GST

Moving inch by inch towards GST

The 9th GST council meeting between the centre and the states on January 16 passed off with a broad consensus on several fronts. The roll out of GST would begin by July 1. The centre conceded in leaving 90 per cent dealers in under Rs 1.5 crore annual turnover category within the State government purview.

 Another contentious area of levying tax on economic activity within 12 nautical miles of territorial waters was given to states though such rights vest with the centre.  The initial roll out of GST by April 1 may not happen now and has been deferred to July 1, 2016. Nevertheless, the movement towards a new GST regime is happening inch-by-inch.

 In the next council meeting scheduled on February 18, the officials would sit together to categorize goods under the slabs of 6 per cent, 12 per cent, 18 per cent and 28 per cent. Finance ministers of different states have been making efforts to see that there would be no tax on agriculture products and minimum possible tax on goods used by the common man.

On the issue of differences between states over GST, the centre would intervene and resolve.

 Overall there has been a consensus among all the states barring West Bengal which insists a 100 per cent control over the traders with a turnover below Rs 1.5 crore.

The power to levy and collect Integrated-GST, a tax on inter-state movement of goods and services, would lie with centre but by special provisions, states will also be cross-empowered.  While there are issues such as dual control over assesses, the fact that with each council meeting some headway is being made augurs well for GST.

The coming days are exciting as several questions on sharing of administration, how is it going to be for large tax players, whether it would be on the basis of revenue or type of supply is to be seen.

The publication of GST laws would be keenly observed as all stake holders prepare for what can be termed as a new regime. Watch this space for more on GST.

GST

GST just needs a push and a shove

The Goods and Service Tax (GST) can still be rolled out from April 1, 2016

It goes without saying that the GST is a causality of demonetisation and the fear of it getting postponed from the planned roll out from April 1 seems likely. But then political will and smart moves could well see the game-changing reform that it has come to be known become a reality. A consensus on key issues such as rates and jurisdiction must be reached before the budget session that starts from January 31, notwithstanding the opposition moves. This consensus is crucial for the roll out. Technically, the new direct tax regime has to be rolled out by September 16 as the one-year time given in the gazette notification on amending the constitution expires. The challenge that the Finance Minister Arun Jaitley faces is to wade through the different forces that wish to scuttle GST and postpone it further.

With five assembly elections round the corner, the push for GST must happen sooner than later as a lot of dust would rise after the elections. What the GST needs is a push and a shove. Once the elections are over, the political firmament would have taken a different hue and the possibilities of pushing GST under the carpet seem likely.

Reaching out to states by the centre to explain how GST is beneficial to them is an exercise that the Finance Ministry could well do as it is the states that are going to benefit. The guarantee to states that they would be compensated for losses they incur would do a great deal of good for the roll out of GST.

The Bharatiya Janata Party’s efforts in the last 18 months to amend and usher in GST is laudable but then with the mammoth changes that have taken place in the last three months should not belittle the efforts towards GST and the leaders need to gain traction and usher in an early GST that will pave the way for a cashless economy.

A crucial component for the realisation of GST roll out in April depends on the budget. If there are no changes in the rates of excise duty and services tax on products and services, it would make it easy for the easy implementation of GST. All the hard work of the last one and a half years to bring the GST to the brink of implementation cannot and should not be scuttled. What it needs is just a push and a shove.

Do Mumbai and Delhi represent India?

The recently released World Bank report placed India at 130 in the 2017 ranking of the Doing Business Survey on the basis of a survey from just two cities; Mumbai and Delhi. For a country as diverse as India which is growing and making its presence felt in the comity of nations, by taking just take two cities into consideration does injustice to a nation.

Now these two cities have done badly in the state ranking conducted by the Department of Industrial Policy and Promotion (DIPP) and World Bank. What is ironical is even this survey was done in conjunction with the World Bank.

img_9432Telangana and Andhra Pradesh jointly topped the ‘Ease of doing business reforms ranking 2016-17 relegating Gujarat to the third spot. Gujarat was the top ranker the previous year.

The question is how can the World Bank decide to place India as low as 130 by taking Delhi and Mumbai and ignoring several states in the country that are upping the ante in welcoming investment and implementing the single window system with gusto.

Indian states are now making sincere attempts to woo investors and are serious. Sample this: In the previous year if seven states implemented more than 50 % of the reforms proposed, this year 17 implemented more than 50% of the 340 reforms listed by DIPP. Does this in itself not warranty a better ranking?

img_9431The pace at which states are implementing reforms can be gauged by the fact that last year not a single state implemented more than 75% of reforms but this year 16 states have done so.

