple states and multiple regions, filing returns would be a mind boggling exercise and that too at huge cost of compliance. Against this, all that was required was a quarterly or half-yearly return. The anti-profiteering provision and authority is being viewed as an abomination, which is against market economics and commerce. Matters also would be worst confounded as the GST Network is not working, the call centers are down and there is mayhem before the rollout at midnight tonight. The spirit backed with the deafening slogan “one nation, one tax” also has been compromised by keeping Jammu and Kashmir out of the new tax regime.  

The opposition parties are opposing the GST . Congress Vice President Rahul Gandhi, who is currently abroad, said on twitter that the implementation of GST is a “tamasha” (farce).

West Bengal Chief Minister Mamata Banerjee today said it would bring back the dreaded “Inspector Raj”. Under the GST regime, the “Inspectors will have the power to arrest on 4 different types of offences which can lead to jail from 1 year upto 5 years,” she said, and opposing the GST arrest clause, pointed out that despite West Bengal’s opposition to this arrest clause in the GST Council, “Government of India did not pay any heed”.

GST has also left its impact on the market. Ahead of the GST rollout, Sensex today fell over 154 points and the Nifty went below 9,500 in the beginning on Friday.

Countering the opposition, Union Minister Nitin Gadkari said that the much-awaited GST regime will end ‘Inspector Raj’, weed out black money from the system and end corruption.

 

GST, Aadhaar and bank accounts: People have become defaulters due to glitch in the system

Newsroom24x7 Staff

New Delhi/Bhopal: During the penultimate moments on 30 June 2017, just before the historic rollout of GST from midnight, commoners were running from pillar to post and tearing their hair as they were finding it impossible to use the online banking facility to link their Aadhaar cards with their bank accounts. Even after any number of attempts they repeatedly kept getting the message that the Aadhaar number was not matching with UIDAI.

When Newsroom24x7 investigated the matter by accessing the Aadhaar Online Services that offer the facility to check Aadhaar Enrolment; Locate Enrolment Center; Check Aadhaar Status; Download Aadhaar, Get Aadhaar Number on Mobile, Retrieve Lost UID/EID, it was found that even after filling the Aadhaar number, the online service was not responding satisfactorily.

In the case of many, hours after they had visited the UIDAI enrolment centre and completed all formalities to register or change their mobile number, the UIDAI website kept flashing the message “Your registered mobile number is not Valid. Please use EID.” People were also drawing a blank even after feeding the EID.

Under these circumstances, for no fault of their’s, people have become defaulters when it comes to the basic compliance of linking the Aadhaar number with the bank account.

Killing people in the name of cow worship is not acceptable: Narendra Modi

Newsroom24x7 Staff

Prime Minister Narendra Modi offered flower petals at Mahatma Gandhi bust, at the Sabarmati Ashram, in Ahmedabad, Gujarat on June 29, 2017.

Ahmedabad: Prime Minister Narendra Modi today issued a stern warning against cow vigilantism and said that killing people in the name of cow worship (Gau Bhakti) is not acceptable.

This is not something that Mahatma Gandhi would approve of, he said. As a society, there is no place for violence; no person in this nation has the right to take the law in his or her own hands, he added.

Modi was speaking at a special function organised to mark the centenary year celebrations of Sabarmati Ashram in Gujarat.

Making a strong statement on cow vigilantism, the Prime Minister said, “We are a land of non violence. We are the land of Mahatma Gandhi. No one spoke about protecting cows more than Mahatma Gandhi and Acharya Vinoba Bhave.”

The Prime Minister urged people to work together and create the India of Mahatma Gandhi’s dreams, which our freedom fighters would be proud of. He said Mahatma Gandhi’s thoughts have the power to mitigate the challenges the world is facing today.

He said that it is essential, as a society, to stay connected to our history. Recalling the contributions of Shrimad Rajchandraji on his 150th birth anniversary, Prime Minister Modi called for further academic research on his life and thoughts.

