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Vol 60
CONTENTS
Tax Reforms: Past, Present and Future GST: game changer for Indian Economy?
TN Ashok ....................................................................................7 Ranjeet Mehta............................................................................35
Indias Tax System: Increasing Progressivity GST and the Constitutional Conundrum
Malini Chakravarty....................................................................12 Jayanta Roy Chowdhury............................................................41
do you know?...................................................................15
special article
Indirect Tax Reforms : Goods and Services Tax:
Facilitative tax regime The International Experience
Najib Shah..................................................................................17 Pravakar Sahoo , Ashwani Bishnoi............................................45
Ushering in a New Era of Tax Reforms
GST: One Nation, One Tax
D S Malik...................................................................................22
Shishir Sinha..............................................................................52
Road Map for Taxation
Timsy Jaipuria............................................................................27 NORTH EAST DIARY . .........................................................55
Our Representatives : Ahmedabad: Amita Maru, Bengaluru: Punita, Chennai: A. Elangovan, Guwahati: Anupoma Das, Hyderabad: Vijayakumar Vedagiri,
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Girish Chander Das.
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T
axes the word conjures up an image of a person rushing to pay his income tax before
the last date. Or, an income tax raid on a businessman where wealth and money is
unearthed. However scary the term may sound but it is a fact that Taxes are essential for
development of any economy. It is these very taxes which the citizens of a country pay that go
towards development activities like building roads and bridges, constructing dams, maintaining
the railways network, offering health care services, etc.
The rajas and maharajs of yorealso collected taxes. The more enlightened ones like Ashoka
and Akbar evolved a systematic taxation policy and also tax collection policy so as to earn revenue
to run the kingdom without creating much hardship for the common man. Some kings had an
arbitrary tax collection system which they used to maintain their lavish lifestyles and wage wars.
Today, in the modern economies, taxes are regulated by various rules and regulations and are
monitored by the peoples representatives.
Indian tax system is the most complicated one in the world with the Centre, the States and
the local bodies having powers to levy variety of taxes to earn revenue. Various kinds of taxes
are collected at different levels like the direct taxes which affect the common man directly like the income tax and wealth tax,
indirect taxes which the common man pays for goods and services availed of like VAT and service tax, corporate tax, etc. Every
budget sees expectations on tax reforms by both the common man and the corporates. The common man wants the income tax
slab raised, while the corporates want tax relief in various sectors. Government handles these requests according to the economic
necessity. Over the years India has experienced unprecedented rates of economic growth. This growth required reforms in the
taxation system to make it simpler and attractive for the foreign as well as domestic investors. In an effort to keep in line with the
changes in global economy, Indian taxation system has undergone remarkable reforms during the last decade with rationalization
and simplification of tax laws.
The Goods and Services Tax which was passed recently is one of the most historic tax reforms in Indian taxation history. It
seeks to streamline the taxation system so that there is only a single tax paid for supply of goods and services. The bill will replace
nearly 15 state and federal taxes which is in line with the Governments focus on cooperative federalism. With 16 States ratifying
the GST bill so far, minimum requirement of 50 percent states ratifying the bill has been completed. The Government is all set
to usher in a new era on 1st April, 2017 with the roll out of the Goods and Services Tax (GST) in the country. It is expected that
this landmark reform will go a long way in facilitating ease of doing business and enabling India to compete with world trade.
While the GST is a major step towards simplifying tax system in India, the complexity of the system so far has resulted in
evasion of taxes and creation of blackmoney in the country. The amount of this black money is so huge that it is said to run almost
like a parallel economy in the country. The Government has adopted a multipronged strategy to unearth and control black money
which includes policy-level initiatives, more effective enforcement action on the ground, putting in place robust legislative and
administrative frameworks, systems and processes with due focus on use of information technology. Voluntary disclosure of
income Schemes (VDIS), Constitution of the Special Investigation Team (SIT) on Black Money, Enactment of a comprehensive
new law - The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 to specifically deal with
the issue of black money stashed abroad, Introduction of the Benami Transactions (Prohibition) Amendment Bill, are some of
the recent major initiatives of the Government in this regard.
Indian taxation system has come a long way from closed, complicated one to open, simple and futuristic. And the current
Government is committed to take it further to make India one of the most favorable investment and manufacturing destinations
in the world. q
TN Ashok
T
ax reforms are an integral Realising this , two legislators
part of the development are trying to deliver a broad tax
process of any country. reform. Max Baucus, the Democrat
Even developed who heads the Senates tax-writing
countries such as the committee, and Dave Camp, his
United Kingdom and the Republican counterpart in the House
United States, which are often the role of Representatives, have been at
models for developing countries such the exercise for the last three years;
as India, too undertook reforms in the they have been talking to people and
last few years. floating ideas. Though any full plan
GST is .... a giant leap for is yet to fructify, their principles
Take the United Kingdom. The
the country in tax reforms Conservative Liberal Democrat are sound: lower tax rates for both
to inspire confidence of coalition government undertook corporations and individuals, paid for
manufacturers and investors reforms between 2010 and 2015. In the by limiting or scrapping tax breaks.
