It will, of course, cause a revenue shortfall for states, but that can be dealt with by hiking the rate of GST compensation cess In these circumstances, it is unlikely that they would let any of these products be taxed at a much lower rate—an inevitability if they are brought under GST. ———————————————— The ministry of petroleum and natural gas (MoPNG) has taken on board a proposal—mooted by the industry during recent pre-budget discussions—to bring natural gas within the ambit of the Goods and Services Tax (GST). This will ensure a uniform tax on gas throughout the country and lower its price for both industrial and domestic use, which may help increase its share in India’s energy mix from the...
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Category: Taxes & duties
Equalization levy – India must not backtrack
On June 2, 2020, the Trump administration had announced the “Section 301 investigation” under the US Trade Act, 1974 into digital services taxes (DST) that have been either adopted or were under consideration by its trading partners viz. Austria, Brazil, the Czech Republic, the European Union (EU), India, Indonesia, Italy, Spain, Turkey and the UK. Conducted by the United States Trade Representative (USTR), the objective of the probe was to determine whether levies on electronic commerce discriminate against US technological giants like Apple, Google, Amazon and so on. On January 6, 2021, the USTR released its findings on the probe and concluded that India’s 2% DST is discriminatory and restricts US commerce. It has raised three aspects which it alleges,...
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Gas under GST – is government serious?
Reportedly, the Ministry of Petroleum and Natural Gas (MoPNG) has taken on board a proposal mooted by the industry during recent pre-budget discussions to bring natural gas within the ambit of the Goods and Services Tax (GST) thereby ensuring a uniform tax on gas throughout the country. Touted as a major step forward in realizing Union Government’s goal of increasing the share of natural gas in India’s energy mix from the current level of 6.2% to 15% by 2030 by reducing its cost for both industrial and domestic use, the MPNG has indicated that the proposal will be placed before the GST Council (The Council is the all powerful federal body mandated to decide on all GST matters viz. tax...
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A taxing problem
India’s sovereign taxation rights on capital gains cannot be held hostage to its bilateral investment treaties with other countries The Permanent Court of Arbitration (PCA) tribunal in The Hague has rejected the back tax demands of Indian tax authorities in both, the Cairn and Vodafone cases. These back taxes relate to capital gains made on transactions in 2006-2007. According to the PCA, the demands have been rejected on two counts. First, they violate India’s obligations under Bilateral Investment Treaties. Second, they are based on a retrospective amendment to a tax law passed in 2012. Both the arguments are untenable. As regards the first, tax is levied on the earnings of the companies from their operations in India. The Government has done nothing...
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Taxing capital gains – legal muddle
In a span of just three months, Modi – government has been confronted with two orders of an international arbitration tribunal overturning demand raised by the Income – Tax (IT) department on multinational companies in back taxes on income arising from capital gains by made by the latter on sale of their ownership in Indian companies – running into tens of thousand crore. First, on September 25, 2020, an international arbitration tribunal rejected Indian tax authorities’ demand for Rs 22,100 crore in back taxes (Rs 7,990 crore plus interest and penalty) relating to Vodafone Group Plc (the British telecom giant) US$ 11billion acquisition of 67% stake in the Hutchison Essar Ltd (HEL) – an Indian company running mobile phone business...
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Many a slip…
It is natural to expect an economic rebound in FY 2021-22. But it is vital to take a pragmatic view based on an objective assessment of how the situation unfolds on ground zero The green shoots seen in October, in particular the rise in the Index of Industrial Production (IIP) by 3.6 per cent, have prompted agencies to revise their growth assessment for the current financial year (FY) from the minus 9.5-10.5 per cent projected earlier to minus 7.5-8.5 per cent, now. For the FY 2021-22, when the impact of the virus is expected to subside to a large extent due to the availability of the vaccine, it is only natural to expect an economic rebound. However, it is necessary...
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On road to recovery
The growth of real Gross Domestic Product (GDP) had already started sliding from the third quarter of FY 2018-19 and continued all through the FY 2019-20 culminating in a low of 3% during its last quarter ending March 31, 2020. During the whole of 2019-20, the growth plummeted to a decade low of 4.2% down from an average of 7.5% recorded in the previous 5 years i.e. 2014-15 to 2018-19. A nation-wide lockdown announced by the Prime Minister, Narendra Modi on March 24, 2020 dwelt a body blow by bringing most of the economic activities to a grinding halt. As a result, there was precipitous decline in GDP growth by 24% during the first quarter of current FY ending June...
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A taxing question
As pointed out by the nation’s top auditor, there are irregularities galore in the management of the various cesses as they have been appropriated to manage deficits Reining in the fiscal deficit has always been a challenge for the Centre especially after the enactment of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, which requires it to maintain the shortfall within a specified threshold. At the same time, there are certain thrust areas, such as education, roads and other infrastructure, telecommunication networks in rural areas, exploration of oil, gas and so on, which the Government feels won’t get the desired funds in the normal course of budgeting. This led to successive dispensations to think of a special tax or...
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Cess – anathema in Indian taxation
Reining in the fiscal deficit (excess of total expenditure over total revenue) has always been a challenge for the union government especially after the enactment of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which requires it to maintain the deficit within a specified threshold. At the same time, there are certain thrust areas such as education, roads and other infrastructure, telecommunication network in rural areas, exploration of oil and gas etc which mandarins in the finance ministry felt won’t get the desired funds in the normal course of budgeting and deciding allocation. This led them to innovate special taxes such as USO (Universal Service Obligation) levy imposed on telecom service providers, Cess on Crude Petroleum Oil (CPO), Road...
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GST: More than three years on, several problems remain
Billed as a ‘transformative’ reform, the Goods and Services Tax (GST) is now more than three years old. It is time to take stock. GST is a single nationwide tax that subsumes within it more than a dozen taxes of the pre-GST era, namely central excise duty (CED), service tax, sales tax/value added tax (VAT) besides a host of local taxes such as octroi, purchase tax, turnover tax, etc. The old regime was afflicted with several anomalies. First, each state was free to impose as many taxes and fix the rate for each item as it wished. This not only resulted in multiplicity of taxes but also vast variation in the rate across states. For instance, on natural gas, VAT...
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