Test of political will on GST
The BJP-led National Democratic Alliance government has rolled up its sleeves for the ongoing winter session of Parliament in a bid to guarantee the passage of the Constitution amendment Bill that will usher in a Goods and Services Tax. The government, which has staked a lot of political capital on ensuring that the April 1 target deadline for the implementation of GST is met, has moved to try to build a consensus through a combination of political outreach and an internal reappraisal of some of the contentious features of the tax measure.
Prime Minister Narendra Modi met his predecessor Manmohan Singh and Congress president Sonia Gandhi to court bipartisan support for the legislation in the Rajya Sabha, where the Congress still has the upper hand. And the government has said it hopes to continue talks with the Opposition to reach an understanding. Separately, a panel headed by Chief Economic Adviser Arvind Subramanian has recommended the government make some modifications to its proposals that are seen as helping to pave the way for a resolution of the political deadlock over the Bill.
Among key suggestions are that the government drop the proposed additional 1 per cent levy on inter-State sales over and above the GST rate, and that alcohol and petroleum products be included in the ambit of the tax. Crucially, however, the panel shied away from endorsing the Congress’s demand for writing into the statute an explicit cap of 18 per cent on the standard rate of tax. Dr. Subramanian reasoned it would be unwise to limit the future freedom of the political process by laying down the minutiae of policy. This could well end up being a bone of contention.
For both the government and the Congress, a lot now rides on the political calculations the two sides make ahead of a clutch of State elections due next year. On test will be the sagacity and statesmanship of their respective leaders. A Congress spokesperson was emphatic that the onus of finding a resolution to the differences lay with the government. The party stands by its core demands that include the introduction of robust accountability measures.
The party claims that the government’s efforts to communicate with the Opposition have been high on atmospherics and low on substance. It is now time both sides rose above partisan considerations. That the implementation of GST will help reduce the cascading impact of the prevailing multiplicity of taxes has been well-established. The projected benefit to the economy from an expected improvement in administration and compliance of the indirect tax regime is also fairly beyond doubt.
The challenge will remain in warding off incipient inflationary pressures in the early stages of the implementation of the tax, and enlightened politics is needed here. Both the Congress, which had once championed the GST, and Prime Minister Modi need to show the political will to get this key reform measure passed to create a common market that could spur growth.
The BJP-led National Democratic Alliance government has rolled up its sleeves for the ongoing winter session of Parliament in a bid to guarantee the passage of the Constitution amendment Bill that will usher in a Goods and Services Tax. The government, which has staked a lot of political capital on ensuring that the April 1 target deadline for the implementation of GST is met, has moved to try to build a consensus through a combination of political outreach and an internal reappraisal of some of the contentious features of the tax measure.
Prime Minister Narendra Modi met his predecessor Manmohan Singh and Congress president Sonia Gandhi to court bipartisan support for the legislation in the Rajya Sabha, where the Congress still has the upper hand. And the government has said it hopes to continue talks with the Opposition to reach an understanding. Separately, a panel headed by Chief Economic Adviser Arvind Subramanian has recommended the government make some modifications to its proposals that are seen as helping to pave the way for a resolution of the political deadlock over the Bill.
Among key suggestions are that the government drop the proposed additional 1 per cent levy on inter-State sales over and above the GST rate, and that alcohol and petroleum products be included in the ambit of the tax. Crucially, however, the panel shied away from endorsing the Congress’s demand for writing into the statute an explicit cap of 18 per cent on the standard rate of tax. Dr. Subramanian reasoned it would be unwise to limit the future freedom of the political process by laying down the minutiae of policy. This could well end up being a bone of contention.
For both the government and the Congress, a lot now rides on the political calculations the two sides make ahead of a clutch of State elections due next year. On test will be the sagacity and statesmanship of their respective leaders. A Congress spokesperson was emphatic that the onus of finding a resolution to the differences lay with the government. The party stands by its core demands that include the introduction of robust accountability measures.
The party claims that the government’s efforts to communicate with the Opposition have been high on atmospherics and low on substance. It is now time both sides rose above partisan considerations. That the implementation of GST will help reduce the cascading impact of the prevailing multiplicity of taxes has been well-established. The projected benefit to the economy from an expected improvement in administration and compliance of the indirect tax regime is also fairly beyond doubt.
The challenge will remain in warding off incipient inflationary pressures in the early stages of the implementation of the tax, and enlightened politics is needed here. Both the Congress, which had once championed the GST, and Prime Minister Modi need to show the political will to get this key reform measure passed to create a common market that could spur growth.
