Shri Arun Jaitley Intoduces the Constitution Amendment Bill on Goods and Services Tax (GST) in Lok Sabha

Union Finance Minister Shri Arun Jaitley Intoduces the Constitution Amendment Bill on Goods and Services Tax (GST) in Lok Sabha; New Article 246a Proposed to Confer Simultaneous Power to Union and State Legislatures to Legislate on GST ; Centre To Compensate States for Loss of Revenue Arising on Account of Implementation of the GST for a period up to Five Years

The Union Cabinet approved on 17th December,2014 the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country. The Union Finance Minister Shri Arun Jaitley introduced the said Bill in the Lok Sabha today. The proposed amendments in the Constitution will confer powers both to the Parliament and State legislatures to make laws for levying GST on the supply of goods and services in the same transaction. GST will simplify and harmonise the indirect tax regime in the country. GST will broaden the tax base, and result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one state to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders. It is thus, expected that introduction of GST will foster a common and seamless Indian market and contribute significantly to the growth of the economy. Following are the salient features of this Bill: • A new Article 246A is proposed which will confer simultaneous power to Union and State legislatures to legislate on GST. • A new Article 279A is proposed for the creation of a Goods & Services Tax Council which will be a joint forum of the Centre and the States. This Council would function under the Chairmanship of the Union Finance Minister and will have Ministers in charge of Finance/Taxation or Minister nominated by each of the States & UTs with Legislatures, as members. The Council will make recommendations to the Union and the States on important issues like tax rates, exemptions, threshold limits, dispute resolution modalities etc. • It is proposed to do away with the concept of ‘declared goods of special importance’ under the Constitution. • Centre will compensate States for loss of revenue arising on account of implementation of the GST for a period up to five years. A provision in this regard has been made in the Amendment Bill (The compensation will be on a tapering basis, i.e., 100% for first three years, 75% in the fourth year and 50% in the fifth year). The proposed GST has been designed keeping in mind the federal structure enshrined in the Constitution and will have the following important features: • Central taxes like Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (CVD) and Special Additional Duty of Customs (SAD), etc. will be subsumed in GST. • At the State level, taxes like VAT/Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc. would be subsumed in GST. • All goods and services, except alcoholic liquor for human consumption, will be brought under the purview of GST. Petroleum and petroleum products have also been Constitutionally brought under GST. However, it has also been provided that petroleum and petroleum products shall not be subject to the levy of GST till notified at a future date on the recommendation of the GST Council. The present taxes levied by the States and the Centre on petroleum and petroleum products, i.e., Sales Tax/VAT, CST and Excise duty only, will continue to be levied in the interim period. • Both Centre and States will simultaneously levy GST across the value chain. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. • The Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supply of goods and services. There will be seamless flow of input tax credit from one State to another. Proceeds of IGST will be apportioned among the States. • GST is a destination-based tax. All SGST on the final product will ordinarily accrue to the consuming State. • GST rates will be uniform across the country. However, to give some fiscal autonomy to the States and Centre, there will a provision of a narrow tax band over and above the floor rates of CGST and SGST. • It is proposed to levy a non-vatable additional tax of not more than 1% on supply of goods in the course of inter-State trade or commerce. This tax will be for a period not exceeding 2 years, or further such period as recommended by the GST Council. This additional tax on supply of goods shall be assigned to the States from where such supplies originate.

Performance of National Food Security Mission (NFSM)

The performance of National Food Security Mission (NFSM) during 11th Five Year Plan has been assessed through an independent agency. The Mission has helped in widening the food basket of the country with sizeable contributions coming from the NFSM districts. The focused and target oriented implementation of mission initiatives has resulted in bumper production of rice, wheat and pulses. The production of wheat has increased from 75.81 million tonnes in pre-NFSM year of 2006-07 to 94.88 million tonnes during 2011-12 i.e. an increase of 19.07 million tonnes against the envisaged target of 8 million tonnes at the end of XI Plan. Similarly, the total production of rice has increased from 93.36 million tonnes in pre NFSM year of 2006-07 to 105.30 million tonnes in 2011-12 with an increase of 11.94 million tonnes against the target of 10 million tonnes. The total production of pulses has also increased from 14.20 million tonnes during 2006-07 to 17.09 million tonnes during 2011-12 with an increase of 2.89 million tonnes against the envisaged target of 2 million tonnes. Thus, 33.90 million tonnes of additional production of total foodgrains against the target of 20 million tonnes. The various interventions of the mission have been instrumental in bringing about significant yield gain to the farmers resulting into increase in their income level. The Mission has been continued during 12th Five Year Plan with inclusion of coarse cereals crops and commercial crops (sugarcane, jute, cotton). The Mission has target of additional production of 25 million tonnes of foodgrains comprising 10 million tonnes of rice, 8 million tonnes of wheat, 4 million tonnes of pulses and 3 million tonnes of coarse cereals by the end of 12th Five Year Plan.

