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GST needs fundamental restructuring, says Finance Commission Chairman

GST needs fundamental restructuring, says Finance Commission Chairman

The 15th Finance Commission’s final recommendations for the period between 2021 and 2026 have been tabled in the Indian parliament.

The share of states in central taxes has been recommended at 41 percent, which is the same as 2020-2021.

The commission has also said that the 2011 census data represents the needs of the states and helps to fairly reward states that have done better demographically.

However, the Finance Commission has observed that a steady increase in cesses and surcharges have had a direct impact on the divisible pool for states because the increased cess collections are not shareable. The commission estimates cesses and surcharges to average 18.4 percent of gross tax revenue between FY22 and FY26 from 13 percent average between FY17 and FY19.

The commission has also recommended that the FRBM Act needs major restructuring and the timeline for defining and achieving debt sustainability should be examined by a high-powered inter-ministerial group. This group can draft the FRBM Act and oversee its implementation.

Healthcare spending has also received attention in the report. The finance commission has recommended that health spending by states should be increased to more than 8 percent of their budget by 2022.

It has also recommended that total public health expenditure should be increased to reach 2.5 percent of GDP by 2025.

To discuss the recommendations, Shereen Bhan spoke to NK Singh, chairman of 15th Finance Commission.

Speaking about Budget 2021 Singh said, “Budget 2021 marks a tectonic mind-set change. We have for once got out of the miasma of uncertainty to embrace the market or to get out of the market, to privatise or not to privatise, to find scope for private capital or to spotter private capital, I think we had remained trapped in this for very long. This Budget recognising for the first time that the issue of the ownership of public sector banks should not be cast in stone, that public sector undertakings which had become unproductive and outlived their utility yielding very poor returns to the sovereign which had invested vast resources on this, required a fundamental rethink.”

Speaking about Goods and Services Tax (GST) he said, “Realisations from the GST by way of revenue and by the consequence also on the GST cess has been less than what was expected and it has impacted the finances both of the union government and the states as well. In our chapter relating to resources we have given number of important suggestions on how to restructure the GST and these have been favourably commented upon by the finance minister herself in her Budget speech that on many issues, the GST administration, the procedures and in terms of the broad structure, we need to go back to the drawing board. The GST certainly requires a very fundamental restructuring and the finance secretary has said that they are quite conscious of this and that the GST council would consider many of the suggestions which have been made on the basis of our priority.”

Source: cnbc-tv-18

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Centre unable to pay GST dues to States: Union Finance Secretary

Centre unable to pay GST dues to States: Union Finance Secretary

Finance Secretary Ajay Bhushan Pandey told the Parliamentary Standing Committee on Finance, headed by BJP MP Jayant Sinha, at a meeting on Tuesday that the government is in no position to pay the GST share of States as per the current revenue sharing formula, sources said.

According to at least two members who attended the meeting, Mr. Pandey’s comments were in response to a question on the revenue shortfall due to the pandemic. The members then questioned him on how the government could renege on the commitment to the States. At this, “he [Mr. Pandey] pointed out that the GST Act has provisions to rework the formula for paying compensation to the State governments if the revenue collection drops below a certain threshold,” one of the members said on condition of anonymity.

The Finance Ministry on Monday said the Centre had released the final instalment of ₹13,806 crore of GST compensation for the financial year 2019-20.

The GST Council was scheduled to meet in July to try and work out the formula to rework the compensation to the States. However, the meeting has not been convened so far.

The opposition members meanwhile were up in arms, as the committee which was meeting for the first time since the nationwide lockdown instead of discussing the State of Indian economy, took up the topic “Financing the innovation ecosystem and India’s growth companies”.

Congress MPs Manish Tewari, Ambika Soni, Gaurav Gogoi and NCP MP Praful Patel, according to sources, vociferously, demanded that the Committee discuss the current state of economy which has suffered a huge set back because of the pandemic. Mr. Tewari in a letter to Chairperson, Mr. Sinha, had earlier pointed out that the people will consider the Committee to be “delusional” to discuss the chosen topic in a hour of crisis.

According to sources, Mr. Tewari pointed out that even the Budget passed by Parliament on March 23 may no longer be relevant since it was based on certain assumptions about the revenue collections. There is no clarity so far from the government on overall revenue shortfall, he pointed out. Congress MP Gaurav Gogoi said the panel must also scrutinise the efficacy of the government’s rescue package.