to push the economy forward reforms initiated in 2013, two million Though they belong to different
and one can hope for a further people were virtually removed from parties, both Baucus and Camp have
slew of reforms in the 2016-17 paying income tax altogether when the felt that ideally, no tax break should
Chancellor of the Exchequer presented be spared, even the popular ones for
budgets to propel GDP growth
the budget. The raft of reforms brought charity, housing, health insurance and
further. While the government about a rise in the personal allowance,
might take time on DTC or research and development. Though
which meant that no one paid any desirable, they impose a cost, in
Corporate Indias bucket list, tax until he or she earned more than the form of higher taxes, on other
it is apparent that it will stay 9,440. The threshold for the higher desirable things. As an Economist
focused on the main objective rate of tax - above which people pay
article points out, the political reality
of making tax laws simple tax at 40 per cent - dropped from
is that, some of these tax breaks will
34,370 to 32,010, excluding the
to make life easier for the personal allowance.
survive, just as there is no hope for a
individuals as also business carbon tax, one of the more sensible
besides bringing in larger At the same time the top rate of ways to raise money.
populations into the tax net income tax fell in 2013-14 from 50
Yet Camp and Baucus found
per cent to 45 per cent for those whose
and making every Indian taxable income exceeded 150,000.
enough common ground to build a
conscious of his social more efficient tax system. They differ
obligation toward paying Take a country like the United on the crucial question of whether tax
States. A symbol of free trade and reform should raise more revenue.
taxes, making the country
an advanced economy, it is a country While Camp, being a Republican,
more tax compliant that needs tax reforms very badly. felt NO, Baucus, like the rest of his
The author was Economics Editor and Chief of Bureau (Economic) of PTI specialising in infrastructure/finance/commerce sectors and
environment. He has covered the historic Earth Summit in 1992 at Rio De Janeiro as also the 1st inaugural WTO Ministerial summit
at Singapore in 1996. He provides strategic advice on public affairs/ media to leading MNCs and Indian transnationals.
Reference
Media Reports: New York Times, Guardian, Business
Standard and Wikipedia. q
(E-mail:ashoktnex@gmail.com)
Malini Chakravarty
W
e all pay taxes to the tax revenue and non-tax revenue. Tax
government in some Revenue: Tax revenue refers to the
form or the other in money collected by the government
our daily lives. These through payments imposed by law.
taxes we pay play Non-Tax Revenue: Non-Tax Revenue
an important role in refers to revenue of the government
financing different raised through instruments other
functions that the government performs. than taxes such as fees/user charges,
There are many responsibilities that dividends and profit of public sector
the government is required to fulfil. enterprises, interest receipt, penalty or
These include ensuring the rule of fine, etc. For most countries across the
law; providing public goods and world, tax revenue forms a significant
services; building physical and social proportion of government revenues.
infrastructure; investing in education
It is hoped that of the population; alleviating poverty, Direct and Indirect Taxes
introduction of GST etc. Clearly, the government needs Taxes can be broadly classified
to mobilise a significant amount into two kinds: Direct Taxes and
would help to simplify of financial resources in order to Indirect Taxes. Direct Taxes: Those
and rationalise the tax fulfil its many commitments. The
government mobilises financial
taxes for which, the burden of the tax
falls on the entity that is being taxed
system and increase resources for funding its different are known as direct taxes. In other
activities mainly through taxes, user
compliance. At the fees/ service charges and borrowings.
words, an entity that directly pays
this kind of a tax to the government
same time, it is also The sources of funds which neither bears the burden of that particular
create liabilities nor reduce assets
important that the are called revenue receipts. Other
tax and cannot shift the tax burden.
Direct taxes are levied on incomes,
government take some sources of funds such as borrowings property and wealth. Indirect taxes,
which create liabilities or those that
steps to increase direct reduce assets (e.g. disinvestment) are
on the other hand, are those taxes
for which the tax-burden can be
taxes that would help called capital receipts.Thus, taxes
and user fees/service charges are some
shifted or passed on to other persons
later through business transactions
increase progressivity examples of revenue receipts of the of goods/ services. These taxes are
government while borrowings are
of Indias tax structure capital receipts.
indirect because the agent who bears
the burden of the tax is not the one on
Tax Revenue and Non-Tax Revenue whom it is normally levied. Indirect
taxes include Customs Duties, Excise
Governments revenue receipts can Duties, Service Tax, and Sales Tax/
be further divided into two categories: Value Added Tax (VAT).
The author is presently working with centre for budget and governance accountability (CBGA). Her research interests include
issues related to macroeconomics, public finance, international trade and social protection.