India Signs First Bilateral Advance Pricing Agreement (APA)

India Signs First Bilateral Advance Pricing Agreement (APA) With A Japanese Company; APA Period is Five Years; APA Scheme Introduced to Bring About Certainty and Uniformity in Transfer Pricing Matters of Multi-National Companies and Reducing Litigation

Central Board of Direct Taxes (CBDT) signed here today a bilateral Advance Pricing Agreement (APA) with a Japanese Company. This is India’s first bilateral APA. The APA is for a period of five years. The APA has been finalized in a period of about one and a half years, which is shorter than time normally taken in finalizing APAs internationally. The APA scheme has been introduced to bring about certainty and uniformity in transfer pricing matters of multi-national companies and reducing litigation. APAs will improve investment climate in the country. In the context of growing economic ties between Japan and India, especially after the Prime Minister Shri Narendra Modi’s visit to Japan, this APA is expected to generate positive sentiments among Japanese investors in India.

GSLV Mark III takes to the skies in test flight

ISRO takes a step towards manned space flight

The first experimental flight of the Geosynchronous Satellite Launch Vehicle (GSLV) Mark III registered success as it lifted off from the second launch pad at the Satish Dhawan Space Centre in Sriharikota on the dot at 9.30 a.m. on Thursday, taking India much closer to realising the dream of manned space flight.

The mission control centre erupted in smiles and claps and the scientists hugged each other, as the GSLV Mark III moved a step closer to its first development flight with the functional C25 cryogenic stage.

Also known as LVM3/CARE, the suborbital experimental mission was intended to test the vehicle’s performance during the critical atmospheric phase of its flight and this carried a passive (non-functional) cryogenic upper stage.

The vehicle, exactly five-and-a-half minutes after take-off, carried its payload — the 3,775-kg crew-module atmospheric re-entry experiment (CARE) — to the intended height of 126 km. Two massive S-200 solid strap-on boosters, each carrying 207 tonnes of solid propellants, ignited at lift-off and separated 153.5 seconds later. The L110 liquid stage ignited 120 seconds after lift-off.

“This new launch vehicle performed very well and was a great success. We had an unmanned crew module to understand re-entry characteristics. That went off successfully and the crew module splashed as expected in the Bay of Bengal,” said Indian Space Research Organisation Chairman K. Radhakrishnan from the mission control centre.

With the module gently landing in the Andaman Sea, about 1,600 km from Sriharikota, the GSLV Mk-III X/CARE mission concluded successfully. “As it made its way back into our atmosphere, the parachutes performed as per the speed that we expected,” said S. Unnikrishnan Nair, Project Director, Human Spaceflight Programme.

The former ISRO Chairman K. Kasturirangan, who was present, said, “ Every GSLV should go higher not only physically, but mentally too.”he first experimental flight (GSLV Mk-III X/CARE) of India’s next generation launch vehicle GSLV Mk-III was successfully conducted today (December 18, 2014) morning from Satish Dhawan Space Centre SHAR, Sriharikota. Also known as LVM3-X/CARE, this suborbital experimental mission was intended to test the vehicle performance during the critical atmospheric phase of its flight and thus carried a passive (non-functional) cryogenic upper stage. 

The mission began with the launch of GSLV Mk-III at 9:30 am IST from the Second Launch Pad as scheduled and about five and a half minutes later, carried its payload – the 3775 kg Crew Module Atmospheric Re-entry Experiment (CARE) – to the intended height of 126 km. Following this, CARE separated from the upper stage of GSLV Mk-III and re-entered the atmosphere and safely landed over Bay of Bengal with the help of its parachutes about 20 minutes 43 seconds after lift-off. 

Two massive S-200 solid strap-on boosters, each carrying 207 tons of solid propellants, ignited at vehicle lift-off and after functioning normally, separated 153.5 seconds later. L110 liquid stage ignited 120 seconds after lift-off, while S200s were still functioning, and carried forward for the next 204.6 seconds. CARE separated from the passive C25 cryogenic upper stage of GSLV Mk-III 330.8 seconds after lift-off and began its guided descent for atmospheric re-entry. 

