As many as 76 members of the World Trade Organisation (WTO) — nearly half the WTO’s membership — have begun a process of framing rules governing cross-border e-commerce. The initiative is being spearheaded by the United States, China, the European Union and Japan — the four largest trading nations in the world economy — and has the tacit support of leading multinational companies (MNCs) in the e-commerce space such as Amazon, Walmart/Flipkart and Alibaba. India has strongly objected to the move. The objection stems primarily from an apprehension that in the event of India being a part of the negotiations, it will have to commit itself to harmonised WTO rules on e-commerce which will take away the ‘policy space’ currently...
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Category: Deccan Herald
With WTO in view, take up restructuring subsidy regime
There is trouble brewing for India at World Trade Organisation (WTO) – the multilateral body which binds member countries to a common set of rules with regard to trade in goods and services with ‘fairness’ and ‘non-discrimination’ as its underlying principles. To get a sense of where it is heading, let us put things in perspective. In May, 2018, in a hard hitting submission made to WTO Committee on Agriculture (CoA), the United States had lambasted India for indulging in substantial under-reporting of its market price support (MPS) programme for wheat and paddy farmers alleging that the sops given by government far exceed the permissible limit. This was a counter to the latter’s notification to WTO in March, 2018. Under...
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In GST, a tale of two obnoxious levies
From the start on July 1, 2017, the implementation of the Goods and Services Tax (GST) has been plagued by several anomalies. The GST Council — the all-powerful body to decide the tax architecture and rates on various items — could have adopted a proactive stance, anticipated problems and taken steps to nip them in the bud. Unfortunately, most of the time, it has been reactive. As a result, it continues to grapple with unending problems. Two such contentious issues are (i) including the TCS (tax collected at source) amount — levied under the provisions of the Income-Tax Act, 1961 — in the value of goods for the purpose of determining the GST liability; (ii) requiring e-commerce companies to deduct tax at the rate...
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Union Budget: The way forward
Three important highlights of the Interim Budget presented by Piyush Goyal at the beginning of this month are: (i) Under PM Kisan Samman Nidhi, the Centre will give Rs 6,000 per year to small and marginal farmers (land holding up to two hectares) to be deposited directly in their account to benefit a total of 120 million. The support is with effect from December 1, 2018, and the first installment of Rs 2,000 was transferred to beneficiaries last Sunday; (ii) Under PM Shram Yogi Mandhan, persons working in the unorganised sector and earning less than Rs 15,000 per month will get a pension of Rs 3,000 per month on attaining 60 years. For this, a worker joining at the age...
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GST: falling revenues, rising populism
A major reason behind the body blow the BJP received in the recent assembly elections in three Hindi heartland states of Madhya Pradesh, Rajasthan and Chhattisgarh was the disenchantment among the micro, small and medium enterprises (MSMEs), which employ the maximum number of persons — next only to agriculture. These persons also account for a big chunk of the middle class. Sensing that MSMEs were affected due to faulty implementation of the Goods and Services Tax (GST), besides demonetisation, the GST Council at its 32nd meeting took decisions intended to give them major relief. These include: (i) increased the exemption limit from Rs 20 lakh to Rs 40 lakh (a business entity having turnover below this does not have to...
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Farm loan waivers: road to economic disaster
The waiver of farm loans worth Rs 65,000 crore about a decade ago by the then UPA dispensation, with an eye on the impending general elections in 2009, had a debilitating effect on the finances of the union government (fiscal deficit during 2008-9 was in excess of 6% of GDP). But political parties do not seem to have learnt any lesson. Early last year, the BJP government in Uttar Pradesh granted a mammoth loan waiver for small and marginal farmers, costing the exchequer Rs 36,000 crore. This was followed by the by JD(S)-Congress coalition in Karnataka granting an equally massive Rs 34,000 crore waiver earlier this year. The monster of competitive loan waivers continues to advance with added fury as...
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Amazon, Flipkart flouting FDI norms. Really, ED?!
During hearing on a public interest litigation in Delhi high court on October 31, the Enforcement Directorate (ED) said it is investigating alleged violation of the Foreign Exchange Management Act (FEMA) against Amazon and Flipkart. The charge is that these companies have violated the extant norms for foreign direct investment (FDI) guidelines as contained in Press Note (PN) 3 (2016-17). The PN 3 allows 100% FDI in the ‘marketplace’ model for e-commerce. An entity working on this model offers a platform to sellers and buyers to conduct transactions. It acts as a facilitator by offering them services such as booking orders, raising invoices, arranging deliveries, collecting payments, etc. It can’t own stocks and can’t sell directly to the consumer. The...
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Trump is hell-bent on decimating WTO
Ever since Donald Trump took charge as US President, he has made systematic efforts to demolish the very foundation of the World Trade Organisation (WTO) which is at the centre of ‘free’ and ‘fair’ trade based on transparent and non-discriminatory rules. At the 11th WTO ministerial conference held in Buenos Aires in December 2017, the US rejected the demand of developing countries to find a “permanent solution” to stockholding for food security which was agreed to four years ago at the 9th ministerial in Bali. Worse, it has dumped the Doha Development Agenda (DDA), which has been assiduously pursued by all members of WTO since 2001. Second, in complete defiance of rules under WTO, it has hiked import duty on...
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Shutting out NRI/PIO-run funds, a bad idea
Faced with a shortage of capital and a compelling need to boost economic growth, successive governments have taken steps to attract foreign investment. But when the inflow happens to be of Indian money that left our shores in a clandestine manner and is coming back in the garb of foreign capital — ‘rounding tripping’ in common parlance — it raises many eyebrows. Until a few years ago, the extant policy and regulatory environment hugely facilitated ‘rounding tripping’. There was little regulatory oversight on money leaving and there were tax havens ever ready to attract it. The shell companies, set up in those havens by the people to whom the money belonged, would then invest in India, fully leveraging benevolent tax...
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Fertiliser subsidy:policy reforms needed, not tinkering
Considering the crucial role played by fertilisers in increasing food production and the overarching need to make it affordable to farmers, the union government has followed a policy of controlling their maximum retail price (MRP) at a low level, unrelated to the cost of production and distribution. To ensure that production is viable at this price, it gives subsidy to the manufacturer to reimburse the difference between the two. In case of urea, the subsidy varies from unit to unit and is administered under the New Pricing Scheme (NPS) whereas for decontrolled complex fertilisers, a ‘uniform’ subsidy fixed on per nutrient basis is given to all manufacturers under the Nutrient Based Scheme (NBS). Since this is subject to submission of...
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