Indian Economy-News & Updates

[dray]

What is GST (Goods & Services Tax) : Details & Benefits

The present structure of Indirect Taxes is very complex in India. There are so many types of taxes that are levied by the Central and State Governments on Goods & Services.

We have to pay ‘Entertainment Tax’ for watching a movie. We have to pay Value Added Tax (VAT) on purchasing goods & services. And there are Excise duties, Import Duties, Luxury Tax, Central Sales Tax, Service Tax….hhmmm

As of today some of these taxes are levied by the Central Government and some are by the State governments. How nice will it be if there is only one unified tax rate instead of all these taxes?

In this post, let us understand – what is Goods and Services Tax and its importance. What are the benefits of GST Bill to Corp orates, common man and end consumer? What are the advantages, disadvantages and challenges?

What is GST?
It has been long pending issue to streamline all the different types of indirect taxes and implement a “single taxation” system. This system is called as GST ( GST is the abbreviated form of Goods & Services Tax). The main expectation from this system is to abolish all indirect taxes and only GST would be levied. As the name suggests, the GST will be levied both on Goods and Services.

GST was first introduced during 2007-08 budget session. On 17th December 2014, the current Union Cabinet ministry approved the proposal for introduction GST Constitutional Amendment Bill. On 19th of December 2014, the bill was presented on GST in Loksabha. The Bill will be tabled and taken up for discussion during the coming Budget session. The current central government is very determined to implement GST Constitutional Amendment Bill.

GST is a tax that we need to pay on supply of goods & services. Any person, who is providing or supplying goods and services is liable to charge GST.

How is GST applied?

GST is a consumption based tax/levy. It is based on the “Destination principle.” GST is applied on goods and services at the place where final/actual consumption happens.

GST is collected on value-added goods and services at each stage of sale or purchase in the supply chain. GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services.The manufacturer or wholesaler or retailer will pay the applicable GST rate but will claim back through tax credit mechanism.

But being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a last-point retail tax. GST is going to be collected at point of Sale.

The GST is an indirect tax which means that the tax is passed on till the last stage wherein it is the customer of the goods and services who bears the tax. This is the case even today for all indirect taxes but the difference under the GST is that with streamlining of the multiple taxes the final cost to the customer will come out to be lower on the elimination of double charging in the system.

Let us understand the above supply chain of GST with an example:

The current tax structure does not allow a business person to take tax credits. There are lot of chances that double taxation takes place at every step of supply chain. This may set to change with the implementation of GST.

Indian Government is opting for Dual System GST. This system will have two components which will be known as

• Central Goods and Service Tax (CGST) and
• State Goods and Service Tax (SGST).

The current taxes like Excise duties, service tax, custom duty etc will be merged under CGST. The taxes like sales tax, entertainment tax, VAT and other state taxes will be included in SGST.

So, how is GST Levied? GST will be levied on the place of consumption of Goods and services. It can be levied on :

• Intra-state supply and consumption of goods & services
• Inter-state movement of goods
• Import of Goods & Services

What is the applicable GST rate?

The rate (percentage) of GST is not yet decided. As mentioned in the above table, there might be CGST, SGST and Integrated GST rates. It is also widely believed that there will be 2 or 3 rates based on the importance of goods. Like, the rates can be lower for essential goods and could be high for precious/luxury items.

Benefits of GST Bill implementation

• The tax structure will be made lean and simple
• The entire Indian market will be a unified market which may translate into lower business costs. It can facilitate seamless movement of goods across states and reduce the transaction costs of businesses.
• It is good for export oriented businesses. Because it is not applied for goods/services which are exported out of India.
• In the long run, the lower tax burden could translate into lower prices on goods for consumers.
• The Suppliers, manufacturers, wholesalers and retailers are able to recover GST incurred on input costs as tax credits. This reduces the cost of doing business, thus enabling fairer prices for consumers.
• It can bring more transparency and better compliance.
• Number of departments (tax departments) will reduce which in turn may lead to less corruption
• More business entities will come under the tax system thus widening the tax base. This may lead to better and more tax revenue collections.
• Companies which are under unorganized sector will come under tax regime.

