Tax reforms back on track, CST cut to 2% from June
Ending uncertainty over a major tax reform initiative, the central government on Friday notified reduction in central sales tax (CST) to 2% from June 1 as compared to the current 3%. The central government and the empowered committee of state finance ministers have further agreed that the compensation for revenue loss to the states in any year arising from the lowering of CST will be limited to the proportionate loss based on the actual collection of CST in the relevant year, a finance ministry statement said. Elimination of CST is crucial to implementation of unified goods and service tax from April 1, 2010.
It is, however, not clear if the centre and states have reached an agreement on raising the floor rate of VAT from 4% to 5% in the current fiscal, which was a part of the compensation package. The hike would impact goods like edible oils, bread, intermediate goods footwear which are now under the general rate. While both sides have agreed on reduction in CST to 2%, certain elements of the compensation package are yet to be ironed out, sources said.
CST, which was reduced from 4% to 3% on April 1, 2007, was to be slashed to 2% from April 1, 2008. The reduction could not be carried out with both the centre and the state governments failing to agree on the compensation package. With the reduction in CST rate from 3% to 2%, the states are estimated to lose Rs 12,000 crore to Rs 13,000 crore in revenues. Source: Economic Times
Assocham seeks VAT cut in entertainment & media
The Associated Chambers of Commerce and Industry (Assocham) released a study on the entertainment and media (E&M) industry, raising certain issues, which they will present to Prime Minister Manmohan Singh at a meeting in New Delhi during the the first week of June. The chamber demanded that considering the rapid growth in E&M and in order to make India a hub for E&M, this sector should be brought under the concurrent list from the state list. It has also demanded that the government should enact the Optic Disc Law for curbing piracy. Venugopal Dhoot, president of Assocham has demanded that value added tax (VAT) and service tax be removed or VAT brought down to 4% from the current 12%.
SRK seeks removal of VAT on entertainment industry
Shah Rukh Khan on Tuesday asked the Centre to remove Value Added Tax (VAT) and service tax on the entertainment industry and sought the conferment of de-facto industry status on it so that it can earn certain tax incentives. It has become necessary to bring in entertainment industry under the "concurrent list" so that it can be governed by Central rules and enjoy tax concessions announced by the latter from time to time, Khan said in a statement.
At present, the entire entertainment and film industry comes under state governments jurisdiction as a result of which, it has not been able to enjoy the already conferred dejure industry status on it. Shah Rukh Khan would release a study on the entertainment industry this evening highlighting the need for the removal of VAT and service tax. The study is done by Associated Chambers of Commerce and Industry of India (Assocham). Retaining the industry in the state government list deprives the tax concessions given by the Centre, Assocham said in its study.
The government has set up five groups on piracy, taxation and custom duties, exports of films, promotion, development and marketing for films. As per the Finance Act of 2007, the Central Excise department has issued notices for recovery of service tax from the industry in cases of renting, leasing, letting immovable properties, Assocham pointed out. As the film industry is burdened with various types of taxes and fee imposed by state governments, the Centre should exempt transactions between producers and distributors, Assocham said. - PTI
Shah Rukh Khan on Tuesday asked the Centre to remove Value Added Tax (VAT) and service tax on the entertainment industry and sought the conferment of de-facto industry status on it so that it can earn certain tax incentives.
ITC asked for removal of excise duty and VAT rate at 4 per cent
ITC, one of India's largest diversified conglomerates, said its sales may be hurt by the consumer shift towards lesser taxed and illegal products following the high taxation rates. The high taxes on tobacco and related products, as much as 30 per cent annually, are compelling people to smoke bidis, chew tobacco and zarda and push contraband trades, according to the Kolkata-based company.
The sales of illegal cigarettes doubled to 300 million sticks a month from around 150 million, ITC said. For example, non-filter cigarettes had become viable as this market was flooded with smuggled and tax evaded cigarettes. This situation could only be rectified through the moderation of taxes on tobacco, minimization of discriminatory taxes between different classes of tobacco products and a regulatory framework, the company said.
The company asked the government for an interim removal of excise duty and standardization of the VAT rate at 4 per cent for all food products to provide relief to the consumers and sustain growth in this sector. Source: Business Standard
Common tariff code for goods next fiscal
States planning to unveil a common tariff code for classification of goods may now be able to operationalise it only in the next fiscal. Although the Centre has already done the groundwork needed for the code, states now want to impart some local element to it. The rollout was scheduled to begin this fiscal. The new Harmonised System of Nomenclature (HSN), modelled on the central excise, customs and followed internationally, was discussed at the last meeting of the empowered committee of finance minister. India follows the eight digit HSN code that is primarily classification of goods for tariff purposes. The Centre wanted states to go in for a common return form, procedures and tariff code to give state tax administration a complete facelift and make it more efficient.
While the states have in-principle agreed to the Centres proposal, they want to introduce some local element as completely switching to the HSN will make it difficult to have deviation in rate of taxation of certain items. At present, there is certain level of uniformity in rates at which VAT is levied all over the country on most products; but there is none in forms, tariff codes and audit procedures.