After the successful re-entry phase, CARE module’s parachutes opened, following which it gently landed over Andaman Sea about 1600 km from Sriharikota, there by successfully concluding the GSLV Mk-III X/CARE mission.

Carbon-dioxide emissions at all-time high in 2013

4.2 % rise in India’s discharge of the greenhouse gas: study

Global carbon-dioxide emissions from burning of fossil fuels and production of cement reached a high of 35.3 billion tonnes in 2013, mainly due to the continuing steady increase in energy use in emerging economies such as India, a new report says.

Brazil (6.2 per cent), India (4.4 per cent), China (4.2 per cent) and Indonesia (2.3 per cent) reported a sharp rise in emissions of the greenhouse gas that year.

The global emissions, however, increased at a notably slower rate of 2 per cent than the average yearly 3.8 per cent since 2003. The slowdown, which began in 2012, signals a further decoupling of global emissions and economic growth, mainly reflecting the lower emissions growth rate of China, says the annual “Trends in global CO emissions” released by the Netherlands Environmental Assessment Agency and the European Commission’s Joint Research Centre.

The top three

China, the United States and the European Union remain the top three emitters of carbon dioxide, accounting for 29 per cent, 15 per cent and 11 per cent, respectively, of the world’s total. After years of a steady decline, the emissions of the gas by the U.S. grew by 2.5 per cent in 2013, mainly due to a shift in power production from gas back to coal and an increase in gas consumption for space heating, the report says.

In the European Union, emissions continued to fall — by 1.4 per cent in 2013.

The much lower increase in emissions in China — 4.2 per cent in 2013 and 3.4 per cent in 2012 — was primarily due to a decline in electricity and fuel demand from the basic materials industry, and aided by an increase in renewable energy and improvements in energy efficiency.

“With the present annual growth rate, China has returned to the lower annual growth rates that it experienced before its economic growth started to accelerate in 2003, when its annual carbon dioxide emissions increased on average by 12 per cent a year,” the report says.

Increase in life expectancy more in women in India

A Global Burden of Disease Study 2013 published today (December 18) in the journal The Lancetpoints out that in the case of India, the life expectancy at birth during the period 1990 to 2013 had increased for both men and women.

In the case of men, the increase in life expectancy was from 57.3 to 64.2 years and in the case of women, it was from 58.2 to 68.5 years between 1990 and 2013. The reduction in death rate was seen both in adults and children. Though the death rate per year witnessed a drop both in adults and children, it was more in the case of children than adults. At 3.7 per cent, the death rate reduction per year in children was much more than that of adults, which was at 1.3 per cent.

According to the report, ischemic heart disease was the number one cause of death in India in 2013. The other leading causes (in descending order) were lower respiratory track infections, tuberculosis, neonatal encephalitis, preterm birth complications, diarrhoea, stroke, chronic obstructive pulmonary disease (COPD), suicide, and finally road injuries.

“COPD is caused due to lung damage. Smoking is one of the causes of COPD. But in the case of women in India, COPD is more due to indoor pollution than smoking. Even TB could be an important cause,” Dr. Soumya Swaminathan, Director of the Chennai-based National Institute for Research in Tuberculosis (NIRT) told this Correspondent. While TB is the number three cause, diarrhoea is way down at the sixth position. Referring to this, Dr. Swaminathan said: “That shows that interventions for diarrhoea have really worked and reduced the number of deaths, while in the case of TB the interventions have been less effective in reducing deaths. This is despite RNTCP being effective and bringing about 20 per cent reduction in TB deaths in India.”Across the world, deaths from diarrhoeal diseases between 2000 and 2013 fell by about 31 per cent.

Though there has been much reduction in the number of deaths in under-five children across the world and in India, lower respiratory track infections and diarrhoea are two of the three causes seen in India. But other causes like neonatal encephalitis and preterm birth complications that affect children continue to be major causes of death in India. Globally, neonatal deaths fell significantly since 2000.

