THE HINDU EDITORIAL : DECEMBER 22, 2017
THE HINDU EDITORIAL : DECEMBER 22, 2017
a) GST, a work in progress
The introduction of the Goods and Services Tax (GST) raised much hope that it would herald the emergence of a ‘good and simple tax’ with ‘one nation, one market, one tax’. However, there has been considerable concern with the new tax, both in its structure and operational details, including the ease of paying the tax and filing returns. Trade and industry have been grappling with the problem of payment, filing the returns and claiming input tax credit, and exporters have been facing liquidity crises as the zero-rating of the tax has not worked and refunds have not been forthcoming, with difficulty in filing returns. Of course, the GST Council has been quite responsive to tweak the structure and operational details to make it simpler. Yet, considerable work needs to be done to ensure a smooth transition and to reap the revenue and productivity gains to the economy.
History of GST
Introduction of the GST is an important reform and is a standard policy recommendation for every country going in for the structural adjustment programme of the International Monetary Fund. This has been a major money spinner and a source of productivity gain. According to Michael Keen, of over 165 countries which have adopted GST in one form or another, only five have repealed it (Belize, Ghana, Grenada, Malta and Vietnam), but have reintroduced the tax later. The GST has taken centre-stage in many countries and is considered important in view of the competitive reduction in corporation tax rates due to high mobility of capital. It is also true that there is no “one-size fits all” GST and each country has to adopt the structure depending on political bargains and operational feasibility. It is a major reform, and even as every country makes a lot of preparations before it is introduced, it takes time to smoothen the rough edges and settle contentious issues. International experience shows that some features of the reform are inherently desirable. It is important not to have too low thresholds. In fact, reasonably high thresholds will reduce the compliance burden to a large number of small businesses without much impact on revenue. Richard Bird and Pierre-Pascal Gendron, after a detailed examination of a number of countries adopting GST, suggest that in developing countries, a threshold closer to $100,000 would eliminate 75% of the taxpayers with a revenue loss of less than 4%. (See Bird and Gendron, The VAT in Developing and Transitional Countries, Cambridge University Press, 2007). Another desirable feature of a successful GST is to have fewer rates. Multiple rates create classification problems, are harder to administer and would require the general rate of tax to be higher. It would also invite a lot of lobbying by special interest groups. Third, it is important to prepare well before the plunge. Most countries take at least two years to prepare for the introduction of reform to ensure a smooth transition. This is particularly necessary for developing and testing the technology platform, educating the tax collectors and tax payers and to avoid any anomalies in the structure of the tax.
The Indian version
In the Indian context, given that the reform had to be evolved by taking into account the views of 29 States, two Union Territories with legislatures and the Union government, compromises are inevitable and it is impossible to expect the structure of the tax to be ideal. As stated by Bird and Gendron, some bad initial features may be an essential compromise to get the tax accepted in the first place. It would have been preferable to evolve the structure with two rates, one lower on items of common consumption and another general rate on consumer durables and luxuries. Notably, given that the VAT in the earlier regime had predominantly two rates, it should have been possible to convince the States of the need to fix the GST rates at two rather than four. In addition, the levy of three rates of cesses has further complicated the structure. Having four tax rates and three rates of cesses should have been avoided. As mentioned above, multiple rates create problems of classification, inverted duty structure and large-scale lobbying. It enormously complicates the technology platform to ensure input tax credit mechanism. It therefore appears desirable to move immediately towards three slabs with the final goal of reducing the slabs to two. It would also have been desirable for the “fitment committee” to evolve the rates by thinking afresh instead to merely adding up the excise and VAT rates to fit the item to the nearest rate decided. This is particularly relevant in the case of commodities which are predominantly inputs as in the earlier VAT regime they were placed in the lower rate category. Hopefully, the GST Council will act soon on this.
Raising the threshold
As mentioned above, expert opinion based on international experience shows that there is much to be gained by having the threshold at reasonably high levels. As mentioned above, international experience is that a threshold closer to $100,000 would eliminate 75% of the taxpayers and the sacrifice in terms of revenue would be less than 4%. Moreover, it is the small businesses which produce and trade in commodities and services which are predominantly consumed by low income groups and therefore, keeping the threshold high would be desirable from the viewpoint of equity as well. Considering this, going further, it may be desirable to fix the threshold at ₹50 lakh. The revenue loss will be minimal but ease of doing business will be high. The inclusion of petroleum products in the GST base will depend on mainly the revenue gains from the reform. Nevertheless, it is a desirable objective and the GST Council must act on it. International experience shows that including real estate may not be easy.