SHASHANK
in CSE 2015 45 days
program
@
JAIPUR
10 Nov
th | PUNE
1 Dec
st
Najib Shah
T
ax Direct and Indirect Indirect tax to GDP ratio for 2016-17
Ta x p l a y a v e r y is 5.20 per cent. In 2015-16, CBEC
important role in nation achieved a figure of 7.09 lakh crore,
building. In the scheme representing a growth of 31 per cent
of Indirect taxes, the and has been tasked to collect Rs. 7.78
Central Board of Excise lakh crore in the current fiscal.
and Customs (CBEC), a statutory
body constituted under the Central Some of the path-breaking
Boards of Revenue Act, 1963 (54 initiatives undertaken by CBEC in
of 1963) has been tasked with the the last two and a half years are:
formulation and implementation i) Make in India:
of policy concerning the levy and
collection of customs, central excise To provide a level playing field to
Following the policy and service tax. The Government has, domestic private sector in defence
of RAPID (Revenue, while appreciating the significant role manufacturing, customs and
of revenue collection in the growth central excise duty exemptions
Accountability, and development of the country, also to defence supplies and central
Probity, Information, stressed that tax policy should be excise duty exemptions to defence
aimed towards creating a competitive, PSUs and Ordinance Factory
Digitisation), CBEC predictable, and clean tax policy Boards have been withdrawn.
has taken a lot of environment which is non-adversarial
ii) Preparatory steps towards
initiatives for improving in its approach. Following the policy
implementation of GST:
of RAPID (Revenue, Accountability,
the ecosystem for Probity, Information, Digitisation), a) Excise duty of 1 per cent (without
doing business in CBEC has taken a lot of initiatives input tax credit) imposed on
for improving the ecosystem for jewellery.
India by relaxing doing business in India by relaxing
the procedures and the procedures and addressing the b) To reduce multiplicity of taxes,
concerns of manufacturers/importers/ 13 cesses levied by other
addressing the concerns Ministries and administered by
exporters, which would go some
of manufacturers/ distance in fostering a non-adversarial Department of Revenue are being
importers/exporters, and facilitative tax regime. abolished. Education Cess and
Secondary and Higher Education
which would go some Indirect tax collections have Cess on excisable goods & taxable
distance in fostering shown a turnaround during 2015-16. services abolished.
With growth in indirect tax collections,
a non-adversarial and the Indirect Tax to GDP ratio for 2015- c) Service tax imposed on all
services provided by the
facilitative tax regime 16 is about 5.2 per cent, as compared
Government or local authority to
to 4.4 per cent for 2014-15. Estimated
YE-167/2016
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D S Malik
T
he present Government menace of domestic black money. It
from its very inception has was announced by the Union Finance
shown its commitment Minister in his Budget Speech of
to tackle the menace 2016. Accordingly, the Government
of black money. The had formally launched the Income
very first decision of the Declaration Scheme (IDS) 2016 from
present Government after taking over 1stJune, 2016 which was kept open for
in May 2014 was to set-up a Special four months i.e. till 30th September,
Investigation Team (SIT) headed by 2016. It provided an opportunity to
the Honble Mr. Justice M.B. Shah, persons who had not paid full taxes in
former Judge of the Supreme Court the past to come forward and declare
as Chairman and Honble Mr. Justice their domestic undisclosed income and
Arijit Pasayat, former Judge as Vice assets. Declarations could have been
Chairman. The constitution of Special made online as well in printed copies of
Investigating Team (SIT) was approved the prescribed form up to the midnight
by the Union Cabinet in its First
...this overall Meeting to implement the decision of
on 30th September, 2016.
The author is Addl Director General (M&C), Press Information Bureau, Ministry of Information and Broadcasting, Government of
India and incharge of Media and Publicity for Ministries of Finance and Corporate Affairs.
YE-170/2016
Visit us at www.vajiramandravi.com
Timsy Jaipuria
A
fter having faced The Scheme was effective from
criticism globally over 1 June 2016 for a period of 4 months
uncertain tax policies, (i.e. till 30 September 2016) and saw an
India in the past 2 years overwhelming response with Indians
has been on a tax overhaul declaring over Rs 65,000 crore of
which has shored up the unaccounted income. Any disclosure
government's reform made under the Scheme was immuned
credentials. from high taxes and penalty with no
Be it the announcement of a scrutiny or inquiry shall be undertaken
road map for phasing out deductions in respect of such declarations.
under the Income-tax; indicating
Be it the announcement that the rate of corporate tax will be
To encourage entrepreneurship
through incentives for start-ups, the
of a road map for phasing reduced from 30 per cent to 25 per government had announced that income
out deductions under the cent over the next four years along of such start-ups subject to specified
with corresponding phase-out of
Income-tax; indicating that exemptions and deductions to simplify
conditions would not be chargeable to
income-tax and that they could receive
the rate of corporate tax the tax laws, making them clearer capital at a value which may not be
will be reduced from 30 per and more transparent; or the policies equivalent to the fair market value.