This facelift of the states tax administration was a precursor to the unified goods and service tax that is expected to roll out from April 1, 2010. The HSN for state VAT has been prepared by the Central Board of Excise and Customs officials. State finance officials have examined it in detail and given their recommendations to the empowered committee. The committee at its meeting on May 5 also discussed the e-governance framework that is aimed at computerising the value added system in the country. Source: The Economic Times CST reduction appears to be in limbo
The fate of planned reduction in Centre Sales Tax by one per cent from this fiscal hangs in balance with the impasse between union and state governments over the compensation for revenue loss to states continuing. Already one and a half months of this fiscal are over, but CST reduction from three per cent to two per cent is yet to take place due to continued stalemate between the Centre and states, sources said today.
The CST cut is not likely to be introduced with retrospective effect from April 1, 2008, VAT Committee Chairman Asim Dasgupta had said earlier. While the Centre insists that state governments keep up the promise given by their finance ministers to increase the VAT rate from four to five per cent, impose VAT on textiles from this fiscal, states are not ready for it.
States attribute their decision not to go for VAT rate hike to high inflation, which has reached 7.83 per cent.
They also say if the Centre agrees to impose VAT on import, the revenue loss to state governments from CST reduction would be partly compensated and the burden on union government to provide relief to states would come down, the sources added.
Imposing VAT on import is another item of the package agreed by the Centre and states, but yet to be implemented. However, the proposal is not easy to put into place, because it would certainly be challenged in WTO, the sources said. Besides, it would also make it difficult for the Centre to impose countervailing duty, so essential for level-playing field between domestic and foreign players, they said. PTI
UP mulls simplifying VAT
Acceding to the long-pending demands of traders in Uttar Pradesh, the state government is planning to simplify the present structure of value-added tax (VAT). "We have prepared a draft seeking the amendments in the present VAT system and want to make it trader-friendly. We are also working to develop a software for the traders to submit their returns online. We want to make it a paperless procedure," said Govindan Nair, principal secretary (commercial tax). The state government also announced exempting handmade carpets (silk and wool) from VAT. "We will also close about 50 check-posts in the state in phases in order to safeguard the traders' interest. Unclassified items will also be categorised," he added.
For records, revenue collection after the implementation of VAT in Uttar Pradesh has shown good results in the first quarter. The collections showed an increase of 11 per cent for the first three months of the year. The increase in the collections in the corresponding period last year, on the other hand, were to the tune of 5-6 per cent.
Uttar Pradesh introduced VAT on January 1 this year. The department has set a revenue collection target of Rs 19,555 crore for the current year. The collections made last year (2007-08) were Rs 15,040 crore. "We expect an increase of 30 per cent in the overall collection this year," said Govindan Nair . Source: Business Standard
UAE could start VAT early next year
The UAE is likely to introduce a value added tax (VAT) early next year as studies into its implementation have reached an advanced stage, a senior Dubai Customs official said. The indirect tax on goods and services will replace the existing customs duty, which will be phased out as part of free trade pacts the GCC will sign with a number of key trading partners such as the EU, China and India.
"Having spent two years studying VAT around the world to ensure that what is proposed for the UAE and the GCC is best practice, we are now in phase two, which is looking at how to successfully implement VAT," Dubai Customs executive director Abdul Rahman Al Saleh told a seminar at the Arabian Travel Market.
The infrastructure to levy VAT will be ready by the last quarter of 2008. It will be introduced after the federal government's approval and will be done across the country. "Most likely it will be in early 2009," Al Saleh said. He said other GCC states are also expected to adopt VAT after it is introduced in the UAE. Source: Gulfnews
VAT growth rate goes north
Haryana leads the way in the North as far as annual growth in value added tax (VAT) collection is concerned. Even otherwise, Haryana stands a respectable number three in the entire country as far as growth in the resources collected from VAT is concerned.
According to the latest national figures available, Andhra Pradesh, with a high growth rate of 24 per cent, is number one in the country as far as VAT collection growth for the year 2007-08 is concerned, while Bihar stands at number two with 23 per cent growth in VAT collection over the previous year. Haryana, with 20 per cent growth in VAT collection for the previous financial year just ended, stands third. Compared to the growth of 20 per cent of VAT collection of Haryana, other states lagging behind were Gujarat with 17.5 per cent, Rajasthan with 17 per cent, Delhi 15.7 per cent, Maharashtra 15 per cent, Punjab and West Bengal with 14 per cent each. Uttar Pradesh with 8 per cent growth and Tamil Nadu with a mere 3 per cent were at the bottom of the table, said sources.