Challenges for implementing Goods & Services Tax system

• The bill is yet to be tabled and passed in the Parliament
• To implement the bill (if cleared by the Parliament) there has to be lot changes at administration level, Information Technology integration has to happen, sound IT infrastructure is needed, the state governments has to be compensated for the loss of revenues (if any) and many more..
• GST, being a consumption-based tax, states with higher consumption of goods and services will have better revenues. So, the co-operation from state governments would be one of the key factors for the successful implementation of GST

Since GST replaces many cascading taxes, the common man may benefit after implementing it. But it all depends on ‘what rate the GST is going to be fixed at?’ Also, Small Traders (based on Annual Business turnover) may be exempted from it.

France was the first country to introduce this system in 1954. Nearly 140 countries are following this tax system. GST could be the next biggest tax reform in India. This reform could be a continuing process until it is fully evolved. We need to wait few more months for more details on Goods & Services Tax system.

http://www.relakhs.com/gst-goods-services-tax-in-india/

View attachment 309980 View attachment 309981

@GURU DUTT @Rain Man @ranjeet @Abingdonboy @Levina @Roybot @Water Car Engineer @PARIKRAMA @Nilgiri

A very informative one!!

 

[PARIKRAMA]

@anant_s
You knw my good friend, I am powerless or else I would any day give a positive rating for such posts.. Your posts are always a delight to read..

Btw can you look for a topic which is interesting me. It seems Indian Railways is planning for smart toilets like the ones in Aeroplanes. It seems going forward the new hi speed trains and the ultra fast ones will sport such stuff in order to improve cleanliness, hygiene and ease of maintaining it's status versus the present toilets Installed in most of the trains.

Of course the quantum of ppl using a toilet in railways is huge.. But it seems solutions are being explored on this.. Some import route are being talked and then a MII part is being chalked out.

If you hear anything, pls do share and pls do tag me.. I would love to hear more on the smart toilet thing since Railway volume and challenges is a huge task...

 

[anant_s]

smart toilets

Indian Railway tracks have been dubiously termed in Western Media as World's longest and biggest open toilets owing the the existing dump method used till date, where waste is simply dumped on tracks. Although mos of the waste is Bio Degradable, but the dumping especially when train is standing at Station causes huge problems of hygiene and additional cost of cleanliness.
To overcome this problem, till now Railways have been requesting (by means of putting sticker notices in Toilets) passengers not to use toilets when train is at station. As elsewhere people don't tend to read advice or use common sense.

Solutions

1. Control Discharge Toilet System (CDTS)
This system consists of a Programmable Logic Control (PLC) pannel that allows waste to be retained in tank and only allow discharge once train has picked up speed (minimum value set at 30 kph). This ensures that waste disposed is at a location far away from station and in open areas.

2. Zero Discharge Toilet System (ZDTS)

In 2010, IR signed an MoU with DRDO to develop a system of Zero Discharge bio Waste on tracks, dubbed as ZDTS. This system consists of a Digester tank, where Anaerobic bacteria is introduced in tank. the waste is converted to organic matter and finally mixed with Chlorine (to remove stench) and discharge on tracks. The material has absolutely no impact on soil or environment as whole.

it is proposed to install these technologies on all existing coaches and the newer coaches introduced every year, have these toilets pre installed. Over next few years, when entire passenger coaches are installed with these toilets, bio waste on tracks shall be a thing of past for Indian Railways.

Railways to provide 17000 Bio-Toilets in Trains under Swachh Rail Swachh Bharat Mission

@Abingdonboy @nair @MilSpec @Rain Man @Ryuzaki @Roybot @ranjeet @Levina

 

[fsayed]

 

[mehboobkz]

Is bank's 'quarter horibilis' a sign of an impending economic crisis?

 

[Levina]

What is GST (Goods & Services Tax) : Details & Benefits

The present structure of Indirect Taxes is very complex in India. There are so many types of taxes that are levied by the Central and State Governments on Goods & Services.