Half of all suicide deaths that occur in the world are in India and China. “Suicide is a major and growing public health problem in India,” notes a release. What is of great concern is that though India and China account for half of global suicide deaths, the number of suicides was reducing “rapidly” in China while it was “rising” in India during the period 1990-2013. “Both countries have undergone economic growth and urbanisation, a key factor in limiting access to lethal pesticides, a common method of suicide by poisoning in both countries. Therefore, as yet unexplained reasons must exist for the divergence between the two countries,” the paper notes.

What becomes abundantly clear is that ischemic heart disease is the only lifestyle disease in the top ten causes of deaths in India. This is in complete variance with what is seen in the developed countries.

Good Serviceable Tax

The Central government must address five challenges if its April 1, 2016, deadline for rolling out the GST is to be met.

First, the challenge of GST design. This has to be arrived at in two steps. First, the tax base needs to be agreed on. Second, the methodology of levy, collection and appropriation needs to be finalised. So far, neither has been done. The states have not yet agreed to the Centre’s proposal to subsume taxes on petroleum products and entry into the GST. No unanimity has been reached on the proposed threshold of Rs 10 lakh. Also, two major issues that will significantly broaden the GST base and lower the revenue neutral rate (RNR) have not been examined: the inclusion of real estate and the treatment of e-commerce in the GST.

 Preliminary calculations reveal that an additional revenue of about Rs 20,000 crore can be generated by including property transactions in the GST. The ongoing confrontation between Amazon and the government of Karnataka on tax payable on e-commerce transactions highlights the need to put in place transparent and predictable point-of-sales rules for this burgeoning sector.

The empowered committee of state finance ministers (EC) is reportedly considering a recommendation that the RNR for state GST (SGST) be 14 per cent, and 12.7 per cent for Central GST (CGST). This adds up to 26.7 per cent, against the present tax rate of about 26.5 per cent. Imposing a GST with a higher RNR than the present aggregate rate may not be worth the effort. The 13th Finance Commission had suggested a model GST base, according to which the SGST would be 7 per cent and CGST, 5 per cent. The Centre should ensure that the tax base is not diluted unreasonably and all revenue options are explored to keep the RNR as low as possible.

Further, which agency will have the last word on design is unclear. As per the draft Constitutional (122nd Amendment) Bill, all the parameters will be finalised by the GST council, which will come into being only after the amendment. However, the amendment won’t be passed until there is agreement on the design, the RNR as well as the levy and appropriation modalities. The bill should be amended to allow the GST design to be frozen prior to its approval.

The second challenge is the need to promote inclusion. So far, discussions have been confined to two of the four stakeholders: the Centre and the states. Since the EC takes decisions on consensus, issues raised by a minority often hold sway. The other stakeholders in the GST framework industry, traders and consumers —  are not involved in the debate. This can be done by making the proceedings of the EC more transparent by publishing not only its meeting agenda and minutes on its website but also the reports of its various committees. Further, trade, industry and consumer representatives should be invited to address the EC on all issues of importance. 

Third, the reinforcement of trust between the Centre and the states. The states have not yet received compensation promised by the Centre for the reduction of Central sales tax. No provision has been made for this in the 2014-15 Union budget. 

This is dampening the states’ enthusiasm. Further, there is an asymmetric burden on the states for the implementation of the GST. They surrender more taxes than the Centre to the GST pool and have less revenue sources outside this pool than the Centre. Keeping this in mind, the Centre should relax its present stance and agree to the states’ demand to compensate GST losses for a period of five years. The fourth challenge relates to operational issues, the most important being the goods and services tax network (GSTN). 

There is need for an information-intensive electronic network to allow for uniform registration, reporting and tax-payment practices across all the states. While the GSTN company has been set up, the states will have to run complementary portals that can integrate with this network. Many small states do not have this capacity. We must, therefore, allow for differential implementation. Some states could join the network at their own pace. In addition, the operating procedure and training manuals need to be finalised along with integrated GST and place of supply rules. Operating staff as well as traders and dealers will have to be trained. 

The fifth challenge is timing. As was seen during the implementation of the VAT in 2005, some states may not join the GST for reasons other than fiscal. If the 2016 deadline is to be met, the design must be tweaked to accommodate staggered implementation. Thus, the GST design should provide for both staggered and differential implementation. Unless these five challenges are holistically addressed, it may be difficult to meet the GST deadline. To catalyse this process, the Centre could consider implementing a CGST with effect from April 1, 2015. The present Central excise and service tax levies should be merged into a single CGST, allowing for a common return, assessment, and audit and refund framework for both these taxes. Taking this step would signal the Centre’s strong commitment to the GST