The first state in the country to introduce VAT in 2003-04, Haryana has been achieving double figure growth in VAT collection rate every year. So well has the state done that for the last five years, it has always touched the 20 per cent growth mark every year, Haryana Excise and Taxation Commissioner Arun Kumar said. Haryana is already the number one state in the country as far as per capita investment is concerned. It is fast heading towards becoming a state with fastest growth rate of VAT collection per year, adds Arun Kumar. Source: ExpressIndia
No VAT on unstitched clothing in Punjab
Punjab Chief Minister Parkash Singh Badal, who met a delegation of cloth traders and merchants from the state, announced that no VAT would be imposed on unstitched cloth and other womens clothing. Punjab Chief Minister Parkash Singh Badal made this announcement in the presence of Industries Minister Manoranjan Kalia and Excise and Taxation Commissioner A. Venu Prasad. More than 100 persons had gone to meet CM along with Kalia and Anil Joshi, BJP MLA from Amritsar, Bhupinder Gupta, president of North India Retail Merchants Association, said.
The Punjab Excise and Taxation Department had started imposing 4 per cent VAT on unstitched cloth in the wake of a recent judgment by the Punjab VAT Tribunal. The traders had been opposing the move and many truckloads of unfinished dress material were held up at various entry points in the state.
Maharashtra may slash VAT on ATF in Mumbai, Pune
The Maharashtra government is now considering reducing the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 25 per cent to four per cent in Mumbai and Pune. This development comes close on the heels after the Ministry of Civil Aviation (MoCA) dashed a letter to Maharashtra's Chief Minister,
Vilasrao Deshmukh, requesting the inclusion of Mumbai and Pune airports for benefits of reduction of VAT on ATF in rest of the state. Maharashtra's Finance Minister, Jayant Patil had reduced tax on ATF from 25 per cent to 4 per cent, while presenting the Budget (fiscal year 2008-09), however, Mumbai and Pune were not included. We are now considering reducing VAT on ATF by 21 per cent i.e. from 25 per cent to four per cent for Mumbai and Pune Airports. The Revenue department has already forwarded the proposal to the state Finance Minister to consider it and thereby table the proposal in the next cabinet meeting. Source: My Yahoo
Foreign Trade Policy, promises remain unfulfilled
The annual supplement of the foreign trade policy (FTP) 2004-09, to be announced by commerce and industry minister Kamal Nath on April 11. But an announcement made at the beginning of the series regarding setting up of the Inter State Trade Council has not yet resolved. The Council was envisaged as an institutionalised dialogue mechanism between the Centre and the states to make sure that all the export-friendly measures taken by the Centre are implemented smoothly across the country. Operationalising such an institutional mechanism could have helped since states are in charge of VAT refunds for exports and in awarding exemption from some state levies. The Council could have solved several obstacles faced by exporters proper implementation of the single-window clearance mechanism of the Special Economic Zones Act as well as labour reforms and treating export units as essential services to thwart flash strikes by workers. Pointing out the inordinate delays in VAT refunds, exporters have demanded that discussions on awarding them exemption from VAT also could have happened through such a Council.
States need to abolish VAT on edible oils to check prices
States need to abolish value-added tax (VAT) on edible oils to control the spiralling prices, according to Solvent Extractors Association of India (SEAI). The centre has done its bit in regard to VAT. Now the states must abolish VAT so that the edible oil price rise could be kept under check, B.V. Mehta, secretary of SEAI, told IANS. The SEAI, in its pre-budget memorandum to union Finance Minister P. Chidambaram said: It is observed that there are differences in the percentage rates and rules from state to state under VAT for oilseeds, oilcakes and oils.
The prevailing high rate of tax with its cascading effect makes it difficult for the indigenous oilseeds sector to face the challenges of globalisation. The state finance ministers may be requested to place oilseeds, oilcake, rice bran and their derivatives in the category of one percent VAT, it added. The SEAI also sought that an oilseeds and oil development fund be created by imposing development cess on imported edible oils. According to the association, a comprehensive package of fiscal measures can be evolved to finance programmes aimed at increasing oilseeds production to meet the rising demand for edible oil.
Conditional funding of schemes
The Communist Party of India (Marxist) has accused the Centre of imposing a neo-liberal conditionality to the transfer of funds under the centrally-sponsored schemes. The party has said the Centre was vitiating the spirit of federalism by attaching conditions to funds given to states for implementation of social sector schemes.
It is the right of taxpayers to know how their money is being spent. One of the biggest challenges before the government today is to ensure efficient spending. And to this end certain conditionality within the existing federal framework are totally justified. In fact, if anything, the Centre has been far more cooperative and accommodative over the past decade, especially after coalition politics took firmer roots. The NDA regime had started the process of Centre-state co-operation in the implementation of VAT. The UPA government implemented VAT and the result is there for all to see.
The states fiscal position that of revenue surplus on a consolidated basis is largely due to the boom in tax collections after VAT was put in place. The Center's gesture of rescheduling the long-term debt owed by states and the waiver of interest payment based on performance has also helped the latter come out of the woods. Source: The Economic Times
West Bengal to amend VAT rules by April
The state will amend the West Bengal Value Added Tax (VAT) rules by April to rejig the refund mechanism as proposed by the state finance minister, Asim Dasgupta, in his 2008-09 budget. HK Dwivedi, commercial tax commissioner, said the process involved in refunding VAT to the exporters is cumbersome at present, as the department has to cross check whether the VAT, for which the exporter has sought refund, has gone to the treasury or not.