encouraging entrepreneurship through
cent to 25 per cent over the incentives for start-ups, an array of Additionally, the government also
next four years along with reforms are what now India is being decided to abolish Wealth -tax, which
corresponding phase-out credited for. was introduced in 1957 and was levied
@1 per cent on Individuals, HUFs and
of exemptions and With the recent success of the
Companies if the Net Wealth of such
income declaration scheme for
deductions to simplify the unearthing domestic black money, India person/entity exceeds Rs. 30 lakhs.
tax laws, making them with these reforms is also increasing its To r e d u c e l i t i g a t i o n s , t h e
clearer and more revenues and is also getting acclaimed government went for Direct Tax
globally.
transparent; or the Dispute Resolution Scheme, providing
The Finance Minister, in his an opportunity to taxpayers to settle
policies encouraging budget speech, proposed a limited their past cases by making payment of
entrepreneurship through period compliance window for the prescribed tax, interest or penalty
incentives for start-ups, an domestic taxpayers to declare their in respect of any tax arrear or specified
undisclosed income whether in the tax. The key objective of the Scheme
array of reforms are what form of investment in assets in India is to reduce the pending direct tax
now India is being or otherwise, and clear up their past tax litigation, involving various corporate
credited for transgressions by paying a total of 45 and personal tax cases or disputes
per cent of the undisclosed income. which can be settled in one go.
The author is currently Special Correspondent with CNBC TV18, has been a business journalist since last more than eight years
working with Hindustan Times, Financial Express and The Pioneer. She specializes in writing on economic, socio-economic and
politico-economic issues ranging from taxes, international trade relations, infrastructure, social schemes and many more.
YE-176/2016
E
ven at two hours Of the over 120 crore population
to midnight on in the country, less than 5 per cent
September 30th, or 5.43 crore individuals pay taxes.
people were seen Honest taxpayers face a steep tax
streaming into various burden on account of non-compliance
tax offices across the by a significant chunk of individuals
country while many others were who do not declare income. Although,
glued to their computer screens to it is difficult to ascertain the quantum
declare all the unaccounted wealth of black money flow in the economy,
and assets they owned and come various estimates and reports peg
clean. They were amongst the 64275 it at anywhere between 20 per cent
and 70 per cent of the size of Indias
The Indian government individuals who availed the one-
2 trillion-dollar economy. According
time opportunity offered by the
has significantly stepped government and made black money the Swiss government, till the end
up efforts to unearth disclosures under the four-month of 2010, there were deposits worth
Rs 9500 crore in all Swiss banks by
black money from the window that opened on June 1.
Indian citizens. Of about Rs 8 lakh
The midnight hustle guaranteed the
system, which is only set declarants a comfortable sleep in crore worth direct tax revenue, the
to expand going forward future amid governments war-like collections are significantly skewed
in favour of corporation tax, which
with the help of technology approach to fight the black money
had a 60 per cent share and personal
menace. The declarants will escape
such as Project Insight. prosecution under the Income Tax
income tax a 40 per cent share. This
While the efforts using highlights the potential of widening
Act, Wealth Act and Benami Act.
of the tax base. Of the 25 crore PAN
technology are in the Although the government will get
card holders in the economy, only
close to Rs 30,000 crore in taxes by
right direction, the focus September next year from the Income
5.43 crore pay taxes. Governments
must be on discouraging toughened stance against black money,
Declaration Scheme (IDS), which is in line with its electoral promise is
cash transactions and 45 per cent of the Rs 65250 crore set to make the going difficult for
worth of declarations that came in, it
encouraging card payment may well be just a tip of the iceberg.
tax evaders within the economy and
those with unaccounted wealth stashed
in the economy. This will be Incidentally, the Prime Minister has overseas.
the key to curb black money taken up the task of unearthing black
money on a mission mode. It could The government is working on a
circulation be made out from his statement last multi-pronged strategy to tackle the
month warning evaders of tough black money menace. Besides IDS,
decisions after September 30. a slew of other measures includes
The author is a Special Correspondent with Business Standard newspaper and covers Ministry of Finance. With over five years
experience in field, she has written on a range of economy and policy related issues such as macroeconomic data, international
trade, WTO, GST, taxation and FDI among others. earlier she was with The Economic Times and covered the Ministry of
Commerce and Industry.