The ranking has been done keeping in mind parameters such as single-window systems, tax reforms, construction permits, environment and labour reforms, inspection reforms, commercial disputes and paper-less courts.

In the DIPP’s state ranking, Maharashtra and Delhi have fared poorly, the former fell by two spots to 10th rank and the latter by four places to 19th rank. There is all the more reason for the World Bank to seriously take not of this anomaly.

The national implementation average stands at 48.93% several notches higher than last year’s average of 32% according to DIPP statement. There is a serious methodology issue and the World Bank needs to immediately sort this out.

In the past any tourist visiting India would make a trip to Delhi, Agra and Jaipur and return back. India has much more, likewise, though Delhi and Mumbai are hot spots for business, but exciting developments are happening in the length and breadth of the country and limiting a nation’s progress by just viewing two cities is sheer injustice to say the least. Is the World Bank listening?

Should NRIs be gung ho about a clutter-free tax highway?

The winds of change are sweeping India as far as the Goods and Service Tax (GST) is concerned as multiple level taxes would be subsumed under a simple one tax structure. Should the Non-Resident Indians (NRIs) be jumping with joy? Not yet. 23 states in India ratified the GST bill but it would take a while before the system is in place. However, there is something not just for NRIs but everyone in India too to cheer about.

Firstly, GST in its new avatar is expected to drive demand and reduce cost by 10 % and once implemented the unorganized sector would come under a uniformed tax base. For NRIs, there will be less tax harassment and easier compliance for NRI businesses. It will free manufacturers from the burden of multi-level taxes as the tax would be levied only at the destination.

To explain in a simplistic way: Unlike in the past, all taxes would be collected at the point of consumption which would include both central as well as state government taxes. What it essentially means is that a consumer would not be paying tax on tax which was the case before.

For NRIs who export goods from India, stand at an advantage as they would no longer have to flex muscles at multiple levels. The advantage of a single market reduces cost and time, reduces paper work and according to estimates over a period of time, the impact would be such that it would add 2 to 2.5 % to GDP and increase exports to the extent of 10 to 14 %.

The impact on companies is direct as lowers tax burden and improves profit margin for some. There would be no distinction between product and service for tax, a uniform tax across the nation would ease of doing business and smooth movement of products across states is being seen as a boon.

Lower transit time would result in higher truck utilization and a seamless inter-state flow of goods is expected to give a fillip to the logistics sector.

BOX

The road to GST Bill

➤ It all started during Vajpayee’s regime in 2000 and paved the way for serious discussions.

➤ By 2004, the Kelkar task Force suggested for a comprehensive GST.

➤ In 2007, an empowered committee of state finance ministers started working on preparing a roadmap and in the same year in the month of November a report was submitted.

➤ In 2008, the final report was submitted.

➤ In 2009, the first discussion paper was released by the Empowered Committee.

➤ In 2010, the then Finance minister mentioned about GST.

➤ 2011 was a landmark year as 115th amendment bill was introduced in the Lok Sabha for levy of GST on all goods or services except for specified goods.

➤ In 2013, the Empowered Committee rejected the government’s proposal to include petroleum products.

➤ In 2014, 122 amendment bill was passed in Lok Sabha for levy of GST which enabled the introduction of GST by April 2016.

➤ On August 3, 2016, 23 states in the country ratified the GST bill.

Desi tadka for US election

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Even as the Presidential free-for-all ensues and the debate on immigrants continues, there is no stopping Indian-Americans to play an important role in what is being dubbed as America’s most significant election.

The sheer number of Indian-Americans running for political and public offices is a testimony to the ever growing desi influence and is bound to cast an impact on the elections. From Kamala Devi Harris, Ro Khanna, Raja Krishnamoorthi, Sudhan Thomas, Susmita Nayak, Peter Jacob, Pramila Jayapal, Abhay Patel, Ami Bera, and others, the desi takda as it were is sure to add zip to the elections.

The issuance of Diwali stamp by the US Postal Services recently is being viewed by Indian-Americans as an affirmation of the key role played by them in the US. This also has come about with the relentless efforts over the years by the Indian community. Many feel it has come at a right time.

The issues that Indian-Americans are raising range from racial justice, tax and regulatory policies, social security, medicare making higher education affordable and strengthening the middle-class.

All eyes are on Kamala Devi Harris, attorney general of California and there is a strong possibility of her becoming the first Indian-American US Senator. Harris and Loretta Sanchez, democrats, defeated 32 candidates to advance to the general election.  Then there is Pramila Jayapal, a candidate for the US Congress. If elected, she would be the first Indian-American woman to serve in the US Congress.