"In fact refunding is also a trouble at the government of India level, and it is not only West Bengal, which has backlogs in refunding," Dwivedi said. Although Dwivedi did not say the amount lying as backlog, he said by the end of 2007-08, the commercial tax department will be refunding Rs 50 crore against Rs 30 crore in 2006-07. However, this is expected to increase in 2008-09 once the VAT rules are amended, Dwivedi said on the sidelines of an interactive session, organised by the Bengal National Chambers of Commerce & Industry.
The state finance minister proposed in his Budget that the government will be refunding to the exporters 50% of the VAT paid on the basis of book value within one month of the claim filed. The rest 50% will be refunded after proper verification. KK Navada, president of BNCCI, said the proposed changes in the VAT rules is a welcome step, but industry will like to get more simple VAT returns forms, preferably sector-specific. Source: Financial Express
Maharashtra slashes VAT on Aviation Turbine Fuel
Spurred by the recent announcements by Andhra Pradesh and Kerala governments, Maharashtra government has slashed the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF). VAT on ATF in the state has been reduced from 25 per cent to four per cent. This has delighted the Low Cost Carriers (LCCs), planning to start operations in tier-II and tier-III cities in the state. However, the ATF reduction will not be applicable for airports in Mumbai and Pune. An announcement pertaining to the reduction of VAT on ATF was made by Maharashtras Finance Minister, Jayant Patil, while presenting the State Budget (fiscal year 2008-09) last week. Although the reduction of ATF charges will benefit LCCs and the regional airlines, it will also help other cities to connect with metros and major cities across the country. Domestic airlines have welcomed the state governments decision to reduce VAT on ATF.
Rajasthan Govt stops work on Cairn pipeline for VAT loss
Cairn India's efforts to raise the nation's crude oil output has hit another roadblock with the Rajasthan Government stopping work on a pipeline needed to transport the precious commodity to refiners saying it would result in loss of tax revenues to the state.
Though Rajasthan is not opposed to crude oil being taken to refineries outside the state for processing, it fears loss of sales tax, in the form of VAT, revenues if the delivery point of the output from Cairn's Barmer fields is shifted.
The state government has stopped work on giving right of user (RoU) for the pipeline being built to transport the oil to Gujarat coast, official sources said. Cairn has sought shifting of the delivery point so that the 585-km pipeline needed for transporting the crude to Gujarat coast can be included in the cost for developing the oil field and recovered from the sale of oil.
Industry body for 8 pct uniform tax on retail fuels
States should levy an uniform 8 percent value-added tax on retail fuels instead of the sales taxes to offset the impact of high global oil prices on consumers and help state-run firms cut losses, an industry body said on Friday. Indian policymakers are concerned over the rise in crude oil prices, which was at $109.86 a barrel in the U.S., as it stoke inflation and widen trade deficit. India, which imports 70 percent of the fuel it consumes, raised retail fuel prices last month. A multitude of central and state taxes keep retail prices high.
The Associated Chambers of Commerce and Industry said that although sales tax has been abolished for most products, states continue to subject oil companies to sales tax. Sales tax varies from 33 per cent to 18.9 percent in case of petrol, and 34 percent to 8.23 percent for diesel. Therefore it is suggested that a uniform VAT of 8 percent be levied on petrol and diesel so that oil companies are able to stand the burden of rising crude oil prices," it said. The chamber also said government should gradually phase out subsidies extended to sectors like food, fertilizer and petroleum. Source: Reuters
Minister asks biscuit industry to talk to states on VAT reduction
The biscuit industry should approach state governments for bringing down the value-added tax (VAT) from the current level of 12.5 per cent, Minister of State for Food Processing Industries Subodh Kant Sahai said. Inaugurating a seminar organised by the Indian Biscuits Manufacturers Association (IBMA) here today, Sahai said the VAT on any processed food items, including biscuit should be between 0-4 per cent range.
"The industry should try to talk to the state governments and give them the logic behind the demand of reducing the VAT rate," the Minister said. Earlier, IBMA President B P Agrawal said biscuit has been kept in the same basket as cigarettes and pan masala, and demanded that VAT should be brought down to four per cent. The association is celebrating 'biscuit day' today. Sahai highlighted that the Centre has abolished excise duty on biscuits that are sold to consumers within Rs 100 per kg and assured the industry all the help from the ministry. APEDA General Manager Pravin Gupta said it would focus on promoting biscuit export and asked the industry to suggest measures to increase the volume. Soure: The Economic Times
Gogoi presents Rs 2,819-cr deficit Budget
Chief Minister Tarun Gogoi, today placed before the State Assembly a deficit Budget of Rs 2,819.23 crore. In budget he proposed * VAT on rice, pulses, atta, maida, suji, besan, onion and potato to be abolished. * VAT on jute cloth, other jute products soya nuggets and transformers from 12.5 per cent to 4 per cent. * Tax on foreign liquor and country spirit from 24 per cent to 27 per cent. * A cess at rate of 3 per cent on sale of tobacco products. * 4 per cent VAT on sports goods. Footballs and volleyballs to be exempted. * Entertainment tax on DTH connections at the rate of Rs 25 per connection per month. * Cess at the rate of 20 paise per kilogram of green leaf purchased by the bought-leaf factories.
