The long-pending roll-out of the ambitious indirect tax regime of Goods and Services Tax (GST) has run into a new wall now — demonetisation. Though it is not yet clear as to how far it will impact the ongoing discussion between the Centre and the states in the GST Council, there are clear hints of opposition from certain states on this issue.
During the meeting of the fifth GST Council on Saturday, some state finance ministers raised the demonetisation issue and the fiscal situation arising due to it in the states. “State finance ministers wanted to have a discussion on demonetisation and fiscal situation in the states, but it doesn’t fall under the jurisdiction of GST Council,” said Finance Minister Arun Jaitley after the meeting.
Aiming to take the main opposition space, Trinamool Congress chief and West Bengal Chief Minister Mamata Banerjee is leading the charge by raking the issue of demonetisation, which may become a hurdle in the passage of GST. The other states sharing a similar view may join her.
After the demonetisation move, West Bengal Finance Minister Amit Mitra had said that the GST would be difficult to implement from April 2017. He had said the abrupt banning of Rs 500 and Rs 1000 notes created an economic slowdown and states were losing more money sooner than planned. His indication was a clear indication and in sync with the TMC chief that GST implementation target was untenable at this juncture and stands on a sticky wicket.
Incidentally, Mitra, former secretary general of Ficci and an economist had played an instrumental role as the chief of the Empowered Committee of State Finance Ministers on GST in drawing a consensus of the states to support GST earlier.
Mamata is hell bent on opposing the GST on the ground of demonetisation, as she had demanded revoking of currency note ban.
GST — probably the single largest tax reform in India post-economic liberalization in 1991 — is a transition from a production-based indirect taxation to a system of taxation which happens at the point of consumption and has been in the making for more than a decade and a half. Considered as a game-changer, GST will significantly restructure the power to tax between Union and State governments and also substantially expand tax-base and revenue.
Though it was first discussed during the Atal Behari Vajpayee government in 2000, the intention to implement it was announced by former FM P Chidambaram during his Budget speech in 2006.
The Congress party in-principle has supported the Bill, but has always insisted on capping the revenue-neutral rate at 18 percent.
The Centre estimates total compensation to states for losses arising out of transition to GST to the tune of Rs 50,000 crore in the first year. This will be met through a fund — Rs 26,000 crore from a corpus generated by the levy of the clean environment cess on coal and Rs 24,000 crore from cess levied on demerit goods (tobacco, pan masala etc) and luxury items (cars etc).
The cess on demerit goods is another area of concern for the states, as some of them think that they would be at the receiving end in the deal. The apprehension is that the revenue earned from the cess will go to central corpus.
Moving a step ahead from yesterday, a consensus was achieved on nine laws in the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) during the GST Council meeting on Saturday.
However, the Centre and the states couldn’t reach a consensus on the contentious issues of cross empowerment and dual control to divide the administrative, auditing and assessing powers between the two governments under the proposed nation-wide GST, as it continued to be critical.
“Cross empowerment is a critical situation and will take some more time. I want to keep my fingers crossed on whether we are close to resolution. Our effort will always be to implement GST earliest on 1 April but if not, the last date is 16 September, which is constitutional compulsion,” said Finance Minister Arun Jaitley after the GST meeting.
Kerala’s Finance Minister Thomas Isaac, who had earlier distanced himself from the Congress’s demand of 18 percent cap after the state finance ministers’ meeting with Jaitley in June and supported Centre’s GST move, today said if the government is rigid on cross empowerment issue, passage of GST would be difficult.
“There is no consensus regarding the cross empowerment model. Therefore, the GST laws could not be completed. No compensation law is taken up, but formula has been arrived at. We’ll again discuss it in the next meeting,” Isaac said after the meeting.