There is some concern that the revenues from GST in the past few months are somewhat below expectations. Things could improve as the new changes bring in stability and technology platform stabilises. Hopefully the implementation of GST may help in augmenting income tax as well. Strong political commitment, to implementing the reform, thorough advance preparation, adequate investment in tax administration and taxpayer services, extensive public education programme, support from business community and good timing of reform are the important pre-requisites for successful implementation of the GST. It is also important to note that problems of transition to a major tax reform are unavoidable and most countries go through this. In this regard, the approach of the GST Council must be commended for being receptive to the concerns of businesses and in dealing with the glitches in technology. Some of the noise heard is also due to the fact that all traders, in one way or the other, are brought into the formal sector. That hurts some. The GST Council has recognised that it needs to carefully calibrate the reform until the desired goal of a Good and Simple Tax is realised. Hopefully the GST Council will keep the goals clear and consider the reform effort as a work in progress.
- b) Scam, or folklore? on 2G case verdict
What is illegal from the point of view of administrative law may not necessarily be an offence from a criminal court’s perspective. The Supreme Court declared in 2012 that the allocation of 2G spectrum by the Congress-led UPA government was illegal and an arbitrary exercise of power. It went on to cancel all 122 telecom licences allotted to companies in early 2008 during the tenure of A. Raja as Communications Minister. With the trial court’s en masse acquittal of all those arraigned by the Central Bureau of Investigation in the 2G spectrum allocation case, the claim that this was the biggest scam in India’s history lies in tatters. Every ground that the CBI had adduced to prove that Mr. Raja manipulated the first-come, first-served system to favour Swan Telecom and Unitech Wireless, among others, and helped them make a windfall profit by offloading their stakes, has been rejected by Special Judge O.P. Saini. The immediate fallout is that the Dravida Munnetra Kazhagam, to which Mr. Raja belongs, and its national ally, the Congress, will at last be in a position to shake off the perception that they were irredeemably beset by corruption. The Congress, in particular, is now in a position to reiterate that the spectrum allocation resulted in ‘zero loss’; also, that its rule between 2004 and 2014 was not as scam-tainted as it was generally made out, a perception that has impacted its electoral performance since. Attention will now turn to Vinod Rai, whose sensational report as Comptroller and Auditor General, pegging the loss as a result of not auctioning spectrum at ₹1.76 lakh crore, contributed to the perception that a huge scam had taken place. Many had argued that the figure was only notional. Mr. Raja said that not revising the entry fee and not auctioning spectrum ensured cheaper telephony, increased tele-density and contributed to the sector’s overall development. He has been undoubtedly vindicated, but there is a lesson for everyone in the long 2G saga: public perception and audit reports cannot be the sole basis for criminal trials; investigating agencies must carefully sift the available material before deciding to prosecute. Eliminating graft from public life is not only about making allegations stick during election time, but also about diligent investigation and efficient prosecution. The CBI’s image has taken a beating, with the court calling it out for its waning enthusiasm in pursuing the case. There is a cloud over the present government’s commitment to fighting corruption. It may yet have a chance to redeem itself, as the CBI has said it will appeal the verdict. An appeal is in order given the sweeping dismissal of the CBI’s contentions, so sweeping that it dismisses, arguably a tad too breezily, what the prosecution said were suspicious quid pro quo transactions. It is said that the folklore about corruption is bigger than the actual incidence of corruption. Could this be true of the 2G ‘scam’ as well?
Meaning: A person or thing viewed as a sign that something is about to happen.
Example:”They considered the first primroses as the herald of spring”
Synonyms: Harbinger, Sign
Meaning: Make (someone) anxious or worried.
Example: “The roof of the barn concerns me because eventually it will fall in”
Synonyms: Worry, Disturb
Meaning: Struggle to deal with or overcome (a difficulty or challenge).
Example: “Other towns are still grappling with the problem”
Synonyms: Tackle, Confront
Meaning: About to happen or appear.
Example:”The forthcoming cricket season”
Synonyms: Imminent, Impending
Antonyms: Past, Current
Meaning: Twist or pull (something) sharply.
Example: “He tweaked the boy’s ear”
Synonyms: Twist, Tug
Meaning: Receive (something, especially something beneficial) as a consequence of one’s own or another’s actions.
Example:”The company is poised to reap the benefits of this investment”
Synonyms: Receive, Obtain
Meaning: Revoke or annul (a law or act of parliament).
Example:”The legislation was repealed five months later”
Synonyms: Revoke, Rescind
Antonyms: Introduce, Enact
Meaning: An agreement between two or more people or groups as to what each will do for the other.
Example:”Bargains between political parties supporting the government”
Synonyms: Agreement, Arrangement
Meaning: Causing or likely to cause an argument; controversial.
