Indian Economy - News & Discussion Oct 12 2013

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 05 May 2015 11:48

That is not how GST works. It is not a slab rate, but a value added tax. The tax is therefore on the value addition and not on the value of the item. At each step - manufacturer->wholesaler->retailer, the input costs receive a GST credit, and the output has a GST on the cumulative amount, the net between the output tax and the input credit is the tax on the value add. See How does GST work? . This also fosters tax compliance, because your credit is tied to the tax on the value added output.

There already is a central and state VAT in India, except that they are not harmonized into a single system, which is what GST attempts to do. Arguably, the current tax/duty structure imposes much greater costs than GST will, even with a 20% VAT rate in the first couple of years. No longer will trucks pile up at state borders, no octroi or other levies, just one fixed rate across all states, i.e. a common market.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 05 May 2015 15:59

the state border octroi posts are dens of corruption. being a tax inspector at a busy chokepoint border crossing like say assam-wb is a rather coveted posting.

if we can move goods across state borders without any paperwork or checkposts that a MASSIVE leap forward in speed of shipping and hence cost of business.

it is not uncommon to find queues of trucks upto Kms long sometimes.

another korrupt den that needs a nuke is the state RTO posts that issue permits to taxis from neighbouring states for few days, weeks etc. for eg a delhi taxi going to haridwar first needs to pay at a UP checkpost and then at Uttaranchal checkpost. each state has its rules, some give for a few days, some for multiple trips.

all of this needs to go and a better system worked out.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Supratik » 05 May 2015 17:10

The guy expecting Modi to privatize govt banks is day-dreaming. He hasn't listened to his pre-election speeches. Modi doesn't believe in compulsive privatization but in making things more efficient. Besides India needs those banks for social programs. Which private bank is going to do Jan Dhan Yojana? At best he is going to do things that is going to make public banks more efficient.


Also why blame infra companies for a mess created by mis-governance. I have already mentioned in the roads thread that Gadkari has cleared two-thirds of road projects stuck under UPA and you have data on BRF what Goyal is doing with power. That is just two sectors.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby panduranghari » 05 May 2015 19:19

Supratik ji,

The undercapitalised private sector banks like ICICI are sitting ducks if Interbank lending rate rises. They will have no choice but to recall housing loans if that happens. The only alternative left will be for government to provide emergency funding i.e. nationalisation.

Also as most private banks are metro and Tier 1 and 2 city based, the acquisition of these banks by government does not give any net benefit for the out reach to those who need access to banking.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby geeth » 05 May 2015 19:23

Is the 25% rate for both SGST AND CGST together? How about 2% CST with C form? If this is not accommodated cost of capital goods/project cost is going to increase as there is no tax credit since no resale is involved.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Gus » 05 May 2015 19:42

Singha wrote:the state border octroi posts are dens of corruption. being a tax inspector at a busy chokepoint border crossing like say assam-wb is a rather coveted posting.

if we can move goods across state borders without any paperwork or checkposts that a MASSIVE leap forward in speed of shipping and hence cost of business.

it is not uncommon to find queues of trucks upto Kms long sometimes.

another korrupt den that needs a nuke is the state RTO posts that issue permits to taxis from neighbouring states for few days, weeks etc. for eg a delhi taxi going to haridwar first needs to pay at a UP checkpost and then at Uttaranchal checkpost. each state has its rules, some give for a few days, some for multiple trips.

all of this needs to go and a better system worked out.


you can imagine all kinds of worst things and the reality at these border posts are even worse.

I have spent many a days holed up in Hosur, clearing vehicles coming in for dealer at year end and the amount of corruption there is unbelievable. guys pay crores to get that job and they make that many times over.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby RoyG » 05 May 2015 20:32

Supratik wrote:The guy expecting Modi to privatize govt banks is day-dreaming. He hasn't listened to his pre-election speeches. Modi doesn't believe in compulsive privatization but in making things more efficient. Besides India needs those banks for social programs. Which private bank is going to do Jan Dhan Yojana? At best he is going to do things that is going to make public banks more efficient.


Also why blame infra companies for a mess created by mis-governance. I have already mentioned in the roads thread that Gadkari has cleared two-thirds of road projects stuck under UPA and you have data on BRF what Goyal is doing with power. That is just two sectors.