The next meeting of the GST Council is scheduled to be held on 11 and 12 December. Source – http://www.firstpost.com [05-12-2016]
Mamata Banerjee asks colleagues to raise objections over GST implementation
Demonetisation: Mamata Banerjee asks colleagues to raise objections over GST implementation
West Bengal Chief Minister Mamata Banerjee is on warpath with Prime Minister Narendra Modi over demonetisation and apparently, she is not missing any chance to attack him. Now, the Goods and Service Tax, due in April 2017, seems to be the latest casualty of demonetisation.
Evidently, the fifth GST council meeting held on 2-3 December remained “inconclusive” . This is for the fifth time when the all-powerful council could not reach a consensus on the “dual control” issue.
Sources in Trinamool ranks confirmed that Banerjee has instructed her colleagues in Parliament and in the GST council to raise objections over the implementation of the new tax regime saying, the country would not be able to bear two consecutive financial shocks–demonetisation and GST. Political observers feel that Banerjee is emerging as the alternative Opposition to Modi in the national political scenario.
And with that in mind, GST is set to be next battleground for the two. For Banerjee, it’s her lieutenant, Bengal finance minister Amit Mitra who seems to be taking the GST war to Delhi.
A day before the GST council meeting, Mitra hinted that meeting the deadline of April, 2017 is a near impossible situation following the demonetisation.
“The Centre should get their arithmetic correct. The investment in the country is anyway in bad shape. How the country will absorb the shock of such consecutive steps?”asked Mitra Significantly, Banerjee’s Trinamool Congress is adamant on getting dual control, only for those , whose turnover is more than Rs 1.5 crore.
Trinamool Congress always thinks for the small and medium enterprises. How they would survive, if there is a dual control? And with these issues being unresolved, here comes the demonetisation. it is double whammy,” he added. After the fifth GST council meeting, Mitra sounded even more disappointed.
“This is the fifth time , the council failed to reach a consensus on dual control. It would be discussed again in the sixth meeting scheduled on December 11. Moreover, we are now finding many issues, that were not discussed earlier, ” Mitra told ET. Source – http://economictimes.indiatimes.com [05-12-2016]
If GST not rolled out by Sept, there won’t be taxation in country
Citing constitutional compulsion, Finance Minister Arun Jaitley today sought to drive home the point that the Goods and Services Tax has to roll out before September 16 next year as the existing indirect taxes will come to an end by then and it would not be possible to run the country without revenue collection.
He made a pitch for widening the tax base, saying efforts are on to make taxation process far simpler and make rates more reasonable.
For instance, he said, the GST Council is deliberating on ways to reduce the taxation process, including assessment by tax officials.
“Today, each person gets assessed thrice, in each of the three taxations (including VAT and central excise). Now, you will only be assessed once and what one authority assesses, others will have to accept that assessment,” he said.
Terming GST as a game changer, Jaitley said: “The Constitution does not permit delay in GST implementation. The government notified GST on 16 September and the constitutional amendment itself says the current indirect tax system can continue for one year, after which the GST has to come.”
So, if as on 16 September 2017, there is no GST, then there is no taxation in the country, he reasoned.
“So, you have a constitutional compulsion to have a Goods and Services Tax in place before September 16 (2017), otherwise the country doesn’t run, and the tax is absolutely essential. Therefore, our intention is it gets implemented from April 1, 2017, that was the original intention,” he said.
Jaitley made the point that states should not oppose every reform for the sake of opposition because that makes investors wary.
“The states must welcome the decision and I can only tell you, if some states are seen as opposing every reform, then investors in the country and the ones coming from outside, must decide which are the states they want to invest in,” he cautioned.
“So, if your state is seen on the wrong side of the reform, then investors are going to be very wary of those states. Source -http://www.firstpost.com [05-12-2016]
SAP sees huge opportunity in GST, demonetisation
SAP sees huge opportunity in GST, demonetisation
German software and accounting technology firm SAP is placing its bet on two large opportunities in the country—the roll out the Goods and Services Tax (GST) and the ongoing demonetisation exercise.
According to a top company executive, GST that is likely to roll out from April 2017 will require companies to not just be tax complaint but also readjust their structure and supply chain networks.