Questions:
1. What is Goods and Services Tax?
2. What are the different types of taxes currently being paid by citizens of India?
3. Who is the Chief Economic Advisor? What is his role?
4. What changes is the GST going to bring in the established tax structure?
5. How is GST going to impact a common man?
6. What are the current issues associated with GST? Why is the GST bill stuck in Parliament?
7. What is Winter Session of the Parliament? What are other sessions of Parliament (if any)?
8. What is inflation? How do we measure it?
9. How does inflation impact a common man?
10. Which authority is mandated to control inflation in India?
8. Inflation can be defined as a sustained increase in the prices of goods and services in an economy. Inflation in an economy can be measured using the two main price indexes- CPI(Consumer Price Index) and WPI(Wholesale Price Index). The CPI measures the changes in the price level of goods and services bought by the consumers in an economy, whereas the WPI measures the change in price level of goods and services at whole sale rate.
ReplyDelete8. Inflation can be defined as a sustained increase in the prices of goods and services in an economy. Inflation in an economy can be measured using the two main price indexes- CPI(Consumer Price Index) and WPI(Wholesale Price Index). The CPI measures the changes in the price level of goods and services bought by the consumers in an economy, whereas the WPI measures the change in price level of goods and services at whole sale rate.
ReplyDelete1. The Goods and Services Tax is the value added tax or a form of indirect tax. Once it is implemented, it will replace all indirect taxes levied on goods and services by both centre and state government. The tax will be charged together for both goods and services at an uniform rate and will be paid at the time of consumption. It will basically simplify the whole process of taxation. It will increase the transparency and will be easy to administer. It will also facilitate the common national market.
ReplyDelete2. The taxes paid by the citizens can be broadly divided into three categories:
(i) Direct Taxes- Income tax, Capital gains tax, Corporate tax, Perquisite tax, Securities transaction tax
(ii) Indirect Taxes- Sales tax, Service tax, Value added tax, Custom duty & Octroi, Excise duty
(iii) Other Taxes- Professional tax, Municipal tax, Entertainment tax, Education cess, Gift tax, Toll tax, Wealth tax, Dividend distribution tax
3. Couldn't find material from reliable sources.
4. Already addressed in the first answer.
5. After GST, taxes for both Centre and State will be collected at the point of consumption. Both will be charged on the manufacturing cost. Individuals will be benefited by this as prices are likely to come down. There will be no problem of double taxation.
6. GST bill will be brought through amendment of the Constitution and it will require special majority with the ratification of the States. With the shift in the basis of tax collection from the origin state to the destination state, most producing states anticipate a sharp drop in their revenue collection. Therefore, states want high revenue-generating sources such as petroleum and alcohol to be kept outside the ambit of GST. State governments also want some guarantee from the centre for potential revenue loss in the initial years of GST implementation. After much debate, the government addressed a majority of these concerns and agreed to keep alcohol outside GST. The centre also agreed to provide 100% compensation to states for the revenue loss incurred, during the first five years of GST implementation.
Also the demand of an independent dispute resolution mechanism is becoming a hurdle. However, this demand of the Congress Party is somewhat adressed by proposing GST council. But the political agendas are also playing a role here.
7. The parliament ordinarily meets in three sessions in a year. These are the Budget Session (Febuary-May) , Monsoon session (July-August) and Winter session(Nov-December). The sessions of Parliament are convened at the discretion of the President. However, there should not be a gap of more than six months between two sessions. The President has the power to summon or prorogue either or both Houses of Parliament. The power of adjournment belongs to the respective presiding officers. Adjournment of a house does not terminate the session of the house. It merely postpones the proceedings of the house to a future date. But prorogation brings an end to a session of the house.
8. Already answered by Sidd's blog.
9. With increase in inflation, the value of currency unit decreases remarkably which implies less goods or services can be purchased with specific amount of money. Some of the problems which can be caused by inflation are:
(i) Commodity wholesaler dealers may try and hoard essential commodities like food grains on hopes of reaping profits when prices increase further on dwindling supplies.
(ii) Fixed income groups will be hit the hardest because their salaries will not be revised to include the cost of living even as prices of items increase.
(iii) Household as well as national savings drop because there is less money to save now as people use a greater part of their disposable income to pay for daily-use commodities.
10. The authority mandated to control inflation is the Central Bank of the Country, i.e. Reserve Bank of India, through its monetary ploicy.
Good answers Anushree...keep it up
ReplyDeleteGood answers Anushree...keep it up
ReplyDelete