UP imposes four percent tax on kids' workbooks
Under the Value Added Tax (VAT) regime, the Uttar Pradesh state has clubbed students workbooks with copies instead of books in the new academic session, beginning April, inviting a four per cent tax. All education systems in India and abroad are becoming more and more interactive thus making workbooks an indispensable part of the curriculum, said SC Sethi, president of Federation of Indian Publishers and Booksellers Association. UP is the only state that has imposed tax on workbooks, he added.
Glass units suffer as tariffs revised third time
Already struggling to keep up with their production demands amid frequent strikes by workers, the Firozabad glass units have been dealt another blow by the Gas Authority of India Ltd (GAIL) by revising its CNG tariff for the third time since last year forcing the shutdown of over thirty per cent of the glass-blowing units in the town.
According to industry sources, the prices for overdrawn gas, which used to be Rs 6.50 per cubic metre (pcm), had been revised to Rs 12.50 pcm in December last year. Now the rate has further been revised to about Rs 33 pcm with effect from February 20. Production rates of major glass-blowing units of Firozabad have since gone down by 80 per cent.
The state government too has levied a 20 per cent value-added tax (VAT) on CNG in place of the 4 per cent trade tax which was applicable till now, raising concerned voices among the industrialists of this glass town. Source: Business Standard
The excise duty on non-filter cigarettes increased nearly five times
The excise duty on non-filter cigarettes, which do not exceed 60 mm in length, was increased nearly five times to 82 paise per stick from the earlier 17 paise per stick in the budget for 2008-09. Shares of ITC and Godfrey Phillips India were badly hit after the finance minister proposed an increase in cigarette taxes, forcing brokerages to downgrade the stocks.
The steep hike in the excise duty on non-filter cigarettes will have a negative impact on non-filter cigarette volumes of the cigarette industry. ITC would be best placed in the cigarette industry as non-filter cigarettes constitute less than 18 per cent of the company volumes.
5% duty on Naphtha may make plastic goods costlier
Indian Plastic Federation (IPF) said that the prices of plastic goods are likely to go up 5-10% in the next year following the FM's announcement of reintroducing 5% import duty on naphtha in the Budget. The move has prompted Reliance Industries to increase polymer prices Rs. 2-3 per kg.
Four new services under tax net
Finance Minister P. Chidambaram sought to bring in four new services under the tax net to garner higher revenues while keeping the rates unchanged at 12 per cent for 2008-09. The new services included for taxation are stock and commodity exchanges and clearing houses, asset management firms offering unit-linked insurance plan (ULIP) to bring them on a par with similar service providers for mutual funds and customised software to put them on a par with packaged software and other IT services. The fourth category is the right to use goods, in cases where VAT in not payable.
Alongside, to provide relief to the small service providers, he proposed to enhance the threshold limit of tax exemption from the current level of Rs. 8 lakh to Rs 10 lakh. As a result, about 65,000 small service providers will go out of the tax net.
The Minister went on to clarify that certain other categories of service providers such as money changers, persons running games of chance and tour operators using contract carriage vehicles were liable to pay service tax. Accordingly, purchase or sale of foreign currency, including money changing by an authorised dealer or an authorised money changer under banking and other financial service would be under the service tax net.
The new services and changes are to be effective from a date to be notified after enactment of the Finance Bill 2008. With the inclusion of these four new services for taxation purposes, the government has estimated a collection of Rs. 64,460 crore in 2008-09. Source: The Hindu
Liquor prices to go up in Punjab
The new liquor policy approved by the Punjab cabinet here on Wednesday would see a hike in prices of both PML (Punjab medium liquor) and IMFL (Indian made foreign liquor) go up marginally, besides a hike in VAT up to 12.5% from five% earlier. A PML bottle in Punjab would now be costlier by Rs five while the IMFL bottle would go up by Rs 10, a government spokesman revealed. VAT on molasses would be decreased from 22% to four % in order to avoid losses to Punjab based sugar mills, on account of purchase of molasses from outside.
The new excise policy of 2008-09, which is a continuation of the old policy where licensing units would be allotted by draw-of-lots, would see additional revenue generation of Rs 72 crore, and the total revenue generation would be approximately by Rs 1,728 crore. Although, the number of vends would remain almost the same as the previous year, the cabinet has approved to increase the quota of PML by 3% while effecting no hike in the quota of IMFL. With this, the quota for the year 2008-09 would be 618 lakh PL for PML and 325 lakh PLs for IMFL. Source: Times of India
Assocham: remove value added tax (VAT) and service tax on film Industry
Move the film industry to the Concurrent list from State List, enact Optic Disc Law, remove value added tax (VAT) and service tax and confer a de-facto industry status on it are some of key proposals mooted by The Associated Chambers of Commerce and Industry of India (Assocham) for the governments considerations in budget 2008-09.