I agree with this assessment, but only for Modi-1. Modi-2 will be a different beast. Right now the ground work is being laid for major privatization and he needs to win elections and dismantle c-system. It will be a careful balancing act.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 05 May 2015 20:40

geeth wrote:Is the 25% rate for both SGST AND CGST together? How about 2% CST with C form? If this is not accommodated cost of capital goods/project cost is going to increase as there is no tax credit since no resale is involved.

Why not look for this information and post it here for everyone's benefit ? :)

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby geeth » 05 May 2015 21:11

^^I tried..but I find every article is more an opinion than hard facts. All are recycling the same thing that how is drastically different than GST. The "drastic" part is what I am trying to figure out..to me it appears the si.ple trader may end up paying more because (a) rates may turn out to be higher than present (b) some of the facilities may be withdrawn (c) no clarity on interstate trade/ ISGST. With Mani at the helm, it is gonna be a.lose-lose situation for people like me who do straight sale within state and some inter-state as well.

The only problem withe present one is ..in interstate trade you have to pay full state tax in one or both states..if full tax is paid in only one state, then in the other you pay either full CST equivalent to state tax or 2% with CST..

Apart from all these jing bangs, what will make commerce eminently simple is remove list of commodities from the salestax certificate and replace it with a negative list for which permission is required. At present you cannot buy or sell anything that is not reqistered in your salestax certificate. I find this system ridiculus and again no mention of these things in the GST discussions.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 05 May 2015 21:16

There will be an increase in taxes simply because there's so much evasion today. With GST, you can't avoid paying taxes as an intermediate or end retailed simply because you can't get a credit without collecting GST and reporting end value add. In that regard it fosters compliance.

GST essentially eliminates the concept of state-wise taxation and duty applicability. At least, ideally it does. If it were simply central and state VAT, we already have that running for quite some time. There will be no double taxation across two states.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby geeth » 05 May 2015 21:27

Even now you cant avoid tax if you want credit..if you dont want credit, you can still avoid paying tax with new GST also. IMO tax compliance can be enforced with better tech and vigil onlee..more later as I am typing from mobile.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 05 May 2015 21:31

Yes, but current VAT doesn't have as extensive a coverage as GST intends to have, from what I understand. But I'll leave the details as a search exercise for you :)

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby M Joshi » 05 May 2015 23:58

One thing I've tried to search and not able to figure out, is that whether its going to one comprehensive GST, or in two parts of CGST & SGST? If its in two parts then will CGST be available for offset with SGST and vice versa? If not, then I don't see the point of this whole GST exercise.
Also any rate beyond 16% is essentially going to hurt business sentiment & end user will try to underbill to avoid paying 25%! Tax.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 06 May 2015 05:07

Govt's investment push for infrastucture projects starts taking shape
The government is said to be readying a number of measures aimed at increasing public sector investment in infrastructure projects.

These include funding for the Rs 20,000-crore National Investment and Infrastructure Fund (NIIF), announced in the 2015-16 Budget, and drawing a road map to the fund of the smart cities project, most of which is expected to come from the Centre and states, Business Standard has learnt.

For the NIIF, the finance ministry is likely to tap the dividend expected from state-owned companies to the Centre. While Rs 15,000 crore will come from dividend paid by cash-rich public sector undertakings (PSUs) such as ONGC and Coal India, Rs 5,000 crore will be infused by the Centre.

The amounts will likely be infused into NIIF in the latter half of the year, the official added. The NIIF funds will be used to raise debt and, in turn, be invested as equity in infrastructure finance companies such as Indian Railway Finance Corporation and National Housing Bank.

Officials also say the bulk of spending on the 100 planned smart cities and a new urban renewal scheme will come from the Centre, states and PSUs. “Through the coming years, few projects will be through PPP (public-private partnership) or completely led by private entities. Most of the spending will either be through the Centre’s budgetary allocations to smart cities or by issuing municipal bonds by urban bodies or states on behalf of urban bodies,” said a second official.

Just past week, the cabinet approved for funds of Rs 1 lakh crore over the next five years for a 100 Smart Cities, and a new Urban Renewal Mission. Officials say that this amount could increase over the coming years. They admitted that the centre and states will have to take the lead on these projects since private infrastructure companies have a lot of stressed assets on their books.