It is learnt that Mr. Sinha, the Committee Chairperson, said most of the questions posed by the members were political in nature and cannot be answered by Finance Ministry officials. These can only be replied to by Finance Minister Nirmala Sitharaman and can be taken up when Parliament meets during debates on the subject. in either houses of Parliament.

To this Mr. Praful Patel said if the Standing Committee on Finance cannot discuss even the basic question of the state of economy, then it is better to disband the panel, sources added.

Sources: The-Hindu

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GST Rates Can Be Reduced Further As Tax Base Increases: Finance Secretary

GST Rates Can Be Reduced Further As Tax Base Increases: Finance Secretary

GST rates can be reduced further once the tax base increases and everyone pays taxes properly, Finance Secretary Ajay Bhushan Pandey said on Thursday.

“Once the tax base increases and if we are able to enforce our tax laws and everyone pays taxes properly, there will be definitely scope for further reduction of taxes,” he said.

Addressing a session on ”Digitisation in Governance” at CAPAM 2020, he said the ultimate aim should be that to collect minimum taxes at minimum rates.
“The government should collect taxes which are absolutely necessary and to that extent, we need to increase our tax base,” he said.

Mr Pandey said the government is also working on reducing the number of forms under the GST.

He said that there were 495 forms in the pre-GST era with 17 different taxes which were levied by various states.

“After the introduction of GST, the number of forms have reduced to 17-18 and we want to further cut down the number of forms in GST,” he added.

He said that with IT-enabled platforms there is no inspector raj now and GST regime has become faceless.

Elaborating on the new measures for income tax assessment, including the faceless assessment of taxpayers, he said that the government is working on promoting self-compliance.

He added that the government is also working on providing tax profile of each taxpayer.

“We have all the information and if it can be shared in a secure manner, protecting the privacy of the individual, this will also help in securing loans from banks. The entire digital exercise is being undertaken across various government departments. We are making all that information available and providing it to each taxpayer,” Mr Pandey said.

He also said that all the information is getting integrated for the benefit of the citizens, including ease of doing business, ease of living and is enhancing capabilities.

Stressing on the importance of digitisation, Pandey said that India is the only country to have Aadhaar, Aadhaar-enabled payment system, direct benefit transfer scheme and UPI payment scheme. “Use of digitisation in governance has improved our speed, effectiveness, efficiency and capabilities,” he added.

He noted that in the last three months, Aadhaar-enabled transaction have crossed Rs 50,000 crore and UPI transaction has taken over debit card transaction and cash withdrawals.

Referring to the revenue trend, he said all figures are giving an encouraging signal that the economy is coming back on track sooner than what was being anticipated when the lockdown started.

Source: NDTV.

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‘GST changes game for tax evaders’: Finance secretary

‘GST changes game for tax evaders’: Finance secretary

‘GST changes game for tax evaders’: Finance secretary

Finance secretary Hasmukh Adhia said on Tuesday that goods and services tax (GST) will “change the game” for those who avoid to paying taxes. “When GST was introduced it was hailed as a gamechanging tax reform. Do you know what is game changing? It is an innovation which can spoil the games people were playing to avoid paying taxes,” Adhia told a gathering of exporters, while delivering his speech in Hindi. The rollout of GST has been seen as a measure to plug loopholes and ensure that businesses across the country start paying taxes. Using high-end return filing and matching system, the new tax regime makes it tough for tax evaders. Introduction of GST is also seen as the government’s overall strategy to nab evaders.

Adhia, who has played a key role in the implementation of the new tax reform measure, explained in detail to exporters how it will benefit them. “Leave aside the transition problems. I want to assure you that in the long term it (GST) will benefit exports.”

The finance secretary explained the reason behind delay of refund for exporters and how the government had responded swiftly to address the problem. He said wrong filing of returns along with technological problems had delayed the process.

Adhia also elaborated the benefit of GST for exporters. “Earlier some states would give VAT refunds after two-to-three years, some would never give. Plus there was no credit for 5% octroi if you were in Mumbai. Under the GST system being put in place to file one application, get one refund order and get one refund. This will ease life and will boost exports.”

He said once the system stabilises, exporters will get refund for Integrated GST (IGST) as soon as they file for it. Adhia said the government has devised a manual cum automatic way of filing refund. “This is an online system. Printout has to be submitted to jurisdictional officer.”

Commerce and industry minister Suresh Prabhu said introduction of the new tax regime “would be the catalyst for spurring growth in the export sector. Lower duty on most of the items and reduction of cascading effect of various duties would lower the cost and make exports competitive”.

Source :  The Times of India