Ranjeet Mehta
A
t the outset, the level it includes VAT or sales tax,
government of India octroi, state excise, property tax,
must be complimented entry tax and agriculture tax. These
on the tremendous efforts taxes lead to increased tax burden
being made on the GST on the Indian products affecting the
front. The passage of prices and sales in the domestic as well
the Constitutional Amendment Bill as international markets.
as well as release of the Model GST
laws indicates the determination of To address this, the Constitution
the Government to implement GST Amendment Bill for Goods and
The GST subsumes at the earliest. One of the thrust Services Tax (GST) has been approved
by the President of India post its
Indias messy plethora policy initiatives of the government
passage in the Parliament (Rajya Sabha
is the Make in India project that
of indirect taxes, would enable India to become a on 3 August 2016 and Lok Sabha on 8
August 2016) and ratification by more
duties, surcharges and manufacturing hub as it will create
than 50 per cent of state legislatures.
employment / job opportunities for the
cesses into a single burgeoning youth of the country.In The Government of India is committed
tax. It is expected to order to make India a manufacturing to replace all the indirect taxes levied
hub, it is imperative that the foreign on goods and services by the Centre
ease a cumbersome investors/companies find it conducive and States and implement GST by
tax system, help goods to do business here. One of the major April 2017.
move seamlessly across impediments to a smooth business, To have achieved this, in a large
especially in the manufacturing sector, and complex federal system of
state borders, curb is the uncertain and unpredictable multiparty democracy, with a Centre,
tax evasion, improve indirect tax regime. 29 States and 2 Union Territories
compliance, raise The current multi-staged tax of widely divergent interests via a
structure has charges from the State constitutional amendment requiring
revenues, spur growth, and Union governments separately, broad political consensus, affecting
stimulate investment and leading to cascading effect of taxes. potentially 7.5 million tax entities, and
There are taxes at different rates and at marshalling the latest technology to
make investing and doing multiple points. The Centre has taxes use and improve tax implementation
business in India easier like income tax, service tax, central capability, is perhaps breathtakingly
sales tax, excise duty and security unprecedented in modern global tax
transaction tax while at the State history.
The author is Director at PHD Chamber of Commerce and Industry, New Delhi, addressing various policy related issues in Infrastructure,
Power Sector, Renewable Energy, Oil and Gas, Housing sector, Real Estate Regulatory Bill, Land Acquisition Bill, Master Plan of Delhi,
National Water Policy and Logistic Sector. He has written extensively on various subjects. His publications include six books, more than
45 research papers and articles in many journals of repute, leading national and international magazines.
T
he much awaited Goods coloured by its own experiences during
& Services Tax, intended partition, when sedetious tendencies
to transform India into threatened to render apart the nascent
a single marketplace state still in its infancy.
as similar taxes have
transformed Canada and Many who were involved in
the European Union, may have one the proceedings of the Constituent
unintended consequence : turning Assembly as well as independent
Indias constitution from being observers have often opined that the
described as `federal with a unitary Assembly was possibly obsessively
bias to a `Constitution for the Union focused on the need for ensuring
with a federal bias. the unity and integrity of the new
nation. In fact, in one lengthy debate,
Ahead of the passage of the GST, Syamanadan Sahaya, MP from Bihar
What the future protesting against the vexatious system argued In the matter of financial
holds for Indias of multiple taxation at various stages
in different states, some ingenious
adjustments between Provinces and
the centre, I think that the Provinces
taxation laws is businessmen came up with the slogan have not been treated as well as they
of One nation, one tax. The process should be. In fact, I have a feeling that
something which the of unifying the countrys market in this matter, the Provinces are worse
started with VAT in the begining of
Indian polity would this century. However, states remained
off than in the days of the 1935 Act.
The responsibilities of the Provinces,
determine in its own staunchly independent in their taxation
policy, in some cases led by their own
their commitments and their sphere for
introducing ameliorative measures for
unique manner. fiscal imperatives and this created the people are greater than even those
a situation where VAT was often
However for the supplemented by a variety of taxes,
of the Centre and as such, they should
have been given sufficient scope in the
present, the churn leading to India being described as one
of the highest taxed nations.
field of taxation.
The author is currently Senior Editor-Business with The Telegraph, has been a journalist for more than two and a half decades. He specializes
in writing on Economic and Politico-Economic issues, but has a wide range of interests ranging from history to security issues to fiction. He
was Chevening Fellow in Development Economics at University of Bradford, UK, in 2010.
