Union Finance Minister Arun Jaitley and chairman, GST (Goods and Services Tax) Council must be credited with spearheading requisite efforts like draft of all related laws — Central GST (CGST), state GST (SGST), integrated GST (IGST), legislation on compensation to states for loss of revenue, delineation/apportionment of powers for administering the tax, determination of rate structure etc in a time-bound manner to ensure that this revolutionary tax reform is kicked off from April 1, 2017. The pace at which the GST Council was progressing, it was almost certain that the government would meet the deadline. But, the announcement by Prime Minister Narendra Modi on November 8, 2016 to demonetise Rs 1,000 and Rs 500 currency notes came as a spoke...
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Category: Deccan Herald
Will DBT work?
The version of DBT being tried in pilot districts is flawed. It will provide no proper assessment of the scheme’s effectiveness. Alluding to the direct benefit transfer (DBT) of fertiliser subsidy, in budget speech for 2016-17, Finance Minister Arun Jaitley had stated: “We have already introduced DBT in LPG. Based on this successful experience, we propose to introduce DBT on pilot basis for fertiliser in a few districts in the country with a view to improving quality of service delivery to the farmers.” The focus on the DBT has its link to a revelation made in Economic Survey (2015-16). It stated that “24% of the fertiliser subsidy is spent on inefficient producers, 41% is diverted to non-agricultural uses and 24%...
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Rajan’s legacy continues
Much like his predecessor, RBI Governor Urjit Patel too sees interest rate as a potent instrument of reining in inflation. In the first monetary policy review under the Monetary Policy Committee (MPC) dispensation announced on October 4, 2016, Reserve Bank of India Governor Urjit Patel had reduced the policy rate (interest rate at which RBI lends money to commercial banks) by 0.25%. He had then maintained an ‘accommodative’ policy stance thereby alluding to apex bank intent for reducing it further. However, in the second policy review announced on December 7, Patel has dashed this hope by keeping the repo rate unchanged. Concurrently, he has also revised downwards its earlier estimate of GDP for 2016-17 from 7.6% to 7.1% now factoring...
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Taxing times: judiciary slower than bureaucracy
Giving its verdict on a bunch of petition challenging levy of ‘entry tax’ by states, a nine judge constitution bench of Supreme Court recently upheld its constitutional validity. It directed that individual cases will be decided by the regular benches concerned keeping in mind laws of the respective states. Even as regular benches take their own sweet time to conclude proceedings, the affected companies may get breather for a while to actually pay up. But, ‘Damocles sword’ hangs! The total liability on the companies – mostly in infrastructure and energy sectors which resort to large-scale transportation of goods in bulk across states – is about Rs 30,000 crore plus interest which itself would be a humongous amount considering that these...
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Crippled at Bombay House
GOOD CORPORATE GOVERNANCE The revelations made by Cyrus Mistry, ex-Chairman, Tata Sons (letter dated October 25, 2016) immediately following his dismissal point towards a new low in corporate governance in India. If it can happen in one of India’s leading conglomerates which has a turnover of close to Rs 7,00,000 crores, market capitalisation of Rs 8,50,000 crores, operations in more than 100 countries and has about 7,00,000 employees on its rolls, this speaks volumes about the extent of degeneration that has set in corporate board rooms. What is so disconcerting about the recent events at Bombay House? The most worrying point is the brazen muscle-flexing by Tata family-owned trusts (they have 66% share in Tata Sons) which reduced its head...
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Don’t fiddle with GST soul
NEW RATE STRUCTURE In its meetings held on Nov 3-4, 2016, the GST (Goods and Services Tax) Council arrived at a consensus on the rate structure even as it failed to hammer an agreement on an equally contentious issue of who (read Centre or states) will exercise administrative control over which tax. For now, the next meeting has been deferred till Nov 23, thus casting shadow over the government’s ability to meet the April 1, 2017 deadline to kick off the new tax regime. The Council has opted for four rates – 5% for essential and daily use items, two standard rates of 12% and 18% and highest rate 28% on so called de-merit goods such as luxury cars, aerated...
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Bias towards the rich
REINING IN LPG SUBSIDY : The Centre should get into a ‘surgical strike’ mode now and enforce exclusion of all rich/better-off from the ambit of LPG subsidy. Prime Minister Narendra Modi has made pronouncements several times that subsidies will be rationalised to take them away from the rich/better-off and given to the poor besides plugging leakages. While the government has made significant progress on the latter, there is little action on the ground in regard to the former (subsidies). In LPG distribution, the government has performed an extraordinary feat of virtually eliminating leakages and saving about Rs 15,000 crore annually under PAHAL (Pratyaksha Hastaantarit Laabh) for direct benefit transfer (DBT) of subsidy as under it, a record 30 million bogus...
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Stymied by populism
ELECTRICITY REFORMS : One major reform that has been sacrificed at the altar of populism is the provision for ‘open access’ under the amended Electricity Act (2003). Under the Narendra Modi dispensation, even as reforms are progressing on several fronts, ironically, electricity is one area where implementation is hamstrung by political establishments in majority of the states, including the BJP-ruled ones. The reason being they are embracing populism in the form of supply to certain segments such as farmers, poor households at low tariff, or even free, and letting thefts happen. One major reform that has been sacrificed at the altar of populism is the provision for ‘open access’ under the amended Electricity Act (2003). Under this policy, which was...
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Energy security at stake
THE GAS FIASCO In its report submitted in November, 2015, De-Golyer and MacNaughthon (D&M) – a consultant appointed by the Centre following the dispute between the Oil and Natural Gas Corporation (ONGC) and the Reliance Industries Limited (RIL) over alleged migration of gas from former’s oil field discoveries in KG basin to latter’s fields in the same basin off Andhra coast – estimated that 0.4 trillion cubic feet (tcf) of gas had migrated from ONGC’s ‘idle fields’ to RIL. Following this, the government set up a committee under Justice A P Shah in December, 2015 to examine the matter and recommend measures to be taken against RIL for “the unjust benefit” it received from the migration of gas taking in...
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Policy mess getting worse
FDI IN RETAIL : While the Centre wants to welcome FDI, it does not want to displease its core constituency of traders, opposed to FDI per se. The government has set up a committee under the Niti Aayog CEO to look into all issues including the Foreign Direct Investment (FDI) norms pertaining to the fast growing e-commerce industry. Since much of e-commerce is in retail, and trade via this route is a portion of overall retail wherein also contentious issues relating to FDI are involved, it would be apt if the committee examines investment norms in a holistic framework covering both online and offline. At present, the retail sector in India is hamstrung by a policy maze which gives too...
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