Speaking about cleanliness, Shri Modi said it must become a habit. He said this would be a tribute to Mahatma Gandhi on his 150th birth anniversary in 2019.

He urged people from all over the world to visit the Sabarmati Ashram.

Fitch: Indian Loan Waivers are a Risk to Fiscal Consolidation

Newsroom24x7 Network

Mumbai/Hong Kong/Singapore: The farm loan-waiver schemes being discussed and rolled out across an increasing number of Indian states could have a significant impact on state government finances, and might undermine efforts to bring down general government debt, says Fitch Ratings.

The impact on India’s debt dynamics and capital spending will depend on the total size of loans waived, how the scheme is financed, and whether there are possible offsets from cuts to other forms of spending, including capital projects, Fitch adds.

Larger state deficits would delay an expected gradual reduction in general government debt, which includes central and state government debt. When India’s rating was affirmed at ‘BBB-‘/Stable in May, Fitch forecast general government debt to fall to 64.9% of GDP by FY21, from 67.9% in FY17, and we highlighted that potential changes to India’s fiscal position are a rating sensitivity. Public finances are a key weakness in India’s sovereign credit profile, with general government debt well above the ‘BBB’ median of 40.9% and the fiscal deficit of 6.6% of GDP in FY17 much higher than the ‘BBB’ median of 2.7%.

India’s central government has gradually consolidated its fiscal position in recent years, and has indicated it will not participate in the waivers. However, the combined finances of the states – which are included in general government debt and deficits – have been under pressure. Public pay hikes, election spending and higher interest costs stemming from the UDAY scheme – under which state governments have taken on debt from power distribution companies – are all likely to add to expenditure.

There is a risk that farm loan waivers – which we have not previously factored into our assumptions – will lead to further fiscal slippage at the state level or will reduce the funds available for public investment. The central government has the authority to block states from borrowing to finance persistently large deficits, but it could be reluctant ahead of approaching elections in some states, and with the 2019 Lok Sabha election drawing nearer.

The last widespread farm loan-waiver scheme was rolled out in 2008 by the central government, and covered 43 million farmers. It reportedly cost around 1.3% of GDP. The combined cost to the states could also become large this time. Schemes have already been announced in Uttar Pradesh, Maharashtra, Punjab and Karnataka, which account for around one-third of India’s population. Other governments are likely to feel pressure to implement similar policies, particularly in states with upcoming elections. A roll-out across much of India is not unthinkable.

Banks could also be affected by the waiver schemes. The schemes will benefit banks to the extent that they offload farm loans with weak repayment prospects to state governments. Uniform farm loan waivers could lead to moral hazard and weaken the general repayment culture among financially healthy farmers, but they will still have an incentive to repay loans in order to retain access to future funding. Agricultural loans account for 14% of total bank lending, according to the Reserve Bank of India, and are equivalent to around 6.5% of GDP. (Fitch Ratings)

Newsroom24x7 adds:

Here are clippings of a series of news items by Lalit Shastri, Editor-in-Chief Newsroom24x7, published on 3-consecutive days in July 1989 by a leading newspaper of Bhopal. These exposed the impractical side and futility of rural loan waiver.

In the run up for the 1990 Assembly election in the central Indian State of Madhya Pradesh, the State unit of Bharatiya Janata Party, which was then led by Sunderlal Patwa, had announced from rooftops that once they come to power, all rural loans shall be waived. This was done without explaining what they meant by “Rin Mukti” or loan waiver and what would be the tune of debt that they hoped to exempt and also from where they were going to mobilise resources to meet this goal.

The BJP had done this showing zero regard to the fact that no government’s financial policy recognises or rewards a defaulter.

Patwa had become chief minister for a second term riding on the crest of popularity due to the loan waiver plank but his regime that lasted slightly more than 1000 days ended abruptly in December 1992 when his government was dismissed and President’s Rule was imposed in Madhya Pradesh in the wake of the riots that followed in Bhopal and few other cities after the demolition of the disputed Babri Masjid structure on 6 December that year.