We have to pay ‘Entertainment Tax’ for watching a movie. We have to pay Value Added Tax (VAT) on purchasing goods & services. And there are Excise duties, Import Duties, Luxury Tax, Central Sales Tax, Service Tax….hhmmm

As of today some of these taxes are levied by the Central Government and some are by the State governments. How nice will it be if there is only one unified tax rate instead of all these taxes?

In this post, let us understand – what is Goods and Services Tax and its importance. What are the benefits of GST Bill to Corp orates, common man and end consumer? What are the advantages, disadvantages and challenges?

What is GST?
It has been long pending issue to streamline all the different types of indirect taxes and implement a “single taxation” system. This system is called as GST ( GST is the abbreviated form of Goods & Services Tax). The main expectation from this system is to abolish all indirect taxes and only GST would be levied. As the name suggests, the GST will be levied both on Goods and Services.

GST was first introduced during 2007-08 budget session. On 17th December 2014, the current Union Cabinet ministry approved the proposal for introduction GST Constitutional Amendment Bill. On 19th of December 2014, the bill was presented on GST in Loksabha. The Bill will be tabled and taken up for discussion during the coming Budget session. The current central government is very determined to implement GST Constitutional Amendment Bill.

GST is a tax that we need to pay on supply of goods & services. Any person, who is providing or supplying goods and services is liable to charge GST.

How is GST applied?

GST is a consumption based tax/levy. It is based on the “Destination principle.” GST is applied on goods and services at the place where final/actual consumption happens.

GST is collected on value-added goods and services at each stage of sale or purchase in the supply chain. GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services.The manufacturer or wholesaler or retailer will pay the applicable GST rate but will claim back through tax credit mechanism.

But being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a last-point retail tax. GST is going to be collected at point of Sale.

The GST is an indirect tax which means that the tax is passed on till the last stage wherein it is the customer of the goods and services who bears the tax. This is the case even today for all indirect taxes but the difference under the GST is that with streamlining of the multiple taxes the final cost to the customer will come out to be lower on the elimination of double charging in the system.

Let us understand the above supply chain of GST with an example:

The current tax structure does not allow a business person to take tax credits. There are lot of chances that double taxation takes place at every step of supply chain. This may set to change with the implementation of GST.

Indian Government is opting for Dual System GST. This system will have two components which will be known as

• Central Goods and Service Tax (CGST) and
• State Goods and Service Tax (SGST).

The current taxes like Excise duties, service tax, custom duty etc will be merged under CGST. The taxes like sales tax, entertainment tax, VAT and other state taxes will be included in SGST.

So, how is GST Levied? GST will be levied on the place of consumption of Goods and services. It can be levied on :

• Intra-state supply and consumption of goods & services
• Inter-state movement of goods
• Import of Goods & Services

What is the applicable GST rate?

The rate (percentage) of GST is not yet decided. As mentioned in the above table, there might be CGST, SGST and Integrated GST rates. It is also widely believed that there will be 2 or 3 rates based on the importance of goods. Like, the rates can be lower for essential goods and could be high for precious/luxury items.

Benefits of GST Bill implementation

• The tax structure will be made lean and simple
• The entire Indian market will be a unified market which may translate into lower business costs. It can facilitate seamless movement of goods across states and reduce the transaction costs of businesses.
• It is good for export oriented businesses. Because it is not applied for goods/services which are exported out of India.
• In the long run, the lower tax burden could translate into lower prices on goods for consumers.
• The Suppliers, manufacturers, wholesalers and retailers are able to recover GST incurred on input costs as tax credits. This reduces the cost of doing business, thus enabling fairer prices for consumers.
• It can bring more transparency and better compliance.
• Number of departments (tax departments) will reduce which in turn may lead to less corruption
• More business entities will come under the tax system thus widening the tax base. This may lead to better and more tax revenue collections.
• Companies which are under unorganized sector will come under tax regime.

Challenges for implementing Goods & Services Tax system

• The bill is yet to be tabled and passed in the Parliament
• To implement the bill (if cleared by the Parliament) there has to be lot changes at administration level, Information Technology integration has to happen, sound IT infrastructure is needed, the state governments has to be compensated for the loss of revenues (if any) and many more..
• GST, being a consumption-based tax, states with higher consumption of goods and services will have better revenues. So, the co-operation from state governments would be one of the key factors for the successful implementation of GST

Since GST replaces many cascading taxes, the common man may benefit after implementing it. But it all depends on ‘what rate the GST is going to be fixed at?’ Also, Small Traders (based on Annual Business turnover) may be exempted from it.