In a memorandum submitted to the I&B and Finance Ministries, Assocham president Venugopal N. Dhoot proposed immediate enactment of Optic Disc Law to combat increasing video, cable and TV piracy and amend the existing Copy Right Act which does not adequately prevent piracy both in print and electronic media.
Father of VAT` dies
Eminent economist and scholar of public finance, Amaresh Bagchi, died today. He was 77. He is survived by wife, a son and daughter and three grand-children. Bagchi has written extensively on public finance, in particular on tax policy, tax administration and fiscal federalism. His 1993 report on reform of consumption taxes in India kick started discussion about the introduction of value-added tax (VAT) at the state level. The current idea for a goods and services tax (GST) is also said to have originated from the same report.
Bagchi was currently serving as a member in the Commission on Centre State Relations and as an Emeritus Professor at the National Institute of Public Finance and Policy (NIPFP), New Delhi.He also served in the finance ministry as officer on special duty (OSD) with responsibilities of economic adviser. Later, Bagchi was appointed as a member in the Eleventh Finance Commission and subsequently served as a member in the Prime Ministers Economic Advisory Council. Source: Business Standard
Durable makers for lower indirect taxes
The consumer durables industry has asked for lower indirect taxes and cut in Customs duty on inputs in the forthcoming Budget, as it seeks to safeguard its profitability against any increase in cheaper imports of finished goods. The industry has called for reduction in value-added tax (VAT), abolition of central sales tax and cut in excise duty.
In 2007, all categories recorded a double-digit growth. This year, we expect reduction in VAT and incentives to bring the sector at par with the IT industry. Even reduction in import and excise duty will help in fetching better margins and provide products to the consumers at a cheaper rate, Haier India Director Pranay Dhabai said. The industry has asked the government that non-IT products like consumer electronics and entertainment should be treated at par with the IT industry regarding indirect taxes.
Industry players have sought incentives for the electronic hardware sector. The difference between IT and non-IT products is getting blurred, as one can view the TV programmes on personal computer and mobile phone. Therefore, it is requested that IT and non-IT products be treated at par with regards to indirect taxes, Mirc Electronics Chairman and Managing Director G L Mirchandani said. Source: Business Standard
Fertiliser firms seek duty cut on fuel, inputs
Fertiliser manufacturers have sought removal of basic customs duty on liquefied natural gas-- used as feedstock-- as well as on inputs like ammonia, phosphoric acid and sulphur, in order to reduce cost of production. Removal of the 5 percent customs duty on the feedstock/inputs in the 2008/09 Budget will also help reduce the government's subsidy burden, an industry body said.
The industry body has also sought fiscal incentives in order to attract fresh investment in domestic fertiliser capacity, in the form of a 15-year tax holiday, and exemption for fertilisers and inputs from the value added tax (VAT) charged by states. The last major urea domestic capacity addition of 775,000 tonnes was in 1999. The industry body said that demand-supply gap is likely to jump to 16 million tonnes by 2012, from 10 million tonnes now. Source: Reuters
Double taxation and multiple levies hampering growth
The telecom industry is overburdened with taxes. The industry is undergoing a rapid change and dealing with multifarious taxes and levies is cumbersome. The domestic telecom industry ends up paying a significant share of their total revenues towards different levies, compared with their counterparts in other Asian countries.
The two biggest issues surrounding the industry are of double taxation and existence of multiple levies which are hampering the growth of the industry. Both service tax and VAT are consumption taxes which are borne by the end consumers. Ostensibly, these taxes are intended to operate on a mutually exclusive basis. However, the problem is that there are no clear cut definitions in law of what constitute either goods or services. Equally, there are no overriding principles which can be applied in order to come to a determination on the point. Thus, it is entirely possible that what is a service under service tax law is equally goods under VAT law. Consequently, because of this lack of mutual exclusivity in terms of the underlying definitions of goods and services in the respective laws, a particular transaction can possibly be charged to both the service tax, as provision of services, as also the VAT, as a supply of goods. Source: Indian Express
Reduce multiple levies on local pharma: Assocham
Dr. GSK Velu, President, AMDSI and Head of Manufacturing Sub-Committee, Assocham and CII said the multiple levies on manufacturers and increased customs duty makes domestic manufacturing costly. He expects the government to remove anomalies in customs duties and to exempt excise duties and VAT on domestic manufactured goods. Capital grants and subsidies for this industry should be provided, stated Velu. According to him, with the right kind of incentives from the government, the nascent Indian medical technology industry can grow by leaps and bounds. Source : moneycontrol.com
Move to hike VAT on oilseeds draws flak The Centres advice to states to hike the floor rate of VAT from 4 per cent to 5 per cent to offset any revenue loss they may incur due to reduction in Central sales tax from 3 per cent to 2 per cent, has invited criticism from many quarters. The Solvent Extractors Association of India (SEAI) has opposed the reported move of the Union government.