Apart from high-profile woman candidates who are making their presence felt in the high volatile campaign, there are quite a few Indian-American men who are punching their weight. Ro Khanna, the Democratic candidate for Congress is hoping to defeat incumbent Mike Honda in California’s 17th Congressional district. Republican Abhay Patel, a businessman from Louisiana, is running for US Senate. Peter Jacob, an activist who recently faced racist attacks is undaunted and is running for US Congress from New Jersey’s District 7 and is crossing against Republican incumbent Leonard Lance.

Indian-Americans have always been punching above their weight and contributing to the social, economic and political fabric of America. In recent years, their voice has become stronger, louder (The grand celebrations of festivals and marches on the streets of New York) and vibrant.

Whether one likes it or not, Indian-Americans will only be increasing their footprint on the American political firmament, with a desi tadka of course. Who does not like a little colour!

An Innovation Capital in the Making

NIKHIL AGARWALCEO, Innovation Society ITE&C Department
NIKHIL AGARWAL
CEO, Innovation Society
ITE&C Department

Andhra Pradesh is leaving no stone unturned to establish itself as the innovation capital of India, and its Innovation and Startup Policy has been designed accordingly, tells Nikhil Agarwal, CEO, Innovation Society, ITE&C Department, to Sudheer Goutham of Elets News Network (ENN)

Can you give an outline of the Innovation and Startup Policy of Andhra Pradesh on which you want to make it big?

In order to encourage innovation, the AP Government has endorsed an Innovation and Startup Policy 2014-2020 that supports startups with innovation funds of Rs. 100 crore. The Government is targeting to incubate 500 startups by the end of December 2015, and 5,000 by 2020. The Government will reimburse to the incubators or the investors 15 per cent of the seed capital infused into a startup based out of the State. The idea is to create an ecosystem to produce an entrepreneur in every family and at least one homegrown billion-dollar technology startup.

Which are the specific areas that the State Government has focused in the policy?

We have identified five key areas, including shared infrastructure, accelerators/incubators, human capital, funding and good governance, which would support the State as part of its policy for innovation. These areas cover IT, electronics and all other sectors. At present, the Government has made about one million sqft of incubation infrastructure available in Vizag, Kakinada, Tirupati and Anantapur. It is creating another 3,00,000 sqft of additional space in the vicinity of the Vizag Startup Village. The physical infrastructures are being developed through the public-private-partnership (PPP) mode. Also, the new incubation infrastructure development fund will be set up under the innovation mission as a revolving fund.

innovation

‘Innovation capital’ means a huge talent pool. How does the Government plan to attract talent to the State?

Even if the talent and innovators are from outside Andhra Pradesh and are interested in moving into the State, they will be supported. Besides, huge talent, innovators and entrepreneurs will be from within the State. In the Government’s plan, students and universities in the State figure high. In the process, the Government has called upon the universities to change the curriculum in tune with the emerging technologies and requirements of the industry. The universities have also been asked to give merit to students who have successfully completed notified online courses as part of the State Government’s plan to boost human capital. Further, to encourage technopreneurs, the universities would be introducing the concept of Student-Entrepreneurs in Residence, wherein outstanding students, who wish to pursue entrepreneurship, can take break of one year after the first year to pursue entrepreneurship full time. This period, popularly known as gap-period, may be extended to two years, and these two years will not be counted in the time taken for completing graduation.

How are the universities in the State complementing the Innovation & Startup Policy?

All the universities in State may give five per cent grace marks and 20 per cent attendance every semester for student startup teams, which have at least one woman as a co-founder. Students’ startups from the very first year of college may be allowed to convert their projects as final-year project. These proposals may be implemented by the universities with immediate effect.

How will be the projects and startups be financially supported?

Besides the initial innovation fund of Rs. 100 crore, an amount of Rs. 1,000 crore will be mobilised as venture capital and that will offer shared infrastructure, accelerators/incubators, human capital and funding for startups. The VC Fund, however, will invest in startups directly and will be professionally managed like a PE/Venture Fund.

Why India needs to look beyond frugal innovation

While frugal innovation has put India on the world map, the flip side India as a nation has come to be known more for its spartan innovations notwithstanding the Indian space programme. There is nothing wrong in being frugal especially for a country as large as India with its myriad problems but if she has to be known as a leader in the comity of nations, it is time to look beyond.

