It is perfectly justified if the rich class is made to pay more which, in turn, helps the Government provide services to the poor In the Finance Bill, 2023 passed by the Lok Sabha on March 24, 2023, an amendment relates to a change in the tax treatment of capital gains from non-equity or debt mutual funds (DMF). This has led to consternation in the investor fraternity including high net-worth individuals (HNIs), corporate, and so on who argue this will undermine efforts to deepen the bond market which is crucial for financing the long-term development needs of the economy. They also say such a change should have been introduced in the Union Budget. This would allow for thorough discussion in...
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Category: Taxes & duties
Bring petroleum products under GST
The Finance Minister should proactively engage with states to speed up the process of taxing petroleum goods under the GST Finance Minister Nirmala Sitharaman has exhorted the states to give their concurrence for fixing the tax rate for five petroleum goods—crude oil, natural gas (NG), petrol, diesel, and aviation turbine fuel (ATF)—under the Goods and Services Tax (GST) to enable the GST Council to give its stamp of approval to this pending proposal. GST is a single nationwide tax with a provision for set-off tax paid on inputs. It subsumes within it more than a dozen taxes from the pre-GST era, namely central excise duty (CED), service tax, and sales tax/value added tax (VAT). Besides, a host of local taxes...
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Budget revolutionises personal income tax
The new personal income tax regime will spur economic growth as it leaves more cash in the hands for people In Budget 2023-24, Finance Minister Nirmala Sitharaman has made some radical changes in the structure of personal income tax (PIT). To get a sense, let us first take a look at what she did in her Budget 2020-21. Then, Sitharaman had announced the Modi Government’s intention to move towards a regime that was simple, free from a plethora of exemptions and deductions, and reduced the tax liability of assesses, thereby leaving higher disposable income in their hands. From the perspective of the economy, the idea was to give a boost to aggregate demand and drive growth. Under the old regime...
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India must tax MNCs for revenues here
Ideally, the source country from where an offshore firm is deriving its income should have sole right to collect tax Over the years, an increasing share of the income generated globally has gone towards boosting the profits. The proportion of corporate profit in global GDP (gross domestic product) went up from 14.5 per cent during 1975 to 16.2 per cent in 2000 and further to 20 per cent during 2019. The growth in profit, in turn, was driven largely by multinational companies (MNCs) – companies which operate in several jurisdictions. Their share in corporate profit increased from four per cent during 1975 to 18 per cent during 2019. Even more disconcerting is the fact that such companies didn’t pay taxes...
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Tax surge a cushion to bear hit from subsidies
But tax collection buoyancy has been slowing down since the last year, which calls for tightening slippages In the past, a shortfall in tax receipts of the Union government vis-à-vis the budget estimate (BE) and excess of expenditure over BE led to high fiscal deficit (FD) year after year. To rein in FD, it often took recourse to non-tax receipts such as dividend from public sector undertakings (PSUs), proceeds from selling government shares in one PSU to another, transfer of surplus by the Reserve Bank of India (RBI), proceeds from sale of spectrum for telecom services, etc. This was unsustainable as reliance on non-tax receipts is unreliable. For instance, dividend from a PSU depends on a host of factors specific...
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GST compensation can’t be perpetual; States must be prudent
The disruption caused by the pandemic is a thing of the past as tax collection rebounded during 2021-22 In its 47th meeting, the GST (Goods and Services Tax) Council held on June 28/29, 2022, at least a dozen finance ministers and other ministers of the states demanded that compensation for losses due to implementation of the GST should be extended. In the follow up to the unveiling of the GST by the Modi government, ‘The Constitution (One Hundred and First Amendment) Act, 2016’, that introduced the GST from July 1, 2017, the Union government also introduced ‘The GST Compensation Act, 2017’. It provides for compensation to the States for five years (2017-18 to 2021-22) for the loss of revenue. The...
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Fuel tax cuts: Easier said than done
It would be fair to keep the fuel tax rates in a lower slab, say, 18 per cent, but the Centre and States would start wobbling at the very idea To rein in the inflationary pressure, on May 21, 2022, the Narendra Modi Government announced reduction in the central excise duty (CED) on petrol and diesel by `8 per litre and `6 per litre, respectively. The cuts are significant but, given the magnitude of the challenge, these won’t be enough. Let us do a fact check. In May 2014 (when Modi took charge), CED on petrol was `9.8 per liter and on diesel `3.8 per liter. By March, 2020 (this was when the Covid-19 pandemic struck), already the Government had...
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Fuel tax – more cuts needed
To rein in the inflationary pressure, on May 21, 2022, Modi – government announced reduction in in the central excise duty (CED) on petrol and diesel by Rs 8 per litre and Rs 6 per litre respectively. The cuts are significant but given the magnitude of the challenge, these won’t be enough. Let us do a fact check. In May 2014 (when Modi took charge), CED on petrol was Rs 9.8 per liter and on diesel Rs 3.8 per liter. By March, 2020 (this was when Covid – 19 pandemic struck), already the government had hiked these to Rs 20 per liter on petrol and Rs 16 per liter on diesel. During 2020, it was further increased on petrol by...
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GST: Should States’ compensation stay?
The worst phase of pandemic over, GST collections are expected to touch record highs and both the Centre and States can expect to perform better Less than three months from now June 30, 2022 will be an important milestone under the national Goods and Services Tax (GST) regime that was launched on July 1, 2017. In the follow-up to The Constitution (One Hundred and First Amendment) Act, 2016, that introduced the GST, the Union Government had also introduced The GST Compensation Act, 2017. It provides for compensation to the States for five years (2017-18 to 2021-22) for the loss of revenue to be calculated as the difference between their actual collection (including transfer of their share in indirect tax collected...
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GST – should compensation to states continue
Less than three months from now June 30, 2022 will be an important milestone under the national Goods and Services Tax (GST) regime that was launched on July 1, 2017. In the follow-up to The Constitution (One Hundred and First Amendment) Act, 2016, that introduced the GST, the Union government had also introduced The GST Compensation Act, 2017. It provides for compensation to the States for five years (2017-18 to 2021-22) for the loss of revenue to be calculated as the difference between their actual collection (including transfer of their share in indirect tax collected by the Centre) and the amount they would have got with annual growth at 14 percent over the 2015-16 level under the erstwhile dispensation (Central Excise...
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