Get MBA Entrance Exams Updates on Whatsapp & Email!GET UPDATES NOW
Published : Tuesday, 14 July, 2015 11:22 AM
MBA aspirants must be updated with General Awareness on current topics. General awareness topics with analytically drawn conclusions will benefit you in CAT, XAT, IIFT, NMAT, CMAT, MAT, Essay writing General Awareness sections besides in WAT, GD & PI.
Read General Awareness Topic:
Currently being considered in the select committee of Rajya Sabha and awaiting passage, the Goods and Services Tax’s (GST) decade long journey has never had a smooth sailing. The intent to introduce GST, a uniform tax system across India, by April 1, 2010 was first mooted in the 2005-06 Union Budget speech by the then Finance Minister P Chidambaram.
Between now and then, the GST has missed deadlines, faced political turbulence especially from states, and undergone several rounds of revisions to suit India-specific conditions. The key question, however, yet remains unanswered: can it turn into a major overhaul of Indian tax system?
To be sincere, there cannot be a definitive zero-sum answer. The biggest irony with India’s biggest tax reform initiative in the post-independence period is: everyone agrees that GST is necessary, but significant differences upon the scope, form and content of the GST continue to prevail to this day.
It is necessary because nobody disagrees with the GST aim to replace a plethora of taxes (at least 14 central and state levies) with a countrywide uniform tax regime that promotes the cause of business and consumers alike. Despite that, GST has become a victim of political brinkmanship and vested interests.
For the uninitiated and in very simple terms, GST is an improved version of the Value-added Tax (VAT), which replaced the sales tax and has already been adopted by all Indian states. The difference between GST and VAT mainly pertains to widening the base of taxation.
While VAT is imposed only on goods, the GSK seeks to include services as well. To put it simply, GST is a VAT on goods and services. The existing tax regime allows states to tax sales of goods but not services, while the centre taxes manufacturing and services and not wholesale or retail trade.
The GST is, therefore, expected to usher in a uniform tax regime across India through an expansion of the base of each into the other’s territory. The two benefits of GST are, first, a simplified tax administration under GST likely will improve compliance, and remove economic distortions in production, trade, and consumption.
Second, by giving credit for taxes paid on inputs at every stage of the supply chain and taxing only the final consumer, it avoids the ‘cascading’ of taxes, thereby cutting production costs, and making exports more competitive. Finance Minister Arun Jaitley has reportedly said that the GST will add 2% to the country’s GDP due to these efficiencies.
Be that as it may, the political differences over GST largely stem from questions relating to the States’ fiscal, and therefore, political autonomy. To allay those fears in the short-to-medium term, the Constitution 122 Amendment Bill, 2014 passed in the Lok Sabha in May introduced a dual structure GST, levied and managed by different administrations. GST has proposed to subsume all the taxes levied by the Centre as Central GST (CGST) and all the state levies into one single tax called State GST (SGST). For all inter-state movement of goods & services, it shall be called Integrated GST (IGST) which shall have CGST and SGST.
The revenue neutral rate (RNR) has been plugged at 27% with CGST at 14% and SGST at 13%. The monitoring of compliance will also be done independently at the two levels. The government, however, in order to win support from states that fear losing revenue has agreed to a 1% additional levy by states on the cross-border transport of goods. There will be a separate tax on petrol, diesel and aviation fuel. All of this is in addition to compensation offered to states.
This back-room political manoeuvring by the BJP government to get GST rolled out in April 1, 2016 has raised concerns among businesses and industry bodies representing them. The discomfiture with the additional levies is that they tax even products to be transported between plants in different states and raise input costs for businesses, which is against the spirit of the reform. In fact, the Congress and other regional parties are backing businesses on this and want the levy to be scrapped along with the removal of exemptions on tobacco, liquor and electricity.
Many independent experts on the issue are not happy with the dual structure introduced in the Bill and would rather see delay than a hastily put reform creating tax chaos and high inflation. The proposed dual structure in reality may create a cascading five-layered tax structure which will be akin to miscarriage for the reform.
A multi-layered tax structure will further complicate the whole process of tax filing and returns for businesses. From the tax offices’ perspective, they will be burdened with complicated tax transactions, which will further undermine their already questionable capability to effectively oversee the tax administration process. The more than 25% rate of GST is unprecedented even by the European Union standards which levies a 19.5% GST rate. The world average is around 10-12%.
The GST aims to provide build a single market for India and the emerging grey areas in its implementation in current form suggest that more preparation is needed before it is rolled out. While the ruling government may believe that even a flawed reform could boost economic prospects of the country and evolve into an ideal GST regime, it must consider the fact that short-term gains could torpedo long-term goals of the reform.
Stay informed, Stay ahead and stay inspired with MBA Rendezvous
Let's start by understanding what's meant by the term disruptive technology. A disruptive technology is basically one which displaces an established one, thereby shaking up an entire industry
The Start-up India and Stand Up India programmes were initiated basically to inculcate the habit of entrepreneurship among the fellow Indians particularly the youth
The Shanghai Cooperation Organization (SCO) is one of the most significant international organization formed in the post-cold war era.
On June 1, 2017, the newly elected United States (US) President Donald announced his decision to withdraw from the Paris Agreement on climate change, which came onto force on November 4, 2016.
The One Belt One Road (OBOR), also known as the 'Belt and Road Initiative' (BRI), is the most ambitious development project proposed by China that aims to connect Eurasian and African countries to boost economic cooperation.