France was the first country to introduce this system in 1954. Nearly 140 countries are following this tax system. GST could be the next biggest tax reform in India. This reform could be a continuing process until it is fully evolved. We need to wait few more months for more details on Goods & Services Tax system.

http://www.relakhs.com/gst-goods-services-tax-in-india/

View attachment 309980 View attachment 309981

@GURU DUTT @Rain Man @ranjeet @Abingdonboy @Levina @Roybot @Water Car Engineer @PARIKRAMA @Nilgiri

Wow!
That's a lot of info. Thanks!
I have just skimmed through the post, will read it again tonight.

 

[Nilgiri]

Indian "Interstate" system on the anvil soon:

http://economictimes.indiatimes.com...corridors-identified/articleshow/52723683.cms

I am enjoying this govt immensely w.r.t their long term vision when it comes to transport. Lets hope they will have 4+ lanes in the relevant stretches.

 

[Nilgiri]

Of course India growth of 7 - 8% is absolutely false....just look at the stagnation in oil consumption:

India Funds Siberian Oil Quest With Its Cheapest Loans in Decade

http://www.bloomberg.com/news/artic...n-oil-quest-with-its-cheapest-loans-in-decade

As energy consumption explodes in the world’s second-most populous nation, India’s state-owned oil companies are taking advantage of the lowest overseas loan costs in a decade to finance exploration in the wilderness of Siberia.

ONGC Videsh Ltd. signed a $1.16 billion nine-month bridge loan on May 19 to fund the purchase of a 15 percent stake in Vankor field in Siberia from Russia’s Rosneft OAO, data compiled by Bloomberg show. Indian Oil Corp. plans a $1.2 billion fundraising for Russian investments in three or four months, including short- and long-term loans, Finance Director A.K. Sharma said in an interview on Wednesday. The average margin over benchmark rates on non-rupee loans for Indian refiners and explorers was 74 basis points this year, the lowest since 2006, the data show.

“We expect this trend of overseas acquisitions to continue as upstream companies such as ONGC seek to fulfill their mandate to improve the nation’s oil security,” said Mehul Sukkawala, a Singapore-based analyst at S&P Global Ratings. “India’s government has taken significant measures to improve the operating environment for oil and gas firms.”


The country, which imports more than three quarters of its crude requirement, is expanding its energy assets overseas as the pace of economic growth in India outstrips other major nations. It consumed 4 million barrels a day last year, according to the International Energy Agency, and is expected to surpass Japan as the world’s third-largest oil user this year.

The funding for ONGC Videsh, the overseas unit of New Delhi-based Oil & Natural Gas Corp., accounts for the largest part of $1.6 billion in total overseas loans signed by Indian companies so far in 2016 for financing acquisitions, according to Bloomberg-compiled data. It was closed at a margin of less than 85 basis points over the London interbank offered rate, according to people familiar with the matter. While six-month U.S. dollar Libor touched a seven-year high of 0.9931 percent on May 31, it remains significantly lower than rates in India. The three-month interbank rate for rupees was at 7.15 percent on Friday.

“We get much cheaper rates abroad, since they are Libor-linked,” ONGC’s Finance Director A.K. Srinivasan said in an interview June 7. “Rates are low, so we will take advantage of that.”

The yields on ONGC’s 4.625 percent dollar notes due 2024 fell to 3.78 percent on May 17, the lowest since April 2015. The average spread for Indian dollar bonds over Treasuries touched a six-month low of 293 basis points on May 19, according to a JPMorgan Chase & Co index.


ONGC Videsh said in a May 31 statement that it completed the purchase of its holding in Vankor for $1.27 billion last month. Indian companies including ONGC and Indian Oil will get a 49.9 percent stake in the oilfield, India’s Oil Minister Dharmendra Pradhan said in an interview on Monday.