GST will for many years to come well define Indias federal
relations. q
(E-mail:jrchowdhury@yahoo.com)
T
he most awaited in India is its complicated tax system
economic reforms in with multiple rates at both the centre
India, for a simplified and states. Compliance with taxation
and uniform tax rate, norms requires enormous time and
were passed in the money, and simplification has been
Parliament of India on one of the most demanded reforms
3 August 2016. The biggest tax from industry and investors over
reform in independent India, and also the past decade. Integrating taxes on
the biggest economic reform since goods and services will reduce the cost
the structural reforms in 1991, has of compliance and also give full tax
now been passed in both houses of credit for inputs at one go.
parliament after 11 years of political
For the first time, all political logjam, debate, and discussion. The present VAT system, at both
parties came together central and state levels, has certain
The goods and services tax shortcomings. At the central level,
and passed the GST Bill (GST), which subsumes 15 central only taxes paid on raw materials is
unanimously. This is not and state taxes on goods and services, given as input credit, but not taxes
only a mature act but truly will create one single indirect tax rate paid for post-manufacturing expenses.
an achievement for the across states, and make India a truly Service tax is imposed on limited
unified market. Come April 2017, products; therefore, it is difficult to
government. The GST is there will be no state boundaries give credit of services tax consumed
called the worlds most in taxation terms. This landmark in the process of manufacturing these
complex tax reform, where achievement, which will be a game- products. The comprehensive GST
7.5 million businesses can changer in coming years, is by far the will tax both goods and services, and
biggest milestone of the government is, therefore, essential to reduce the
register, make payments, in terms of economic reforms, but the cascading effect.
and file returns on a GST GST rate still needs to be fixed, and
The present state VAT suffers
portal. It is really a big relief operational issues sorted out.
from limitations like charging VAT on
for business, as even today, The existing system of the central excise duty already paid to the centre,
because of layers of taxes value added tax (CENVAT) and state levying various other indirect taxes
and exemptions, the cost of VAT suffers from the cascading effect. like luxury tax, entertainment tax,
As the two are not inter-linked, the etc., and not having the provision of
tax compliance in India is system leads to high tax on consumers, taking input credit on the central sales
too high. In sum, it is a much different input tax credit from the tax (CST). Therefore, a compressive
needed landmark reform centre and states, and differential state GST is necessary to align rules for
VAT rates. One of the most difficult taking and utilising credits for CGST
challenges for investors and industry and SGST. Overall, both assesse and
*6,,3/86
the appropriate GST rate, which is the RNR, and requires an
efficient IT infrastructure and capacity building of the entire 3UHFXP0DLQV
tax administration. There have been many recommendations
for fixing the revenue-neutral GST rate at between 11 per
cent and 12 per cent. But the report of the Committee on
RNR and Structure of Rates for General Sales Tax (2015)
headed by Dr. Arvind Subramanian (Chief Economic
Adviser to the Government of India) recommended that
the RNR should be between 15 per cent and 15.5 per cent,
with a standard GST rate of 1718 per cent.
0385,
Second, the government needs to go all out for a
successful Digital India programme, as the GST will
require a state-of-the-art IT infrastructure all over India
for effective implementation. Ensuring high-speed IT
LQ*6,,0DLQVZDVIURPRXU
connectivity across states with huge geographical disparity
&ODVV1RWHV 7HVW6HULHV
in such a short time is going to be challenging. Moreover,
the entire tax administration needs capacity building to
handle the GST. &RPSOHWHFRYHUDJHRIV\OODEXV5HDOLW\QRW
The proposal to give states the freedom to impose the PHUHO\5KHWRULF
state GST within a band will dilute the purpose of unified 1HZSDWWHUQGHPDQGVVSHFLDOL]HGIRFXV
GST. Therefore, the GST Council, the proposed highest
decision taking body, made up of voting representatives
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from the states and the centre, should stick to one GST rate 8QGHUVWDQGLQJRIWUHQGV LVVXHDQGQRWPHUHO\
for every state. There are also issues of balance of power HYHQWV IDFWV
in favour of the centre in most powerful GST council with *RYHUQDQFHVSHFLILFYRFDEXODU\EXLOGLQJ
one-third share in voting rights.
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For the first time, all political parties came together and PHUHO\SODJLDUL]LQJRSLQLRQVRIRWKHUV
passed the GST Bill unanimously. This is not only a mature
act but truly an achievement for the government. The GST $UWRIZULWLQJ$QVZHUVZLWKSUHFLVLRQ EUHYLW\
is called the worlds most complex tax reform, where 7.5 &RXUVHFRYHUVQHDUO\UGRI*66\OODEXV
million businesses can register, make payments, and file
returns on a GST portal. It is really a big relief for business,
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as even today, because of layers of taxes and exemptions,
the cost of tax compliance in India is too high. In sum, it
is a much needed landmark reform.
But, although the merit of the GST is evident and
indisputable, the devil lies in the details, as they say, and ,QFOXGLQJ7RSLFVRI3DSHU,,, $$**$5:$/
only time will tell if it is a success.
