GOODS AND SERVICE TAX

 

GOODS AND SERVICE TAX

 

What is GST?

Goods and service tax Is an indirect and value-added tax levied by the government on goods and services sold for domestic consumption.  It is the tax that customers bear when they buy goods or services, for example, food, clothes, transportation, electrical things, daily consumer goods, etc. This tax has replaced multiple taxes levied by the central and state govt. on the goods and services.

When GST was introduced?

If we go into deep then we will find that the concept of GST was first proposed under the Atal Bihari Vajpayee government. And after that with long nationwide debate and some with some good numbers of revisions and also with some negotiations this tax was finally launched into operation on the midnight of June 30, 2017 in the central hall of parliament in Delhi. President Pranab Mukherjee, prime minister Narendra Modi, Finance minister Arun Jaitley recited various provisions of tax in their speeches. Therefore, this tax came into effect on 1 July 2017.

What are the key features of GST? 

• Goods and service tax has replaced several taxes like, excise duty, services tax, octroi, additional custom duty, surcharges etc.  

• The rates of GST get mutually decided by the central and state government. The rates are notified on the recommendation of GST Council.
• Other and different levies that were applicable on inter-state transportation of goods and services were also changed by the launch of the GST regime.
• GST has levied different rates for different goods and services. Rates are as follows: 0%, 5%,12%,18%,28%.
• Also, GST has special rates for some special goods, 0.25% on rough precious and semi-precious stone and 3% on gold. Also, it applies a cess of 15% or other rates on top of 28% GST for the products like aerated drinks, luxury cars and tobacco products.

 

What are the different types of GST?

There are 4 type GST. As follows-

• Central GST- The GST paid of each transaction is divided in two equal parts. The part of the Center is known as CGST.
• State GST- The GST art of State is SGST, when the transaction takes place within the state.
• Union Territory GST- when the transaction takes place in a union territory with the presence of a legislator, the part of GST that union territory gets is called UGST.
• Integrated GST- when transaction takes place between a state/UTs or in between UTs/state and any foreign territory, IGST is levied without any bisection on the applicable GST rate.

 

What are the Activities covered under GST?

• Whatever transaction takes place within a single state, it will be imposed with CGST (central GST) by the central government and SGST (State GST) by the state government. Or if any inter-state transaction takes place then IGST(Integrated GST) gets imposed by the central government.
• No transaction is spared in GST, this tax is levied on all kinds of transactions whether it is a purchase, transfer, import/export, or lease. Dual model GST has been adopted by India i.e. taxation is administered and managed by both the State and Union Government.
• GST is based on consumption, which impact or result will be seen at the final destination. The taxes are then paid to the state government where the goods and services are finally consumed and not to the government of the state where the goods have been produced.

How GST is calculated?

Let’s assume that GST is set at 10%. Now suppose that the manufacturing cost of product is 100 and assuming a GST at 20% the total amount is Rs. 110. The next step of taxation would be when the product will be sold to the consumers. If suppose the product is sold at a price of 140. The GST will charge another 10% on just the difference od Rs. 140 and Rs. 110 i.e. only 10% on Rs. 30 which is equal to Rs. 3. So, then the final price is Rs. 150+ Rs. 3. GST will be applied on every step of value creation. 

What is the need and importance of GST?

Goods and service tax is an instrument and a biggest tax reform taken place in 2017, it is needed in respect to below mentioned points 

• National Council of Applied Economic Research, has mentioned in its report that GST is expected to boost economic growth of the country by 0.9% and 1.7%.
• Businesses registered under GST will be able to claim tax credit to the value of GST they paid on their commercial activity.
•  GST is said to be a right step to move ahead with ‘Make in India’ vision.
• With the help of GST, the multi-tier tax system has been eliminated from the country and it has provided some kind of relaxation to the economy.
• GST is a destination-based tax, so the tax structure is much easier to perceive.
• In GST the taxable goods and services are not different from one another and taxed at a solo rate till it reaches the consumer.
• GST has eliminated complexities in tax structure and hence inhibit the loss of 50%.
• In GST only a single authority will have the administrative responsibility to impose tax on goods and services.
• GST implementation has assured a single taxation system for the whole nation for the goods and services and making it much convenient and more effective.

What items are not covered under GST?

 

There are few items or products, which are not under the girth of GST till after its launch.