The demonetisation, which is leading to a boom in cashless payments, represents a massive opportunity for SAP in terms of data analytics and storage for digital wallet, banks and other financial services firms. Deb Deep Sengupta, managing director for SAP Indian Subcontinent, told ET in interview that the GST roll out is irreversable, whether it happens on April 1 or a few months later, and over the next 18-24 months, the impact will be felt not just on organisations but also on the ecosystem.
“What is expected are 4 billion digital invoices a day, organisations-—large and small—will have to relook at their contracts, dealers and suppliers,” Sengupta said.
“They will have to make their system fool proof because there can’t be a margin of error. The only way you can do that is through automation and technology.”
He added that it is a great opportunity for customers to relook at their structure and redesign their supply chains, since the current supply chain has been designed according to interstate taxation etc.
Sengupta said SAP has 7,500 customers in India and all of them are GST ready. Moreover, 70 per cent of the corporate taxes are paid by its customers, he claimed. In the recent past, SAP has aggressively promoted its big data platform, SAP HANA, and its cloud offerings.
As a result, each of SAP’s customers are using some version of SAP HANA, which is fully GST ready.
“If I take the case of demonetisation, the promise of HANA is to give you real time data, at the lowest cost and be able to give the analytics immediately, so each one of these financial technology companies mobile wallets etc would need analytics, they would need a database, which is real time fast and can enable their services. That will be a huge opportunity for SAP,” said Sengupta.
On Thursday, SAP launched a technology called the SAP Digital Boardroom in India, which aims to contextualize and simplify performance reporting across areas of business on a real time basis through digital assistants such as Amazon Alexa.
It will enable an interactive board discussion and give decision makers a simplified boardroom process by allowing board members to analyse large volumes of data and identify business risks and opportunities in real time.
As far as data centres are concerned, Sengupta said the company has chosen not to set up its own data centre in India unlike technology companies such as Google and Microsoft, which have announced plans to set up centres in India. He said SAP is not an infrastructure company and wants to be platform agnostic.
It has partnered with local data centre provider called CtrlS to offer services to not just corporates but also governments.
“Our competency is to build software solutions and applications. We are working on a concept called cloud foundry where our application and software can work on any data centre be it Amazon or Google,” he said, adding that it will give its customers choice in terms of choosing their cloud service provider. Source – http://economictimes.indiatimes.com [05-12-2016]
Centre faces fresh opposition over GST
Most states agree that demonetisation has stressed their revenue and an early implementation of Goods and Services Tax (GST) will further squeeze it.
At a meeting of the GST Council on Friday, there was no consensus on the contentious issue of dual control under the proposed law, as most states said they “cannot bear double trouble” – demonetisation and GST.
The Union government has kept GST as its top priority after demonetisation. Union Finance Minister Arun Jaitley said the Constitution did not permit a delay in GST implementation beyond September 16, 2017.
“The Constitution does not permit a delay in GST implementation. The government notified GST on September 16 this year and the constitutional amendment itself says the current indirect tax system can continue for one year, after which the GST has to come,” Jaitley said at an event here.
In a veiled reference to West Bengal, Jaitley said: “If a state is seen as always being on the wrong side of every reform, then investors are going to be very wary of that state.”
He said demonetisation and GST together can be a game changer for the Indian economy.
Kerala Finance Minister Thomas Issac, however, said the impasse continued on dual control in the GST Council, but it would not boil down to voting. So far, the council has taken all decisions, including on GST rates, through consensus.
West Bengal Finance Minister Amit Mitra had recently said demonetisation posed a “double whammy” for states already confronting loss of revenue due to GST.
Jammu and Kashmir Finance Minister Haseeb Drabu said GST will be thoroughly discussed in Saturday’s meeting as it incorporates dual control. Parliament has to pass supporting GST legislation – central and integrated GST – and the compensation laws before the proposed GST rollout from April.
The Centre is contemplating introducing these legislation in the Lok Sabha as money bills to avoid the Rajya Sabha. Source -http://www.deccanherald.com [03-12-2016]