The push for public investment in infrastructure to boost growth was first mooted by Chief Economic Advisor Arvind Subramanian in his mid-year economic analysis in December last fiscal. "It seems imperative to consider the case for reviving public investment as one of the key engines of growth going forward, not to replace private investment but to revive and complement it," he had stated in the report. The idea was taken forward in the 2014-15 Economic Survey and 2015-16 Union Budget.

By delaying the fiscal consolidation roadmap by a fiscal year, and by targeting a fiscal deficit of 3.9 per cent for 2015-16, instead of 3.6 per cent as per the previous roadmap, Finance Minister Arun Jaitley freed up about Rs 70,000 crore for additional investment into key infrastructure sectors, primarily Railways.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby hanumadu » 06 May 2015 05:41

“Through the coming years, few projects will be through PPP (public-private partnership) or completely led by private entities. Most of the spending will either be through the Centre’s budgetary allocations to smart cities or by issuing municipal bonds by urban bodies or states on behalf of urban bodies,” said a second official.


That's one way of working around LAB.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby vina » 06 May 2015 06:50

Looks like GST wont happen this year (if at all) . Sure the Congress is backtracking, but it is the BJP , specifically a gent called Mr Narendra Modi who has to answer for the GST not being in force today.

The UPA did move on the GST, but could not take it through because Mr Narendra Modi , as the then Chief Minister of Gujarat put a spoke in the wheel. Now if other chief ministers are doing similar things, the BJP cannot blame them. After all, if GST is in the national interest and was indeed good ,then they should have got together with the UPA govt and passed it , warts and all, apprehensions and all and then tried fixing it.

Now they are getting paid back in their own coin and the loser in all this idiotic politicking, the long line of trucks at every interestate border, the lack of a common market in India, loss of economies of scale and lost prosperity. Shame.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 06 May 2015 06:52

So the UPA failed to pass GST because of one state and one person ? A very good fantasy, but nothing more than trolling here.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby gakakkad » 06 May 2015 07:43

http://jmp.sh/v/x5ZluilNmmgOgsvLgrXl

This is a link to RTI on stalled projects.. It is an interesting list.. It proves that LAB is urgently needed . While nuts are arguing that only 8% of the projects are stalled because of LAB related problems , that is only a fraction of the whole picture ... The kind of projects stalled due to LA problems are big infra projects like Airports , sea ports , powr plants and roads.. While projects stalled for lack of funding are small prvate projects like hotels or software...

It is a massive list.. I ll try to prepare a spreadsheet of type of projects / cause for stalling (number stalled by LA , environment clearance, other clearance ,other not specified cause , unknown cause) ...
others here can do it too if they have time...

The list re-enforces why UPA was such a @$@#!##@$ ...

edit corrected link

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby vina » 06 May 2015 09:21

Suraj wrote:So the UPA failed to pass GST because of one state and one person ? .


Yes . If i remember, the head of the GST committee was a BJP member (Sushil Modi of Bihar ?) and everything was ready to go, but NaMo put the spokes in to the wheel.

It would do well for Modi to eat humble pie on it, say he was sorry for doing it, reach out to the opposition, say that GST is important, don't stand in the way, we will set up a select committee to satisfy every concern you have via amendments to the GST and spend political capital to get this through. At the end of the day the BJP doesn't have the numbers.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 06 May 2015 09:33

what is the fate of the new airport planned for mumbai in navi mumbai near the coast?

was that a victim of jayanathi/jairam duo or land acquisition issues?

T3 delhi is regularly racking up awards in the worlds best lists among 15-25mil pax handled.

BIAL has crossed MAA and I suspect BLR GDP will soon eclipse MAA and then MAA+HYD combined

Mumbai needs to have the country's biggest and best airport without question.

Sahar can then be made a naval air station housing rows and rows of LRMP and naval strike bombers.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby chetak » 06 May 2015 09:34

Suraj wrote:So the UPA failed to pass GST because of one state and one person ? A very good fantasy, but nothing more than trolling here.



+108

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 06 May 2015 09:39

OT, but DEL is no longer in the 15-25M category moderate size category. It's almost about to leave the 25-40M medium category, with 39.7 million pax in 2014. This year it will probably register around 45 million, in the same range as Kuala Lumpur, Seoul, Bangkok and San Francisco. They should start work on T4 soon, because T3 will hit its own design capacity of 36 million soon.