• Liquors and alcohol.
• Petroleum products: GST is not imposed on five petroleum products- crude oil, diesel, petrol, natural gas and ATF.
• Tobacco.

 

What are the challenges in GST?

 

• The SCGT and CGST input credit cannot be utilized.
• The states involved in manufacturing lose revenue on a bigger scale.
• The reduction in fiscal autonomy of the respective state.
• Banking and insurance companies concern over the various and multiple registration under GST.
• GST results in the imposition of additional cess.

 

Conclusion

  

However, GST is a positive step towards shifting the Indian economy from informal to formal to informal economy. It is important to use the experiences of global economies that have implemented GST in front of us to overcome imminent challenges.

 

 

 

 

 

 

Make In India

 Make In India

 

What is Make In India?

The Make In India campaign was launched by Prime Minister Narendra Modi with a vision and mission to achieve high growth, attract businesses from around the world to invest and manufacture in India and make India a global hub for the manufacturing of goods ranging from cars to software, satellites to submarines, paper to power and a lot more.

 

Tapping the Indian Potential

The aim of this campaign was to increase the contribution of manufacturing sector from the then 16% of GDP to 25%.

India achieved the milestone of being one of the fastest growing economies of the world right from the launch of the campaign as it has a favourable demographic dividend which will only continue to grow in the next few decades and because of affordability of manpower.

India houses strong, responsible and innovative businesses operating with various levels of credibility and professionalism. They have contributed a lot to the development of the economy.

India also has a strong consumer market which is expected to expand in the coming years. The strong technical and engineering capabilities backed by top-notch institutes will further boost the possibility of success of this campaign.

 

Manufacturing Sector: India Vs China

India is also expected to give a tough fight to China, which has a more developed and widespread manufacturing sector.

The increasing labour cost of China is increasing, and the subsequent increase in cost of goods produced there will open the way for India to enhance its manufacturing capabilities with its low-cost labour and cheap goods. China may even lose its dominant position as the 'Factory of the world' in the near future because of the diluting quality of its goods.

Former RBI Governor Raghuram Rajan made a statement that the world cannot accommodate two Chinas but it also cannot stop India from becoming a successful exporter.

Although India exports less than 2% of the world’s merchandise, far below than China’s 12%, it has a considerable advantage owing to its massive labour force and lower wages. It is estimated that India, in the next 4 years, can snag 2% of the exports from China in the global trade. That alone will be a huge success of the Make In India campaign.

Till 1978, China had been a closed-door economy and way behind India but it marched on the path of steep economic growth after opening its doors to the global market.

Similarly, the Indian Economy had been on the path of consistent growth since liberalisation but it couldn’t take full advantage of globalisation because of its weak manufacturing sector and majorly exporting raw materials instead of finished goods.

Although it make take time to surpass China’s exports and break its hold on the world market, Make In India, by attracting foreign investors to set up units in the country, manufacture here and then export to the rest of the world will speed up the process considerably from before.

 

Make In India depends on Ease of Business

With abundance of natural resources, India is the 3^rd largest growing economy of the world.

The export-led manufacturing sector will benefit from the campaign and create more job opportunities for both the skilled and the unskilled.

Concerns remain in the form of poor infrastructure, roads and electricity which could deter foreign investors. India should focus more on development of energy resources and infrastructure. Investment should be focused in these sectors to enhance the ease of doing business for global and national firms. The necessity is also to do away with unnecessary red-tapism, operational glitches and bureaucracy and to promote a simplified, flexible procedure.

If continued on the right track with a transparent system, Make In India has a sound objective and a great possibility of reaping economic benefits.

Rising Population of India: Asset or Liability?

 

Rising Population of India: Asset or Liability?

Rising Population of India: Asset or Liability?

The ever-growing population of India has been a grave cause of great concern in the past few years.

 With a population of 1.2 billion people, India boasts of having a formidable 17% of the world population. This makes India the second most populated country after the People’s republic of China.

Some people estimate that if the population of the country continues to grow at the same pace, India might surpass the population of China in a very short time.

 

Population of India: Some key figures and facts

In the beginning of the 20^th century, India had a population of just 23 crores. The post-independence census, done 50 years later, didn’t bear any surprising increase. The population in 1951 was just 36 crores.

The major change came after independence when India’s population shot up by more than 3 times in the 50 years since, coming up to about 1.02 billion in 2001.