“I may visit Russia very soon to have the final arrangement regarding this position,” Pradhan said.

The acquisition loans market will continue to be driven by state oil companies, able to get favorable borrowing costs due to India’s investment grade rating, according to Sidharth Rath, group executive for corporate and transaction banking at Axis Bank Ltd.

Moody’s Investors Service rates ONGC and explorer Oil India Ltd. at Baa2, a notch above India’s sovereign score of Baa3, the lowest investment-grade rating. Indian Oil Corp. also carries a Baa3 ranking.

ONGC profits rose 12 percent to 44.2 billion rupees ($661 million) in the three months to March 31, beating the 23.8 billion-rupee median estimate from analysts compiled by Bloomberg.

ONGC had debt of 536 billion rupees at the group level, while cash and equivalents were 289 billion rupees as of March 31, according to Bloomberg data. On a standalone basis, ONGC has available cash of about 140 billion rupees and no debt, Srinivasan said.

“ONGC has not been impacted by low oil prices as much,” said Vikas Halan, lead analyst for oil and gas companies in South and Southeast Asia at Moody’s in Singapore. "There is very little debt on the balance sheet and there is lot of cash and other liquid assets. It is not facing the same problems as other companies globally are facing.”

 

[Sky lord]

Indian "Interstate" system on the anvil soon:

http://economictimes.indiatimes.com...corridors-identified/articleshow/52723683.cms

I am enjoying this govt immensely w.r.t their long term vision when it comes to transport. Lets hope they will have 4+ lanes in the relevant stretches.

Cool.

Any idea on time line? I am guessing minimum 10 years?

 

[Nilgiri]

Cool.

Any idea on time line? I am guessing minimum 10 years?

I am guessing sooner than that given Gadkari pace so far. He is trying to get current road building to 30 km a day. So if he can divert such a pace to this project (alone) it can be done in say 5 years time once the concept is finalised (say in about a year).

 

[fsayed]

[[UC News]#India records 10-year low in investments in public-private sector: World Bank#
http://headline.uodoo.com/story/330...;S.token=1002;S.scene=1002;l.channel=101;end] is good,have a look at it!

 

[Nilgiri]

[[UC News]#India records 10-year low in investments in public-private sector: World Bank#
http://headline.uodoo.com/story/330...;S.token=1002;S.scene=1002;l.channel=101;end] is good,have a look at it!

Not to worry tremendously since this covers only Public-Private partnership area. Investment is quite robust from the world into private sector as evidenced from FDI figures.

Bigger problem for India is domestic investment rate and overall total investment rate....GCF is not increasing to level as fast as one would like given the PSU NPA problems that remain underlying in significant amount and may persistently last till bankruptcy bill is operationalised in significant way and more recapitalisation is provided by the govt in a cpl more budgets.

 

[Nilgiri]

Year’s first trillion-dollar bull market is nearing in India

http://www.bloomberg.com/professional/blog/years-first-trillion-dollar-bull-market-nearing-india/

BLOOMBERG NEWS JUNE 13, 2016
This article was written by Rajhkumar K Shaaw and Jonathan Burgos. It appeared first on the Bloomberg Terminal.

Faith in India’s economy and its weather is giving overseas investors the confidence to snap up equities at the quickest pace in more than a year.

Traders are shrugging off the most expensive stock valuations since 2011, sending Indian shares back toward a bull market amid forecasts for the strongest monsoon in two decades and data showing the nation growing faster than all other major economies. Inflows may continue as the benefits of Prime Minister Narendra Modi’s policies emerge in corporate earnings reports, investors including Mark Mobius and BNP Paribas SA said.

“Foreign investors are looking for growth; there aren’t many places to get it and that’s why India stands out,” Prashant Bhayani, chief investment officer for Asia at BNP Paribas Wealth Management, said in an interview in Singapore. “Valuations aren’t cheap relative to history but we expect earnings will start to pick up gradually from depressed levels. That’s going to provide a tailwind for the market. We are overweight on India.”