Reference
" &RPSOHWHFRYHUDJHRI%DVLFVIURP1&(57V
"&RPSUHKHQVLYHFRYHUDJHRI%8'*(7 (&2120,&6859(<
1. http://gst.customs.gov.my/en/gst/Pages/gst_ci.aspx " $QVZHUZULWLQJ SUREOHPVIRU3UH0DLQV ,QWHUYLHZ
2. Bird, Richard and Pierre-Pascal Gendron (2007): Value Added
Taxes in Developing and Transitional Countries (Cambridge and
" 'HYHORSPHQWDO6FKHPHVDQG3URJUDPPHV
New York: Cambridge University Press)
3. Cnossen, Sijbren (2010): VAT Coordination in Common Markets $'0,66,2123(1
and Federations: Lessons from the European Experience, Tax $QG)ORRU2OG5DMHQGUV1DJDU
Law Review, Vol 63, pp 584622. Keen, Michael (2009): What 1HDU%LNDQHU6ZHHW'HOKL
Do (and Dont) We Know about the Value Added Tax?, Journal
3K0
YE-171/2016
Shishir Sinha
I
am sure that the enactment will join the select club of nations such
of the GST, will bring as Canada, Australia, Singapore and
about the best as far as the Malaysia having GST as the indirect
economic management of tax system.
this country is concerned,
in a federal form. It will Now, in order to introduce GST
empower the States. It will from April 1 next year, the Government
increase the revenue of the States as has jet set the process in motion. First,
also of the Central Government. It will the Goods & Service Council, the apex
try to dissuade and discourage, and body of Centre and the States, has not
bring down levels of evasion. It would just been set up, but already taken key
ensure that there is no tax on tax. So the decisions in its initial meetings. Second,
cascading effect of taxes in the value GST Network for providing all kinds
of goods itself, will no longer be there of information technology support
for GST is fully functional. Third,
This tax, because and that would even make some of the
model GSR law is in public domain
products cost less. It would, certainly,
of its transparent give a boost, as far as the economy is which will finally be converted into
supportive legislations. And, fourth,
character, would be concerned, which is required at this
the Government aims to finalise rates,
very critical stage.
easier to administer. exemption, threshold limit and key
Excerpts from the speech of the rules for GST by November 22, 2016.
Also remember, Union Finance Minister while moving
implementation of GST the Constitution Amendment Bill(related What is GST?
will help in improving with the Goods & Services Tax) for GST is a simplified tax structure
consideration and passage in Rajya Sabha applied on both goods and services. It
Indias ranking in on August 3, 2016 isa value-added tax levied at all points
ease of doing business With this speech, the Finance in the supply chain with credit allowed
for any tax paid on input acquired for
which, in turn, will help Minister managed to end the long wait
use in making the supply. It would
for the introduction of one of the most
foreign investors to ambitious tax reforms of independent be applicable on supply of goods
bring more and India, the Goods & Services Tax or or services as against the prevailing
GST. Since, the 122 nd Constitution system of tax on the manufacture
more money into of goods or on sale of goods or on
Amendment Bill has become a law
the country (101 st Amendment) enabling the provision of services. It would be a
Centre and the States to levy GST destination based tax as against the
concurrently, India is all set to usher existing system of origin based tax.
the financial year 2017-18 with a new In order to maintain the federal
tax regime i.e. GST. Accordingly, India structure, the nation is going to have
The author is Economic & Business Journalist for last 21 years, presently working as Business Editor with ABP News. He has earlier
worked with the Hindu Business Line, CNBC Awaaz, Aaj Tak and Amar Ujala.
M inistry of Petroleum and Natural Gas will extend the benefits under Pradhan Mantri Ujjwala Yojana to the people of all Hilly States
including North-East States by treating them as Priority States and release LPG connections to the eligible beneficiaries.This
measure will help to tackle the difficulties faced by poor people in accessing LPG for cooking purposes, residing in the States of
Jammu and Kashmir, Himachal Pradesh, Uttarakhand, Sikkim, Assam, Nagaland, Manipur, Mizoram, Arunachal Pradesh, Meghalaya
and Tripura.Pradhan Mantri Ujjwala Yojana is being implemented with an objective to provide deposit free LPG connections to BPL
households as a clean fuel solution. So far, more than 50 lakh connections have been released to the beneficiaries.
1 lakh LPG connections will be released in the next 15 days. the central government has released 2 lakh connections during the
last 2 years in J&K vis a vis 5 Lakh connections released during the previous 8 years in J&K by the previous governments. there are 4
LPG bottling plants in the state and another LPG plant at Kargil will be put up and also to increase the capacity of Leh LPG plant.
PMUY scheme provides assistance of Rs. 1600/- to the woman beneficiary, comprising security deposit of Domestic cylinder &
pressure regulator; Suraksha hose; Domestic gas consumer card and installation charges.