Ashok Sethia, president of SEAI, and Sushil Goenka, secretary, said at a press meet in Vijayawada that at present the states were imposing 4 per cent VAT on oilseeds and the derivatives. They said 4 per cent itself is too high, as the previous rates were only one or two per cent. They said the VAT on oilseeds should either be abolished or reduced to one per cent. Source: Commodity Online
Gems and jewellery units in SEZ
Gems and jewellery, which operates in special economic zones in India, has petitioned the government to immediately address issues of tax refunds, withdrawal of customs duty exemption on Indian jewellery in USA under the GSP program, increasing cost of diamonds, gold and severe competition from China, which are posing a severe threat to these units in India.
Bhavesh Shah, secretary Gems & Jewellery Manufacturers Association, said that the sectors' exports to the US in the first nine months of this fiscal had fallen from $ 1669 million to $ 1511. Shah said that the blockage of huge money with Government departments by way of VAT refund, is causing serious hardship, specially to those units which are not entitled to avail set-off facility for VAT refund against VAT liability due to exporting of their entire production. Shah said "The industry employs nearly 5 lakh people and if the stake holders are constrained without government support, then many will be forced to shift to other regions"
Centre may partner states in ATF relief
The Centre is working out a compensation package for states to reduce sales tax on aviation turbine fuel (ATF) to 10% or 15%, which will help domestic carriers like Air India and Jet Airways bring down their operating cost. The finance ministry is considering compensating states for their revenue loss until jet fuel comes under the VAT regime. As of now, many states levy VAT of more than 20% on jet fuel.
The move may not result in lower fares for passengers as airlines are keen to improve their bottom line. Jet fuel accounts for about 40% of the operating costs of airlines. States will suffer a revenue loss if jet fuel is given declared goods status, thereby attracting a uniform 4% sales tax across the country. We have hence proposed to levy an intermediate sales tax rate ranging between 10% and 15%. This will serve twin purposes of minimising revenue losses incurred by states and help airlines reduce operating cost, a civil aviation ministry official told ET.
The finance ministry may consider compensating the states for their losses for at least the next two years, after which the new VAT regime will replace the existing system, he added. According to an estimate, a reduction in tax to 10% or 15% will lead to states losing nearly 35% to 50% of their sales tax revenue on jet fuel, which constitutes about 2% of their total sales tax revenue. Source: Economic Times
Cable TV industry seeks rationalisation of taxes The cable TV industry has sought rationalisation of taxes on par with the IT and telecom sectors. Cable TV Equipment Traders and Manufacturers Association (CTMA) Secretary K K Binani told reporters here on Tuesday that apart from import and excise duties, VAT on capital equipment used by the trade was 12 per cent.
He said this should be brought down to four per cent. Binani said if VAT was lowered, then consumers would benefit by way of lower rates charged from them on a monthly basis. He said it was long overdue and the government should also grant industry status to the trade. Binani said Telecom Regulatory Authority of India (TRAI), in its consultation paper, suggested that the cable TV industry should be treated at par with the telecom and IT industries.
Meanwhile, the association would organise the Cable TV Show 2008, in he city here from January 28-30, to showcase the various arena the cable TV industry has entered such as broadband, data, audio video and telephony.
Urban bodies may be allowed share in VAT
Urban local bodies could do away with octroi and instead be given a share in the Value Added Tax imposed by the state government, a research paper on municipal finance prepared by the Reserve Bank of India said. "The search for a substitute for octroi may perhaps end with a formulae- ased share for the ULBs in the Value Added Tax," the paper said on Monday.
The study, prepared by Department of Economic Analysis and Policy in RBI, said the size of the municipal fiscal sector in India is very small compared to many developed and developing countries. It said municipal finances need to be strengthened and suggested a host of levies like vacant land tax, taxation of central and state government properties, motor vehicle tax or a share from the same, betterment levy, a surcharge on stamp duty on registration deed, advertisement tax be considered as part of the scheme of revenue assignment to ULBs. Source: Economic Times
Will Finance Minister lower the tax burden
The pre-budget wish list of corporate honchos, who met the Finance Minister P Chidambaram on Tuesday, was a predictable one -- lower the tax burden on companies and individuals. India Inc hopes the government will yield as direct revenues have been buoyant so far this fiscal. The extra revenues could provide the cushion to absorb any revenue losses, in the short run. Economists though have a contrary view as they reckon populist moves could impact the government's balance sheet.
With parliamentary polls just two summers away, will the finance minister P Chidambaram unveil his second dream budget in 2008-09? Or will he wait till next year to unleash more reforms, atleast in indirect taxes? Fact is taxpayers had more money in their pockets after Chidam-baram's first dream budget in 1997-98. He slashed income-tax rates, abolished the surcharge on corporate tax and lowered the corporate tax rate. The FM also cut the peak customs duty to make imports cheaper and restructured the excise duties to benefit the consumer.