Foreign investors have bought $1.5 billion of shares since April 1, the second-highest in Asia excluding Japan, after pouring $4.1 billion in March alone as global risk appetite revived and Modi took steps to boost rural demand and investment. The benchmark S&P BSE Sensex has risen 16 percent from a low reached in February, putting India on course to become the first among markets valued at more than $1 trillion to crawl back from a bear market this year.

Modi has opened sectors such as railways and defense, helping draw record foreign direct investment in 2015, narrowed the current-account gap by curbing gold imports, quickened infrastructure building and limited the budget deficit to a nine-year low.

The steps are beginning to take hold: 66 percent of the companies in the NSE Nifty 50 Index posted March-quarter results that beat or matched estimates, versus 52 percent in the previous three months. Operating profits increased 9 percent year-on-year in the period, the most since September 2014, data compiled by Bloomberg show.

Cycle turning

“The narrative on the Modi government will change over the next few months because the earnings cycle is turning,” Ridham Desai, head of India research at Morgan Stanley, said in an interview with Bloomberg Quint in Mumbai. “People were looking at the earnings cycle and thinking the government hasn’t done enough work.”

The brokerage upgraded Indian stocks to overweight and Citigroup Inc. raised its March 2017 Sensex target by 7 percent, citing improving economic indicators. Data last week showed India’s GDP expanded by a world-beating 7.6 percent in the year ended March, cementing the nation’s position as a bright spot among emerging markets as China slows while Russia and Brazil contract.

Mobius, executive chairman at Templeton Emerging Markets Group, said he will add more shares of smaller companies.

“Modi’s policy stance and philosophy will start feeding into the economy, accelerating the pace and that’s going to have a terrific impact,” Mobius said in an interview to Bloomberg Quint. “If you factor in the reforms, India is on the cusp of an interesting opportunity.”

Monsoon weather

Indian stocks rose to a seven-month high earlier this week as the central bank said its monetary policy will remain accommodative even as it left borrowing costs at a five-year low. It also cited a strong monsoon among factors that could help offset upward inflationary pressures.

India’s monsoon, which accounts for four-fifths of the country’s rainfall, reached the mainland in southern Kerala state on Wednesday. The government is counting on above-normal precipitation this year to help control food prices, boost farm production and ease a drinking water shortage caused by back-to-back droughts.

One wild card for equities is whether Raghuram Rajan will remain as Reserve Bank of India governor. Rajan on Tuesday urged patienceregarding his future after his term ends in September. The former International Monetary Fund chief economist is a darling of investors, who have lauded his policies that lifted the rupee from a record low, halved consumer-price gains and rebuilt currency reserves since taking office in 2013.

An exit by Rajan won’t have a lasting impact if he’s replaced by someone “equally capable, neutral, non-political person,” Mobius said.

Need proof

Some analysts are taking a cautious approach to equities. UBS Group AG, for one, is waiting to see stronger proof of improving expansion before raising its projections.

“Earnings are recovering and some high-frequency data points have turned positive, but the evidence isn’t big and broad enough,” Gautam Chhaochharia, head of research at UBS Securities India Pvt. in Mumbai, said in an interview last month.

The Sensex trades at 16.4 times 12-month projected profits, the costliest since January 2011 and higher than its five-year mean of 14. Lofty valuations make India vulnerable to capital outflows, as happened earlier this year. Foreigners pulled a total $2.9 billion from stocks in January and February amid a global selloff, ending the nation’s longest-ever bull market.

The recent rally could sputter if the buoyancy in global stocks ebbs, UBS’s Chhaochharia said.

The Sensex declined 0.5 percent to 26,635.75 at the close in Mumbai. The gauge lost 0.8 percent this week, ending two consecutive weeks of advance.

Others say the potential for earnings and the economy outweigh the market’s elevated valuations.

“We’re are thinking of increasing exposure to the emerging world and India would be high on the list,” Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which oversees about $120 billion, said by phone from Sydney. “India’s share market is expensive compared with other emerging markets, but it has better fundamentals.”