T he Cabinet Committee on Economic Affairs has given its approval for construction of second line between New Bongaigaon
and Kamakhya of Northeast Frontier Railway in Assam. The estimated cost for this line is Rs.2,232.32 crore and an expected
completion cost of Rs.2,586.85 crore. The 176 km long railway line is expected to be completed in five years during 12th and 13th
Plan period.
l The consensus over GST is proving that Rashtraneeti is above Rajneeti (national issues are above politics) in
India.
l GST is one more pearl in the necklace of Ek Bharat much on the lines of the Railways, the All India Services,
and visions such as Bharat Net and Sagarmala.
l With GST, we intend to bring uniformity in taxation. The consumer would be supreme in the new dispensation.
l The judicious use of man, money, machine, material and minutes (time) is an important principle of sound economic
policy, and GST would aid in achieving this.
l GST would help bring in real time data, as its strength was in technology. Most of the things that can impact consumer
inflation have been kept out of the ambit of GST. GST would help reduce corruption in collection, as well as the
cost of collection.
l Small businesses will also gain tremendously from GST, and will feel more secure with GST.
l This reform will promote Make in India, help exports and thus boost employment whileproviding enhanced
revenue.
l GST is a system that benefits all Indians and promotes a vibrant and unified national market.
l GST will also be the best example of cooperative federalism, will take India to new heights of progress.
l The whole country will become one integrated market. Simplification will be easier. It will also lead to lesser
leakages and evasions and therefore the tax base will naturally expand. This will benefit both states and the Central
Government.
l This is a historical reform in the taxation of our country being carried out by our Parliament. This is a major
reform, which will in the long run, go in the interest of the country.
I would like to assert that the issues on Women Empowerment and Energy were really commendable. I wish to thank the entire
team for the appreciable efforts they put in. The articles were thought provoking and enlightening and a mirror for the people. They
would certainly help to shape our opinions in the right manner and direction. I would request to publish some issues on Terrorism,
or National sanctuaries etc. Saundarya Sinha
Multifaceted approach along with national and global importance on each different subject makes the articles of yojana very
valuable. Archie Roy
Response from Yojana Team
We are really grateful to our readers who take time out to send in encouraging words and valuable suggestions. It makes our
work seem worthwhile.
We do try to incorporate your suggestions in our journal whenever possible. We will definitely consider them while planning
our issues.
Please do write in with your feedback on our issues. It will help us in planning our issues.
Thanks once again
I
ndia is projected to be skill development etc. Therefore, it
the Youngest Nation in is necessary to focus on its growth
the world by 2020, and perspective.
the average age of our
population will be around National Manufacturing Policy and
29 years. Besides, by that Make in India
time, we will have surplus Any paradigm shift in policy that
youth of 47 million whereas the world has benefited the masses socially and
will be facing a shortage of youth of economically, has always got the top
56 million to take the development priority in Indias developmental
agenda further. Therefore, the richness agenda. To break the vicious circle and
Indian manufacturing sector is of demographic dividend needs to be Stagnation of manufacturing sector,
primarily resource-driven than properly utilized to accelerate our Government of India has formulated
technology-driven and therefore development process and to achieve National Manufacturing Policy to
the input cost and subsequent higher GDP. The benefits of the promote this sector and has taken
taxes on it, make the sector more demographic dividend can be realized various initiatives to trigger growth of
challenging. Manufacturing sector only by making these youth productive manufacturing sector to its potential
can be strengthened through fiscal in terms of health, education and and set a target of achieving 25 per
interventions like tax concession, skill development. To attain this, cent of GDP by 2025.
tax reduction on the manufacturing Indian manufacturing sector has
process, especially on import of great potential to absorb these youth Indian manufacturing sector
and provide them the right forum to has great potential to create 90
technology and research and
make them skillful. Even though, million jobs and is able to produce
development. Besides, subsidies and
service sector contributes highest to USD 1 trillion and can contribute
other fiscal interventions on inputs approximately 25-30 per cent to
GDP and sustained till date, making
cost, import of technology and the country a Knowledge Economy, GDP by 2025 (McKinsey Report,
plant equipments will change the but long-term growth of any nation 2012).To achieve the same, National
investment climate and eco-system depends a lot upon the contribution Investment and Manufacturing Zone
and able to boost the manufacturing of manufacturing sector, to make (NIMZ) has been created to boost the
sector. Policy paradigm is the need the growth self-sustaining. Indias sector. It is based on infrastructure-
of the hour and the initiatives manufacturing sector's contribution building approach through which,
taken by the present government is is approximately around 16 per cent the congenial infrastructure support
forward-looking especially on the to GDP over a period of time, even is provided to bring much-needed
tax-front being a valued sector, in terms of its improvement in the manufacturing
contribution to GDP, employment, sector. NIMZ planned to have single
The author is Associate Professor in Economics and Area Coordinator of Strategy, Entrepreneurship and General Management at
Fortune Institute of International Business (FIIB), New Delhi. He has been engaged in teaching as well as in research in the area of
Economics, Finance and Public Policy. He has regularly contributed to various seminars and conferences both at the national and
international level. He has to his credit the authorship of five books and twelve edited volumes. He has published more than forty
articles and research papers in various books, magazines and journals of repute. He is lifetime member of Indian Economic Association
and Indian Commerce Association.
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