April 2015: Work on Navi Mumbai airport may start in 3 weeks

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 06 May 2015 09:46

vina wrote:
Suraj wrote:So the UPA failed to pass GST because of one state and one person ? .


Yes . If i remember, the head of the GST committee was a BJP member (Sushil Modi of Bihar ?) and everything was ready to go, but NaMo put the spokes in to the wheel.

You remember wrong. A single state leader is not capable of derailing the GST. GST is a central bill entirely under the control of the central government, of which Modi had no part until May 2014. He could refuse to pass a bill in the Gujarat legislature in support of a central GST bill, but there are 28 other states of which any 15 could pass the GST bill and make it a formal constitutional amendment. Unless you refer to a single deadlock breaking vote in LS or RS, one man cannot do anything about GST. Please keep your personal politics out of here. It is not welcome.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby vina » 06 May 2015 09:48

Singha wrote:BIAL has crossed MAA and I suspect BLR GDP will soon eclipse MAA and then MAA+HYD combined .

MAA and Kolkata was because the DMK and TMC stood in the way of privatisation and the AAI was given the job of modernisation and as expected they did a Kakkoose/Pakistan of it.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby gakakkad » 06 May 2015 10:31

Navi mumbai airport does not seem to be listed in the stalled project list..may be it is not stalled...there are several airports listed...most of them are stalled due to land acquisition and others due to jayanthi..

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 06 May 2015 10:40

goa has got a new terminal under AAI to replace the rather cramped old one.
but true to AAI design it is peculiar.
ground floor is x-ray and checkin - fair enough
1st floor has security at one end and nothing for a vast open space
2nd floor is the departure lounge, most of it is ok but a carpeted area really stinks and is badly in need of replacement
once u enter the boarding gate, you need to come DOWN two floors via long ramps to enter the aerobridge into the 737/A320

maybe the lack of land footprint led to this peculiar design because normall security, immigration, departure and aerobridge are all at same level

dropoff and pickup are on same driveways and very limited parking available outside. a new multi level car park is nearly done.

goa really needs to leave dabolim to the navy and build a fresh new airport either in north or south for civilian flights. another cheaper option is fund the new airport as a naval air station, hangars and housing and take over the naval side of the current one for expansion of civilian ops, parking etc.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Singha » 06 May 2015 10:42

http://www.business-standard.com/articl ... 322_1.html

Delhi’s Indira Gandhi International (IGI) airport has emerged the winner among the world’s best airports, according to a ranking by the Airports Council International (ACI), an association of the world’s airports. IGI won the best airport award for the year 2014, for passenger service under the category of airports handling 25-40 million passengers per annum (mppa).

The airport scored 4.90 on a scale of 5, measured by 300 members of the ACI Airport Service Quality (ASQ) benchmarking programme. ASQ is considered the key to understanding how to increase passenger satisfaction and improve business performance. The survey, the result of which came on Saturday, covers 34 service areas, including access, check-in, security, airport facilities, food and beverage and retail.

The award was presented to IGI at a ceremony of the ACI Asia-Pacific/World Annual General Assembly on April 28 in Jordan.

A “13-member team from Delhi Airport, comprising representatives from DIAL (Delhi International Airport), Delhi Duty Free Services, Airline Operating Committee, Jet Airways and IndiGo Airlines, was present at the ceremony to receive the award,” says a statement on the airport website.

“IGI Airport partners and employees have consistently delivered a memorable and distinct experience to our customers, enabling us to achieve the coveted world number-one position,” I Prabhakara Rao, CEO of DIAL, which manages IGI, was quoted as saying. DIAL is a joint venture between the GMR Group, Airports Authority of India, Fraport and Malaysia Airports Holdings Berhad.

IGI’s Terminal 3, or T3, is the eighth largest airport terminal in the world. In 2014-15, the airport handled 40 million passengers, an eight per cent increase from 36.88 million the previous year.


According to the statement, DIAL has made “rapid progress in enhancing the service quality at IGI which has resulted in steady improvement in rankings over the past eight years since DIAL took over the operations.” The statement adds that the airport scored 4.90 on the ASQ scale out of 5 points and has been recognised as the world’s best airport in the 25-40 mppa category. ACI has 300 members participating in the ASQ benchmarking programme.