 

[fsayed]

http://m.economictimes.com/news/pol...out-congress-demands/articleshow/52751428.cms

GST: States get into the act, toss out Congress' demands
By ET Bureau | 15 Jun, 2016, 00:52 hrs IST
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Jaitley, however, rejected Congress' demand for capping the GST rate, which has been the main issue of contention.
KOLKATA: The proposed Goods and Services Act may be entering the last lap with near-unanimity among state finance ministers in getting the legislation passed as they tossed out Congress' demands that the tax rate be enshrined in the Constitution, which would have tied the hands of future governments.

For the tax idea that germinated 15 years ago when Atal Bihari Vajpayee was the prime minister, the finish line may be getting nearer with even the ministers from Congress-ruled states not insisting on writing the tax rate in the Constitution during the meet amid the party's reduced representation in the Rajya Sabha.

"Virtually every state has accepted the idea of GST," Finance Minister Arun Jaitley told reporters after a meeting with state finance ministers where 22 of the states were represented by ministers and 7 by bureaucrats.

"Tamil Nadu has some reservations and they made a few suggestions," said Jaitley. Although the minister was optimistic about getting the approval of the Upper House, he did not set a deadline as many legislations in the past had to be put in cold storage due to opposition from the Congress, or had to be withdrawn despite promulgating Ordinance. The central government will compensate for the losses that states would incur because of the implementation of the Act, said Jaitley.

"We don't fix deadlines, we move with a positive intent," said Jaitley. Junior finance minister Jayant Sinha on Monday said GST can be implemented from April 1, 2017 if the upper house of Parliament passes the Bill in the monsoon session.

The two-day event in Kolkata is the biggest GST meet in the last two years.

"It is an instance of record attendance from states, which reflects the essence of federalism, and we have seen the enthusiasm among the states on GST," said West Bengal Finance Minister Amit Mitra, who is also the chairman of the Empowered Committee of State Finance Ministers. His leader, the mercurial Mamata Banerjee, is supporting the tax.

The BJP may see this as a victory over Congress but there is still a long procedure to follow for the actual execution of the new indirect tax regime, which will bring 29 states into a single market. Congress is demanding a GST rate of 18% and scrapping the additional 1% tax designed to compensate producer states which fear losing revenue once the measure is implemented.

Opposition may also be losing steam. After the recent elections to Rajya Sabha, the ruling coalition's tally in the House of 245 rose by 5 to 74 members, and for the Congress-led United Progressive Alliance, it fell by 3 to 71. To stall the Bill, it needs numerous regional parties' support.

GST is touted as the biggest tax reforms in the country since Independence as it would break down the barriers created by a plethora of taxes in various states which hinder free movement of goods and complicate businesses. The tax if implemented is expected to remove bottlenecks that could boost the gross domestic product by about two percentage points straight away.

The GST Bill has already been approved by the Lok Sabha where the Bharatiya Janata Party has a majority but is pending in Rajya Sabha.

A government panel headed by Chief Economic Adviser Arvind Subramanian has recommended three broad rates for GST: 17-18% as the standard rate for most goods and services; 12% for essential items, and 40% for luxury items, tobacco. Precious metals will be taxed at 2-6%.

Some states may lose during transition. Punjab may lose.`4,000 crore that it earns from agri-produce if the Centre does not come to its rescue, said the state Finance Minister Parminder Singh Dhindsa.

"We have demanded 100% compensation for the first five years, 70% for next two years and 50% till the states recover," said Etela Rajender, finance minister, Telangana.

Now, states would need to devise a workable formula for management of the dual-taxation structure and fix the revenue neutral rate in their proposed July meeting. On the issue of dual control, it has been decided that states would manage traders whose annual turnover is less than Rs 1.5 crore and dual control would come only for traders with higher turnover. States need to fix a revenue neutral rate (RNR) to strike a balance between keeping tax rates reasonable and preventing revenue loss to states.

"There are certain issues on dual control and these will be worked out. As far as the RNR is concerned, we must have a rate that is not too high which is bad for industry and not too low or states would lose revenue," Mitra said. After Parliament approves the constitutional amendment to allow GST, it needs to be ratified by more than half the states. Lawmakers need to pass three more legislations — Central GST, State GST and Integrated GST — after this.

 

[fsayed]

http://m.economictimes.com/markets/...esome-shankar-sharma/articleshow/52790626.cms