MOMENTOUS REFORM On August 3, 2016, Rajya Sabha (RS) passed the 122nd constitution amendment bill (already cleared by Lok Sabha last year) paving the way for the Goods and Services Tax (GST). This is a ‘transformative’ reform that will convert the Indian Union of 29 states in to a seamless national market enabling free movement of goods and services as a single uniform tax replaces a plethora of existing taxes. Promising multiple benefits for producers, exporters, businesses, consumers and governments via increasing efficiency in supply chain, reducing transaction cost, improving ease of doing business, tax buoyancy and stemming evasion and black money, GST will lay the foundation for putting India on double digit growth trajectory in the next couple of...
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Category: Deccan Herald
Seize the moment
STRATEGIC DIVESTMENT : Unwillingness to go for strategic sale would be a tactical blunder. So far, the outcome on this front has been rather disappointing In its previous incarnation under A B Vajpayee, the BJP-led NDA dispensation (1998-2004) had vigorously pursued “strategic” disinvestment of Union government’s shares in public sector undertakings (PSUs), some of the high profile cases being Modern Food Limited (MFL), Hindustan Zinc Limited (HZL), Bharat Aluminium Company (BALCO) etc. The UPA government which took charge in 2004, abandoned this route. The present NDA regime under Modi may have resurrected the idea. Looking at the budget for current and previous year, it would appear so. For these years, Finance Minister Arun Jaitley provided for Rs 28,500 crore (2015-16)...
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Agri ministry defies govt
While the intent of the government is to give a big push to commercialisation of GM crops, the agriculture ministry is against it. In December 2015, the Union Agriculture Ministry had issued a Cotton Seed Price Control Order under which it fixed the price of cotton seed sales all over the country at a uniform level and max trait fee (royalty) payable to the technology provider (TP). Given that the genetically modified (GM) Bt cotton accounts for 98% total cotton seeds used in India, the decision was directed primarily at this segment. The ministry also ordered a probe by the Competition Commission of India (CCI) – in to alleged ‘monopolistic’ practices by the Mahyco Monsanto Biotech (India) Private Limited (MMBL)...
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Soft on borrowers
STRESSED ASSETS SCHEME : A close look at the scheme reveals that this is nothing but skulduggery and playing with jargons to make it look robust. Even as the Reserve Bank of India (RBI) has become increasingly tough with public sector banks ordering them to clean up their balance sheets by March 2017, it continues to treat the defaulting borrowers (who were responsible for their proliferating non-performing assets in the first place) with kid gloves. First, it was a scheme nick-named 5/25 introduced in December 2014, under which maturity of loans given to infrastructure companies could be extended up to 25 years. Six months later, this was followed by a scheme for “Strategic Debt Restructuring” (SDR). Under SDR, banks can...
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Time to shut door
P-NOTES REGIME : Why have a system where everyone is dissatisfied? Modi should crack the whip by saying “no” to foreign investment via ODIs/P-notes. Early last month, the Narendra Modi government revised the India-Mauritius DTAA (double taxation avoidance agreement) to withdraw exemption from tax on capital gains made by foreign investors from sale of shares of Indian companies from April 2019. That was a major attempt to kill the incentive for rounding tripping of Indian black money through that tax haven jurisdiction. The tax treaty with Singapore is being re-negotiated on the same lines. Now, the Securities and Exchange Board of India (Sebi) – the national regulator for investment in Indian stocks – has taken the fight against money laundering...
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Exclude the better-off
FOOD SUBSIDY The National Food Security Act (NFSA) enacted by the then UPA – government in 2013 guarantees availability of 5 kg of cereals per person per month at Rs 3 per kg rice, Rs 2 per kg wheat and Rs 1 per kg coarse cereals to 67% of India’s population (75% rural & 50% urban). The cost of making food available being substantially higher, this entails massive subsidy payment. Subsidy is financial supports given by government to enable a person buy a commodity which he cannot afford with his limited income. Prudence demands that this should be given for a temporary period to avoid perennial burden on the exchequer. This period should be used to enable him earn more...
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Grant full autonomy
REJUVENATING PSU banks Last year, a Reserve Bank of India (RBI) committee headed by P Nayak made sweeping recommendations aimed at bringing about structural reforms of public sector banks (PSBs) to enable them meet expanding requirements of an economy on accelerated growth trajectory and improve its competitiveness among the comity of world nations. The committee recommended (i) setting up of an autonomous Bank Boards Bureau (BBB) with a mandate to select the top management; (ii) setting up of a bank investment company (BIC) where all government shares in PSBs will be vested and (iii) divestment of its shareholding in all PSBs to below 50%. BBB was contemplated as an interim arrangement precursor to the BIC. The most crucial of these...
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Burden on shareholders
In the Union Budget for 2016-17, Finance Minister Arun Jaitely proposed that if the dividend income earned by a resident individual, HUF (Hindu Undivided Family) or firm exceeds Rs 10 lakh, it will be taxed at the rate of 10% in the hands of the recipient. This is over and above the dividend distribution tax (DDT) currently paid by firms at 16.99% (inclusive of surcharge and education cess] of the dividend amount so declared, distributed or paid. With the grossing up [as per Finance Bill, 2014, dividend paid is grossed up with income distributed for computing DDT), the effective tax rate is even higher at 20.47%. The policy in regard to tax on dividend income had a chequered history with...
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Good move, hasty retreat
TAX ON EPF WITHDRAWAL The 2016-17 budget proposal to tax 60% of withdrawal from EPF (employees provident fund) and other superannuation funds faced flak from all quarters forcing Finance Minister Arun Jaitley to withdraw it lock stock and barrel. How could the Narendra Modi government, which is committed to the welfare of every section of the society, contemplate such a move in the very first place? Was it really targeted against the salaried class? Was it a right step but not properly piloted? Jaitley had proposed tax on 60% of withdrawal from accumulations in EPF account (contributions plus interest accrued) from April 1, 2016. However, the money would be exempt from tax if re-invested in purchase of annuity plan. He...
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A thing of the past
RETROSPECTIVE TAX About a fortnight ago, the income tax (I-T) department sent a reminder notice to the UK-based Vodafone Group Plc to pay Rs 14,300 crore in tax dues and threatened to seize the assets in case of non-payment. Foreign investors have taken umbrage to it. Vodafone termed this as an act completely out of sync with Prime Minister Narendra Modi’s promise “Retrospective tax is a matter of past… We are ensuring that neither this government nor future governments can open this chapter” made during India – France Business Summit in January, 2016. Others opined this is return of tax terrorism, a phrase coined in the wake of a retrospective amendment in tax laws initiated by then finance minister Pranab...
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