“Airports are more than simply points of departure and arrival. In the fast-changing landscape of worldwide aviation, ASQ is the key to understanding how to increase passenger satisfaction and improve business performance. At the end of the day, good business acumen comes down to a simple equation: Better service, improved traffic and a healthier bottom line,” said Angela Gittens, director-general, ACI World.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby member_27845 » 06 May 2015 10:47

GST Bill - If NDA has the requisite numbers in a joint session they should use it and ram it through

ADMK's grouse is due to expected loss of revenue and not any idealogical or policy issues - this can be solved with some financial package deal

The LAB has become an emotional issue - NM could do a one to one session like what Putin does - exclusively with the farming community and answer their concerns in a forthright manner - BEFORE they ram it through in a joint session
If it becomes an electoral issue in 2019 , then so be it

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby geeth » 06 May 2015 12:15

Further to my earlier post I find the salient features about the new GST from what I could gather from various sources and my own personal experience:

POSITIVES of GST compared to existing VAT regime.

1. The CGST and SGSTs are calculated based on basic value of the good. I.e., if Rs 100 is the cost, then present VAT system calculates basis Rs 100 as the value of the good :

(A) 100x 1.145 = 114.5 - invoice amount (state VAT only if the turnover is less than 1.5 cr and sale is within state - max rate)
(B) 100x1.145x1.125 = 128.81- invoice amount (state VAT + central excise excluding cess if turn over is more than 1.5 cr and sale is within state - max rate)
(C) 100x1.145x1.145x1.125 =147.49 (for interstate with orgin state+ destination state + central excise - max rate)
(D) 100x1.145x1.45x1.02= 133.72 (for interstate with C form - max rate)

With new GST in force and rates assumed as 12.5% CGST and 12.5% SGST rates for above 4 cases will be as follows:
(A) - 112.5
(B) - 100(1.125+1.125) = 125
(C) 100 (1.125+?) =? Since new IGST rate is not known and central excise is subsumed.
(D) Same as (C) above since C form will be abolished.

Comparing the two cases the advantages are obvious..these are very good for large corporates and to those smaller firms who buy raw materials from these large ompanies (for eg..steel).

However, when we take into account a large number of smaller firms (less than 1.5 Cr turnover), their present tax rates are somewhat like this

(A) 100x1.145 - 114.5 (max rate)
(B) 100 x 1.145 = 114.5 (max rate ; No Excise duty)
(C) 100 x 1.145 x 1.145 = 131 (origin + Destination state tax - max rate)
(D) 100 x 1.145 x 1.02 = 117

In all the above cases, the max rate of 14.5% VAT is taken. However, there are many goods for which applicable VAT rates are 5%, 2% 1% etc.. I don't find any mention of different rates in the new GST..all are at flat rate of 12.5% (?). So the price of all these goods which are sold at less than 12.5% will find their MRP increasing..This will have effect on raw material cost as well as finished goods price.

Then there is work contract, which is charged at a lower rate, but on the total invoice value including labour..it is slightly complicated and varies from stste to stste - so not attempting.

There is no mention about how the "long ques at the inter-state border check posts" eliminated with the new GST..are they going to completely dismantle these check posts? who is then going to check the goods for compliance? Is it all going to be done in good faith ? I don't know.

Another point is all that is purchased by an organisation is not used in manufacturing process and many of these goods like spares, consumables etc are in the 5% VAT rate.

Now coming to the question of tax compliance :

If a firm purchases raw material worth Rs 100, pays 12.5% SGST, sells it for Rs 132.5 + 12.5% SGST,

he pays a total SGST of Rs 16.56 (or Rs 15 I am not sure..) and makes a profit of Rs 20. Major incidences of non-compliance is when you take into account the income tax also into accout..

If the income tax payable on profit (big margins) is also substantial, the trader may be tempted to un-account a part of his purchases and sales, thereby "saving" on both salestax and income tax.

IMO this cannot be discouraged by migrating to the new GST regime. So for all practical purposes, there will continue to be harassment by tax people, may be in some other form.