These policy reform measures were expected "to improve compliance, add momentum to the growth process, create multiplier beneficial effects and attract more foreign investment". Successive government's carried forward many of the tax reform measures. A reality check a decade later shows that the economy is growing at a scorching pace - India's GDP is expected to inch closer to 9 percent this fiscal. Direct tax revenues have grown by 40% so far this fiscal due to better compliance. Cumulative FDI inflows topped $83 billion till June 2007. Clearly, the Indian economy has moved to a high growth trajectory. Source: Economic Times
AHAR is still fighting against the VAT imposition at 12.5 per cent
The 28th Annual General Body Meeting of Indian Hotel & Restaurant Association was recently held in the city. Inaugurated by president, Chandrahas K Shetty, the 'Restaurant Business' exhibition of AHAR comprised more than 40 stalls. Speaking on the occasion Chandrahas K Shetty said that the membership of AHAR had increased multifold. "AHAR is putting in efforts to fight the injustice meted to the hotel industry by various statutory authorities. AHAR is still fighting against the VAT imposition at 12.5 per cent, as compared to other neighbouring states which have 4 per cent VAT; outdated excise and police rules and inobitent increase in trade refusal charges of MCGM. The president also advised the members to work within the limit of the law and be innovative in their business plans so as to be in-sync with the ever-changing hotel scenerio and thereby be prepared for any future challenge.
The Reserve Bank of India suggests a two-tier structure for GST
The Reserve Bank has suggested a two-tier structure for the Goods and Services Tax (GST) which is slated to come into effect from April 1, 2010. "From the administrative angle, there are supports for a two-tier structure of GST involving central and state governments... use of both the Centre and state machineries in the implementation of GST would be ideal," the Reserve Bank of India (RBI) said in its annual report on state finances for 2007-08.
Based on the success of VAT, the government has decided to introduce GST for all goods and services. "Centralisation of sales taxation is not essential.... and central and state taxes can exist side by side," said the apex bank. The RBI suggested that a system of concurrent taxation consisting of a state GST (SGST) and a central GST (CGST) would be a viable medium-term option. GST is a multi-stage consumption tax imposed on a broad range of goods and services. It is a tax on transactions and end-customers who consume the goods or services bear the final cost of the tax. However, the report also pointed out that the component of tax rates of central and the state GST is still to be determined.
Reasoning out its claim that there is administrative support for the two-tier system, RBI said, "the Centre's administrative capacity vests with the central excise department whereas the state's have a larger capacity in the form of states' sales tax establishment." The RBI report on states finances talks of various models for GST collection like collection at federal level and sub-national level but goes on to suggest dual level collection as the best suited for the country.
The idea for the GST system was floated by Finance Minister P Chidamabram in 2005 when the value added tax (VAT) was introduced. The finance ministry with an aim to move towards a national level goods and services tax (GST) that should be shared between the Centre and the states has proposed April 1, 2010 as the date for introducing GST. While a decision on the GST model to be adopted still needs a lot of deliberation, the Kelkar Committee has already suggested a 20 per cent combined GST rate. - PTI
Builders seek cut in cement prices
It will not be possible to implement the mega infrastructure projects envisaged in the 11th Five Year Plan period within the budgeted cost, unless the government takes steps to control the spiraling prices of cement, steel, bitumen and diesel, warned the Builders Association of India. More than Rs.15 lakh crore infrastructure expenditure is envisaged in the Plan, of which half will go to the construction sector, according to BAI trustee R. Radhakrishnan. Fifty per cent of that cost will go toward these four items. If they really want to achieve it, the government must contain the rates, he said.
The government needs to ban the export of steel until the needs of the domestic sector have been met, said Mr. Radhakrishnan, pointing out that 30 per cent of Indian steel was exported, even while Indian steel consumers were faced with a Rs.3,000 per tonne increase in rates over the last week. Concerning cement, BAI felt that the recent government initiatives such as facilitating import would force domestic manufacturers to cut prices. It also requested the government to exempt imported cement from value added taxes (VAT). This makes up approximately Rs.23 of the price of one 50-kg bag of cement, according to BAI state chairman J.R. Sethuramalingam. The existing market rate for cement is about Rs.240 a bag.
The BAI welcomed the Tamil Nadu governments leadership role in facilitating import and warning cement manufacturers to reduce prices or face the threat of takeover by the State. Builders and contractors have already placed their orders through the Tamil Nadu Cement Corporation to import cement in bulk quantities. While welcoming the State governments decision to distribute imported cement to the general public without any profit margin through the Civil Supplies Corporation, it warned that customers should not expect to get imported cement at Rs.160 a bag that is being cited as the landing cost, or the price at the point of arrival at the Indian ports. Rather, the final price is more likely to stand at Rs.215 to Rs.220 after VAT, handling costs, clearing and forwarding charges and transport costs are taken into account.