The population increase hasn’t, in any part, been due to annexation of any nearby territories. On the contrary, after the partition in 1947 and the Indo-China war in 1962, India lost a substantial part of its territory.

Logically, the growing population ate up whatever meagre economic growth happened and as a result, any tangible and long-lasting progress was slow.

 

Any discussion in India revolving around crucial issues of environment, health, employment and so on is futile and incomplete if the issue of rising population isn’t identified at the crux of it.

While the population continued to grow indiscriminately, the contribution of unskilled population remained more than the skilled population for a major portion of the developmental years of the nation and this position has turned around only in the past couple of decades.  

Presently, the skilled workforce in India is only about 2% of the total population, showing that the proportion of unskilled population has increased and grown at a faster pace than the skilled population.

At present, there is a need for about 150 million skilled people in the non-farm sectors to catch up with the developed nations. Accordingly, if the unskilled population is trained and utilized in a proper manner, it could prove to be a valuable asset rather than a liability.

 

Why is the growing population an asset?

India has a favourable demographic dividend, with a healthy number of young citizens, which needs to be exploited.

As per the findings of the ‘State of the Urban Youth, India 2012: Employment, Livelihoods, Skills’, a report published by the IRIS Knowledge Foundation in collaboration with UN-HABITAT, every third person in an Indian city today is a youth, and in about seven years, the median individual age in India will be 29 years, making India a very young country indeed.

The rapidly growing youth segment of India is expected to continue growing for the next 30 years. This is the bright side of the troubles that the rising population poses. This demographic dividend has the potential to inject new dynamism and vitality into the country’s flagging economy, provided the state acts quickly on vital issues of health, education and employment.

With more than 50% of the population being under 25, there is an extreme potential to tap socio-economic growth, taking advantage of young, innovative minds.

Blessed with the largest young manpower, India has the resources and the human skill set to turn around the face of its economy.

The huge population not only represents a skilled and unskilled pool of human resources from the producer’s point of view, but also represents an active, ever-growing consumer market.

In the past decade or so, India has emerged as a major back-office to the world’s major global firms, serving as an attractive outsourcing destination with its cheap, education and young English-speaking workforce.

India produces around 2.5 million engineering, life sciences and IT graduates per year, besides about 650,000 post-graduates in the fields of science and IT. The IT sector employs about 850,000 graduates and professionals while the pharmaceutical and biotechnology sectors are absorbing a formidable number of graduates too.

About 402 million Indians are aged between 15 and 59, forming a part of the working age group, and this number was expected to grow to 820 million by last year.

 

What is holding progress back?

The other side of the coin is visible in both rural and urban areas, when we look at the lack of employment opportunities in spite of an increase in the workforce willing to work. The population will grow to be asset when the country manages to feed all the people, provide them with clothing and shelter, good education, health care and productive jobs.

Hurdles in the form of poverty, illiteracy and corruption further add to the obstacles to economic growth.

Proper and responsible implementation of government schemes like National Rural Employment Guarantee Act in the rural areas at a massive scale; literacy campaigns, updating of the curriculum at rural schools; and building up of health infrastructure.

The public schemes targeting the poor need to be implemented honestly to bring this marginalised community into the mainstream and expose them to the benefits of digitization and globalisation. Job schemes in regions of low resource richness could also reduce the gap in progress.

 

The silver lining

No capital in the world can substitute the human capital, and as a country lucky enough to have a large base of talented individuals, India has a lot of opportunity and potential waiting to be utilized to the fullest.

A huge population means a huge potential demand for any product and this is indicative of good economic growth. The need is to provide the right share of developmental opportunities in a corruption free environment.

When every individual is free to choose the profession of their liking, without being bound by their economic or social circumstances, they will be able to contribute to the progress of this nation.

Vast resources of the country mixed with a talented, hard-working population is an undeniably good recipe for growth and prosperity.

 

FDI in multi brand retail: Boon or Bane?

 

FDI in multi brand retail: Boon or Bane?

 

What is FDI?

Before we can debate on the pros and cons of FDI in multi-brand retail sector, it is important to understand a few key things about FDI and Retail in India.

Foreign Direct Investment refers to capital inflows from abroad, investment of which enhances the production capacity of the economy.

However, FDI in retail is slightly different from the investment in corporate, manufacturing, or infrastructural sectors. Retail can be single or multi-brand and may be described as a sale to the ultimate consumer at a margin of profit. 