As mentioned before, a manufacturer or trader can buy or sell goods that are listed in his salestax certificate.. often you may not find the exact name in the list of goods mentioned in their websites..Sales tax people don't even know existence of certain goods. Different manufacturer has different names for the same goods etc etc..What do we do in such cases. Simplifying these things are also equally important for smmoth transations across different ststes of the country.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Nitesh » 06 May 2015 13:19


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Re: Indian Economy - News & Discussion Oct 12 2013

Postby vina » 06 May 2015 13:55

GST bill passed in lok sabha

To get stuck in the Rajya Sabha ?

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Nitesh » 06 May 2015 14:23

vina wrote:
GST bill passed in lok sabha

To get stuck in the Rajya Sabha ?

Hopefully No :)

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Patni » 06 May 2015 15:04

CONG. Staged walkout!
The relevant Constitution (One Hundred and Twenty Second Amendment) Bill, 2014, was passed by a division with 336 ayes, 11 against and 10 abstentions. Lok Sabha Speaker Sumitra Mahajan announced the bill was approved with two-thirds majority of the house, as required.

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Re: Indian Economy - News & Discussion Oct 12 2013

Postby vina » 06 May 2015 15:06

Deleted. No discussion of politics here.
Last edited by Suraj on 06 May 2015 21:02, edited 2 times in total.
Reason: Poster banned for a day for trolling.

Frederic
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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Frederic » 07 May 2015 02:46

Seetha at Swarajya Mag gives a succinct summary of what GST is all about:

http://swarajyamag.com/economy/so-what-is-gst-and-what-are-its-benefits/

So what is this all-important GST?

It is a single, comprehensive value-added tax on goods and services that is levied at every stage of a transaction. The person paying the tax can offset it as an input cost. Thus, tax is levied only on the value added during a particular stage of transaction.

It really shifts the burden of tax to the point of final consumption. But the tax burden on the final consumer will be less than it is now because taxes paid earlier have been set off.


Why a GST

It will do away with cascading of taxes or the tax-on-tax phenomenon where the tax paid at one stage gets added on to the price of a good on which tax is levied at the next stage. So it will reduce the tax burden on goods and services for the final consumer.

GST will also end the multiplicity of taxes that make compliance with, and administration of, indirect taxes a nightmare. It will improve indirect tax collections by broadening the tax base, making evasion less attractive (you can get tax credit only if you have paid tax earlier).

Above all, it will create a common market in India, since the rate will be uniform across the country and taxes paid in one state can be offset for transactions done in another.


But wasn’t VAT supposed to do all this?

Yes, and it did, to an extent. Sales tax, which preceded VAT, was a cascading type of tax. Besides, states levied several other taxes, all of which not only made things difficult for manufacturers and traders but also increased prices. With VAT being introduced in 2005, people at various points of a transaction chain could set off the taxes they paid on previous transactions. Most of the other taxes were also subsumed into VAT.

However, VAT has some shortcomings. It does not include all taxes/levies at the central and state level, which it should have. What’s more, some of these taxes cannot be set off as input tax credit. Also, VAT applied only to goods.

There was a separate service tax, which got added on since the production of goods involves some services as well. VAT also did not cover inter-state transactions. So, though cascading was reduced significantly, it was not eliminated altogether.

The National Council for Applied Economic Research (NCAER) has estimated that the implementation of GST will boost GDP by between 0.9 per cent and 1.7 per cent.



Then Seetha goes on to discuss the history of GST in India and the GST systems elsewhere in the world etc.

A good summary for the uninitiated like yours truly.

Rishirishi
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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Rishirishi » 07 May 2015 02:53

Some of the impacts of GST.

1 Boost to large scale manufacturing and retailing. Small businesses will get sqeezed.
2 Cheaper goods for the consumer
3 Boost to the economy
4 More malls
5 Great boost to internet shopping.

Frederic
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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Frederic » 07 May 2015 03:39

Rishirishi, I am hearing about this "small businesses getting squeezed" a lot due to GST law.
Could you pls elaborate a bit on this point?

SwamyG
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Re: Indian Economy - News & Discussion Oct 12 2013

Postby SwamyG » 07 May 2015 05:26

http://www.todayonline.com/chinaindia/i ... epage=true
The new commercial competition is beginning to show. Ask Mr Vineet Mittal, vice-chairman of solar-power company Welspun Renewables. Five years ago, he tried to get permission to build a solar power plant in a southern Indian state. After six months of waiting for appointments with officials and being given the runaround by government bureaucrats, he gave up.