The recent Global Innovation Index 2016 (GII) report puts India at 66th position and placed China among the top 25 countries. The need of the hour is to invest in innovation and look at it not just as another obligation among the many schemes but as a long-term economic growth plan. India’s spending on science is not relative to its GDP. It spends slightly less than 0.9 per cent of its GDP on R&D. Francis Curry, director general, World Intellectual Property Organization (WIPO) says, “Investing in innovation is critical to raising long-term economic growth.” The sooner India realizes this the better it would be.

Innovation requires continuous investment. GII data indicates that global R&D grew by only 4 % in 2014. Experts often ask why India is not coming up with path breaking research and the answer to a great extent lies in the budget allocation for R&D and to a lesser extent the education system which is predominantly rote learning.

The image of India as nation that excels in jugaad (of overcoming constraints and finding solutions, of course by using minimum resources) has to be broken. Every now and then one hears of ordinary people coming out with extraordinary solutions such as a dhaba owner using a washing machine to churn out lassi, connecting a diesel engine to a cart and a barber using a vaccum cleaner to suck up fallen strands of hair after a haircut.

India is a growing economic power and apart from frugal innovation, solid path breaking innovation backed by state-of-the-art technology is what would propel it.

This piece is not against frugal innovation, frugal innovations have an overpowering and explicit social mission and they will keep happening as long as we have inventive, enthusiastic individuals. Being thrifty is in our DNA and people would anyway come up with innovations that make a difference.

Undermining frugal innovation is not the purpose and one cannot forget the efforts of Dr Devi Shetty in delivering affordable heart surgery, the Jaipur foot that has given a new lease of life for millions since the 60s, Aravind Eye Care system that performs over 3 lakh operations at almost zero cost and India’s space programme are testimony to frugal innovation but the time has come for India to take the leap forward and invest heavily in R&D.

The Indian business model is largely based on reengineered imitation. This has to change. By no means are we equating frugal innovation with the creation of cheap, low-tech products but what we advocate is the need to take the next leap forward and ride on the new wave of innovation. That can happen only when we increase our spend on R&D multiple times.

Indian guns will pop, after all

All through India’s independent history, the country stood by its policy of strategic restraint and Pakistan always thought that India would only continue parading its peace narrative, make diplomatic noises but its guns will not pop. That myth was shattered in the last month as India in one stroke, abandoned its self-proclaimed policy of ‘strategic restraint’ and went in for a strategic strike on terrorists preparing to infiltrate from Pakistan Occupied Kashmir.

It is a paradigm shift in India’s foreign policy and the government now means business. The message is loud and clear to Pakistan, the terrorists and its masters that India will no longer tolerate. The proverbial ‘dove’ that is so much associated with India, henceforth could well be replaced with the gun.

Pakistan is well aware of India’s superiority in conventional warfare has used the nuclear card all these years. With the Indian think tank now deciding ‘enough is enough’ knowing well of Pakistan’s nuclear threshold and also believes that the powers at Islamabad may be adventurist but definitely not suicidal.

Incidentally, countries across the world too have started realizing Pakistan’s folly. The changed geopolitical scenario too is working for India’s advantage. The United States by ending its combat mission in Afghanistan is no longer as keen in shielding Pakistan.

The timing of India’s surgical strike, the call for boycott of the November 20 SAARC summit in Islamabad and Bangladesh, Afghanistan and Bhutan joining hands could not have come at a better time, resulting in the whole world turning its attention to Pakistan’s misdemeanor.

What is even more relevant is the fact that these countries cited Pakistan’s policies of aiding and abetting terrorists as the reason for them boycotting the summit. Coupled with the surgical strike, the Prime Minister Modi is also considering to review the Indus Water Treaty and Pakistan’s most favoured nation status.  Pakistan for once has been caught on the wrong foot and India has surprised everyone by talking tough.

A country that always lauded ‘restraint’ as a policy is now no longer in the mood to carry the ‘dove’ card. Growing economically and making a place for itself in the new global order, countries across the world too are toeing the Indian line.

With all opposition parties supporting the government and neighbouring countries joining in, India stands at an advantageous position hitherto never seen in the recent past. Isolating Pakistan and hurting it where it hurts most and that is its economy would many experts feel the way forward.

While India stood in letter and spirit of the Shimla Agreement and always maintained restraint even after the Parliament attack, Mumbai bomb blast and attack on J&K assembly in Srinagar. The peace narrative will continue but the message to Pakistan is clear that India will no longer toe the ‘restraint’ line. The Uri attack was probably the last straw for India to decide it was time the guns begin to pop.