 

Single-brand retailing refers to businesses selling their goods to individual customers under a single brand umbrella. Multi-brand retailing, on the other hand, is selling of goods to individual customers by businesses under several brand names.

 

FDI in single brand retailing in India has been allowed since 2006, but FDI in multi brand retailing has been permitted recently. This means that a retail store with a Foreign Direct Investment can sell multiple brands under one roof. Hence, it serves as the link between the producer or manufacturer and the individual consumer. As a signatory to the World Trade Organization’s General Agreement on Trade & Services which included wholesale and retail services, India had to open up its retail trade sector to foreign investment.

 

How will FDI benefit the nation?

The retail sector of India is highly fragmented, characterized by 97% of its business being run by the unorganized retailers while the organized retail sector is still in its infantile stages.

It is expected that with the infusion of Foreign Direct Investment, the retail sector will become more organized.

 

FDI in agricultural sector

Investment in food-based retailing especially will ensure adequate flow of capital into the country and promote its productive uses.

Additionally, this investment will promote the welfare of farmers by contributing to agricultural growth and thereby, increase their income levels.

 

Intermediaries, known by different names in different parts of the country, flout the most basic of business ethics. Prices lack transparency, farmers are not paid their due share, and even regulated markets have come to take on a monopolistic character. 

Farmers in countries with a greater share of organized retail are easily able to realize 2/3^rd of the price paid by the final consumers. However, in India the situation is such that farmers consider themselves lucky if they manage to earn even 1/3^rd of the price in the final market. We can expect FDI to assist in reducing the dominance of intermediaries on the value chain of the agricultural sector.

 

How does FDI serve the consumers?

FDI in retail will ultimately make the consumers happy. In the absence of intermediaries, the consumers will have to pay, for the same product, a lesser price than before.

Also, in the unorganized sector the consumer has to argue or fight for their consumer rights and most of the times, they have to accept defeat. For example, it is very difficult for them to return or exchange a faulty product. This process will become more standardized, though, with the advent of FDI.

 

FDI will also serve as an antidote to inflation. The producer will be able to get direct payment from the retailer and the same will be higher than what they are used to getting, due to the absence of intermediaries.

In accordance to the provisions made, any company which opts to go for 51% partnership in retail shall have to tie up with a local partner. This will usher in an era of low-priced quality products. It will also improve the income levels for all concerned as a direct consequence of the partnership, investment and increased sales.

FDI will give rise to a wave of investment in the logistics of the retail chain leading to efficient market mechanisms.

 

FDI and Horticulture

In spite of being the biggest producer of fruits and vegetables (more than 180 million MT), India doesn’t have a strong integrated cold-chain infrastructure with a meagre 5400 cold storages which add up to a total capacity of about 24 million MT.

The irony is that about 80% of the capacity is used only for preservation of potatoes. The perishable horticultural commodities find it difficult to reach distant markets, including the overseas market. FDI will become a catalyst in avoiding any distress sales of these products, erosion of quality and wastage of the produce.

 

FDI in retail sector will give way to healthy competition. Some may consider it to be a negative, but rising competition is a boon for the Indian market, paving the way for superior quality products, innovation and high consumer expectations.

 

Is FDI to be feared?

The fears that entry of FDI in multi-brand retail may cause unemployment as a consequence of firms importing materials from the global market instead of buying it from domestic suppliers  are unfounded as it has been seen that the entry of big corporates like Reliance and Tata have substantially improved the living standards of farmers and villages supplying the raw materials.

 

The present Public Distribution System (PDS) will also be strengthened owing to better products and storage facility.

 

In short, allowing FDI in multi-brand retail would bring about supply chain management, increase investment in technology, lead to manpower and skill development, upgradation in agriculture sector, and benefit the nation as a whole through increased GDP and tax income. Greater production will lead to greater employment and bring about a positive change and prosperity to the retail industry, and by extension to all the stakeholders in this sector.

 

Eradicating Corruption: A work in progress

 

Eradicating Corruption: A work in progress

 

 

What is corruption?
Corruption is a self-indulgent act meant for one’s own convenience. It is not just about giving or accepting bribes. Rather, corruption serves as an indicator of the whole society’s value system, a deeply flawed one in fact.
 

Corruption: A mark of an ignorant society

With the second-largest population of 1.2 billion people in the world, widespread illiteracy and poor economic infrastructure; no wonder corruption has become such a deeply embedded truth in India.