Last October, he tried again. When he arrived at the airport, he was surprised to find liaising government officers waiting for him. They whisked him straight to meet senior bureaucrats and the Chief Minister of the state. By March, Welspun was ready to start work on a 7.5 billion-rupee (S$157 million), 100-megawatt project, 20 times the size of the one he tried to propose in 2010.

Suraj
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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Suraj » 07 May 2015 05:28

GST rates likely to be in the range of 20-23%
The proposed national goods and services tax (GST) rates could be 20-23 per cent, if recommendations of the National Institute of Public Finance and Policy (NIPFP) are accepted by the Centre and states.

In the Lok Sabha, on the GST amendment Bill, Finance Minister Arun Jaitley said the rates would be much below the 27 per cent recommended by a sub-panel of the EC. “I straightaway concede that 27 per cent would be very high...after this 27 per cent (revenue-neutral rate or RNR, at which no revenue loss to states is likely on adoption of GST) was born, the states and the Centre have decided to keep alcohol out,” he said. Adding that both had the same view on this.

“We have decided to keep petroleum out and no state is interested in imposing higher taxes on its people and neither the central government. Therefore, this (RNR) figure is going to be much more diluted compared to the figure (27 per cent) mentioned,” he said.

He said the 13th Finance Commission had suggested 18 per cent as a possible figure. However, it had also suggested a different model of GST compared to what is being considered now.

Currently, the Union excise duty rate is 12 per cent on most goods, while value-added tax (VAT) is 12.5 per cent in most states. This combines to 24.5 per cent. Then, there are purchase taxes in some states and a central sales tax of two per cent on inter-state movement of goods. From this point of view, a goods tax at 27 per cent seems too high, given that VAT also gives input credit and so does excise duty in most cases.

Service tax will, however, be 14 per cent from June and making it 27 per cent would again be too high a rate. Currently, only the Centre can impose service tax.

On the 27 per cent RNR recommended earlier by a EC panel, the state GST (SGST) component was recommended at 13.91 per cent and central GST at 12.77 per cent. The committee had also proposed a narrow band for the SGST component.

The recommendations were referred by the EC to NIPFP, since it was based on revenue collection figures of 2011-12.

Prashant Deshpande, Senior Director, Deloitte in India, said 27 per cent GST rate would be a non-starter. “The rate should address the issue of all — industry, states and consumers," Deshpande said.

GST rates are not part of the constitutional amendment Bill. It would be decided later by the proposed GST Council, comprising the Union and state finance ministers.

CCEA raises FDI approval floor to Rs 3,000 cr
The Cabinet Committee on Economic Affairs (CCEA) has raised the threshold for foreign direct investment requiring its approval to Rs 3,000 crore from the present Rs 1,200 crore.

The proposal had been made by the department of industrial policy and promotion (DIPP) under the ministry of commerce and industry.

“This decision is expected to expedite the approval process and result in increased foreign investment inflow,” went an official statement after the meeting on Wednesday.

Presently, investments up to Rs 1,200 crore are cleared by the Foreign Investment Promotion Board of the finance ministry. Those above this limit require approval of the CCEA as well.

“This was done in line with the government’s effort to boost the Make in India campaign and increase the flow of foreign investment,” a senior DIPP official told Business Standard after the CCEA meeting, chaired by Prime Minister Narendra Modi.

During April-February, FDI equity inflows increased by 39 per cent to $28.81 billion compared to $20.76 billion in the year-ago period.

Karthik S
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Re: Indian Economy - News & Discussion Oct 12 2013

Postby Karthik S » 07 May 2015 06:01

Rishirishi wrote:Some of the impacts of GST.

1 Boost to large scale manufacturing and retailing. Small businesses will get sqeezed.
2 Cheaper goods for the consumer
3 Boost to the economy
4 More malls
5 Great boost to internet shopping.


I thought the government is encouraging small scale industries. Small scale industries are equally important for economy. IIRC, Germany is very famous in this aspect. Such industries are an important reason that Germany is still able to compete with low cost Asian competitors in the exports arena.


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