Example:”A contentious issue”
Synonyms: Controversial, Disputable
Meaning: Seek to influence (a legislator) on an issue.
Example:”They insist on their right to lobby Congress”
Synonyms: Importune, Persuade
Meaning: Fall suddenly and uncontrollably.
Example: “A car swerved to avoid a bus and plunged into a ravine”
Synonyms: Crash, Plummet
Meaning: Something that deviates from what is standard, normal, or expected.
Example:”There are a number of anomalies in the present system”
Synonyms: Oddity, Peculiarity
Meaning: Certain to happen; unavoidable.
Example:”War was inevitable”
Synonyms: Unavoidable, Inescapable
Synonyms: Avoidable, Uncertain
Meaning: A government, especially an authoritarian one.
Example: “Ideological opponents of the regime”
Synonyms: Government, Rule
Meaning: Mainly; for the most part.
Example:”It is predominantly a coastal bird”
Synonyms: Mainly, Mostly
Meaning: To a very great degree or extent; considerably.
Example:”Quality of life varies enormously from one place to another”
Synonyms: Very, Extremely
Antonyms: Moderately, Slightly
Meaning: Just; only.
Example:”Gary, a silent boy, merely nodded”
Synonyms: Only, Purely
Meaning: The action or state of including or of being included within a group or structure.
Example: “They have been selected for inclusion in the scheme”
Synonyms: Incorporation, Addition
Antonyms: Exclusion, Omission
Meaning: Make (something) greater by adding to it; increase.
Synonyms: Increase, Raise
Meaning: A sudden, usually temporary malfunction or fault of equipment.
Example:”A draft version was lost in a computer glitch”
Meaning: Adjust (experimental results) to take external factors into account or to allow comparison with other data.
Example:”The radiocarbon results would need to be calibrated to convert them to calendar ages”
Meaning: A particular attitude towards or way of regarding something; a point of view.
Example:”Most guidebook history is written from the editor’s perspective”
Synonyms: Outlook, View
Meaning: Based on random choice or personal whim, rather than any reason or system.
Example: “An arbitrary decision”
Synonyms: Capricious, Whimsical
Antonyms: Rational, Reasoned
24) En masse
Meaning: “The cabinet immediately resigned en masse”
Synonyms: (all) Together, As a group
Meaning: A judgement or verdict that a person is not guilty of the crime with which they have been charged.
Example:”The trial resulted in an acquittal”
Synonyms: Absolution, Clearing,
Meaning: Call or bring (someone) before a court to answer a criminal charge.
Example:”Her sister was arraigned on charges of attempted murder”
Synonyms: Indict, Prosecute
Antonyms: Clear, Acquit
Meaning: Irregularly torn pieces of cloth, paper, or other material.
Example:”He was forced to wear rags and tatters a beggar would scorn”
Synonyms: Rags, Scraps
Meaning: Impossible to correct, improve, or change.
Example: There are irredeemable flaws in the logic of the argument.
Meaning: Contaminate or pollute (something).
Example:”The air was tainted by fumes from the cars”
Synonyms: Contaminate, Pollute
Meaning: Fix, secure, or mark with a peg or pegs.
Example:”Drape plants with nets, pegging down the edges”
Synonyms: Fix, Pin
Meaning: Sell or offer for sale at an auction.
Example:”The painting was auctioned at Christie’s”
Meaning: Existing as or based on a suggestion, estimate, or theory; not existing in reality.
Example:”Notional budgets for hospital and community health services”
Meaning: Show or prove to be right, reasonable, or justified.
Example:”More sober views were vindicated by events”
Synonyms: Justify, Warrant
Meaning: Examine (something) thoroughly so as to isolate that which is most important.
Example: “Until we sift the evidence ourselves, we can’t comment objectively”
Synonyms: Investigate, Probe
Meaning: Institute legal proceedings in respect of (a claim or offence).
Example:”The state’s attorney’s office seemed to decide that this was a case worth prosecuting”
Synonyms: Accuse, Sue
Antonyms: Defend, Pardon
Meaning: A claim or assertion that someone has done something illegal or wrong, typically one made without proof.
Example: “He made allegations of corruption against the administration”
Synonyms: Claim, Assertion
Meaning: Intense and eager enjoyment, interest, or approval.
Example:”Her energy and enthusiasm for life”
Synonyms: Eagerness, Keenness
Meaning: To a small extent; somewhat.
Example:”Mark looked a tad embarrassed”
Meaning: Having or showing a cautious distrust of someone or something.
Example:”He was suspicious of her motives”
Synonyms: Doubtful, Unsure
Antonyms: Trustful, Trusting
Meaning: The traditional stories and culture of a group of people.
Example: Her books are often based on folklore and fairy-tales.