The foundation of corruption is built on people’s need for convenience and ease in day-to-day life. The political elite too are interest-oriented rather than nation-oriented.

Corruption festers in a society which suffers from a lack of moral values and sense of ideals. 

Practising the attitude of an ignorant person makes the society tolerant towards corruption bit by bit, over time.

 

What does this lead to for those who have nothing to offer?

A poor man doesn't get his share of food grains and sugar from Public Distribution System (PDS) as it goes to the open market. A poor man cannot have himself or his family treated in a government hospital due to corruption in maintenance of various departments. Medicines meant for the hospital find their way to open market too. The police does not lodge an FIR at the behest of a poor and helpless person and even if lodged, no action is taken.

This display of power and pelf multiplies the incidence of corruption and threatens the security and well-being of the citizens.

 

Sluggish Economic growth is a direct consequence of corruption

In spite of having the potential of a rising economic superpower, India suffers from various types of corruptions that play a big role in hampering its economic growth. Many government policies haven’t reached their full potential because they have, in one or the other way, been stricken by corruption involving the concerned officials. Corruption in the government has spread out to every public office like the branches of a tree. The roots of this tree of corruption are watered by the greed of those meant to serve the nation and also, by the lack of basic morality on the part of the citizens.  

 

Corruption isn’t just a transaction involving money, it is a gamble on the welfare of the nation too.

It is a well-known fact that most of the public welfare schemes fail to get the desired results as corruption, starting from the highest level, trickles down until there is nothing left for the poor and needy.

The most succinct example of this tragedy is the Mid-Day meal scheme. If it had been responsibly implemented, it could have incentivised millions of poor parents to send their children to school for free food and in the process, served to increase the literacy level of the rural population. But due to rampant corruption in the Public Distribution System, food meant for the poor ended up in the black market. Likewise, many schemes which were started with noble intentions have gone up in flames without bringing the desired changes and while the causes might be many, corruption remains one of the most crippling of them.

This lackadaisical attitude on the part of the government shows that political parties consider welfare a hot topic, one that is to be brought up only during the elections.

Removal of poverty and improving the living standards of all the people in the nation is the most basic duty of the government. It is a duty which the government has failed to perform since independence. Corrupt practises of politicians, bureaucrats and the common citizen has brought shame to the country in the international community as well.

The nation has been hit hard again and again by scams like Fodder scam, Coal Scam, 2G scam, Land scam, Adarsh society building scam, Commonwealth scam, the VVIP Chopper scam and many more.

 

Corruption of the rich

Unscrupulous people find creative ways to circumvent the law and exploit loopholes to the fullest in their need of clinging onto their wealth. They set up shell companies, exploit tax havens and put their black money in foreign banks. This money has the potential to turn around the decaying economic condition of the nation, which is regularly worsened by inflation, lack of growth and infrastructural development. A number of developmental projects fail to kick-off because of lack of adequate funds while crores may be spent on lavish living, wasteful expenditure and of course, sidestepping the law.

 

A shift in perspective

In the last couple of years, India has seen the most intense public outcry against corruption in the government system and public offices.

The diverse cultures and traditions of our ancestors had a mix of morality and a sense of honour in them. People should not forget the ideals of their ancestors, nor should they ignore the vision of democracy dreamt by the founding fathers of this nation.

 

Having the will and courage to not indulge in nor tolerate corruption is the first step to a guilt-free society. In the long run, the government is a scapegoat. In reality, corruption is a result of every free citizen, be it an engineer or a civil servant, partaking in this practise for their own benefit.

Refusing to accept or give bribes, while no doubt a correct course of action, is incomplete if people continue to turn a blind eye to corrupted transactions of others.

In the government, there is a need for electoral reforms to check the funding of the political parties during elections as well as to regularly check where the funds allocated for development programs are being put to use and who is in charge of handling them.

 

Change in ruling political parties in both the central government as well as the national capital have served as an alarm bell for other political parties that have been in power for a good 70 years since Independence and have been repeatedly called out for their corrupt practises. To them, this change is a warning of the common man’s rising awareness and the shift in ideologies.

No doubt, that corruption is the root cause of various types of woes in India but a ray of hope shines when those with the will to fight with honest intentions speak out against these prevalent malpractices. Seemingly impossible, corruption can be eradicated with the collective efforts of praising honesty and punishing deceit. It is a work in progress.