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GST not to Affect Trade, Investment: Finance Minister

October 14th, 2009

The finance ministry has assured other government departments that the proposed goods and services tax (GST) would not have an adverse impact on trade and investments in the country. The issue was taken up at an internal meeting held by Cabinet secretary KM Chandrasekhar on Tuesday with top officials from all central ministries on GST and the Direct Taxes Code (DTC).

Concerns were also raised over provisions in the draft Code including the proposed shift in minimum alternate tax (MAT) from gross profits to gross assets and the move from profit-linked incentives to investment-linked incentives, as many ministries are of the view that these would hurt the profitability and the performance of companies. Finance minister Pranab Mukherjee has already promised to review the proposal of MAT in the draft Code.

Meanwhile, revenue secretary PV Bhide and officials from the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC) held presentations on GST and the Direct Taxes Code and also fielded queries from those present. GST and the Direct Taxes Code will completely overhaul the country’s tax regime over the next two years. GST would subsume excise duty, service tax, value-added tax and other state-level duties, and is slated to be introduced from April 1, 2010. The finance ministry is planning to implement the Direct Taxes Code from 2011-12. The Code aims to replace the current Income Tax Act, 1961. To lay the groundwork for these changes in the taxation system, finance minister Pranab Mukherjee also met representatives from trade and industry last week to discuss their concerns on the draft Code and is expected to hold more such meetings in coming days.

Government in a Fix over CAT Order on CBDT Chief

October 14th, 2009

The government is in a fix over the directive of the Central Administrative Tribunal (CAT) to consider Narinder Singh, a member of the Central Board of Direct Taxes (CBDT), for the post of CBDT chairman with retrospective effect. As it cannot demote the existing chairman S S N Moorthy after appointing him in February 2009 for two years, the government may now move court against the CAT order.

“It is not possible to demote Moorthy now. The government may also think of challenging the CAT’s directive in the high court,” a government official said. CAT, the body for resolving disputes related to the recruitment and conditions of service of government officials, has asked the government to implement its order in 3 months. “Singh has said that the selection took place based on incorrect facts. CAT has also agreed that some error was made during the selection process,” the official added.

Moorthy’s name was suggested by the selection committee of secretaries, comprising the revenue secretary, and approved by the Appointments Committee on the Cabinet. Singh had moved the tribunal saying he was overlooked for the post of CBDT chairman despite being senior to Moorthy. Singh, a 1972-batch Indian Revenue Services (IRS) officer, was appointed a member of the board in August this year. Earlier he was director-general of Income Tax (Exemptions). He is due to retire on May 31, 2010, whereas Moorthy, a 1973-batch IRS officer, will continue in the government service till December 2010.

New Direct Taxes Code Ignores Small Traders, Industries: TN Chamber

October 14th, 2009

The new Direct Taxes Code has been loaded with tax concessions benefiting persons with high income, the Tamil Nadu Chamber of Commerce and Industry, has said. Submitting the views of the Chamber at an interaction meeting with the trade and industry representatives convened by the Union Finance Minister, Mr Pranab Mukherjee, and the Minister of State for Finance, Mr S.S. Palanimanickam, on the new Direct Taxes Code, held at New Delhi recently, the Chamber President, Mr V. Neethi Mohan, and the Secretary Mr N. Jagatheesan, called for the inclusion of the interest of small traders and industries and urged for the incorporation of necessary changes along with other changes before its implementation.

They pointed out that the minimum alternate tax based on gross assets would adversely affect many companies across sectors and the tax payable at two per cent was above the international rates. Even the loss-making companies would need to pay the tax and further would tantamount to double taxation in certain cases going by records in the books.

SUGGESTIONS

Points submitted by the Chamber, among others, include tax rates for firms and LLPs, taxation of retirement benefits, housing loan interest for self-occupied persons, reopening of cases for assessment, silence on the requirement of AIR/PAN number for investments, tax on foreign companies, Trust and NGOs, increase in the capital gains tax rate, non-exemption to Special Economic Zones and so on.

CFOs see April 2011 more Apt for GST Rollout: Deloitte

October 14th, 2009

While the proposed Goods and Services Tax (GST) has been widely perceived as beneficial for the economy, the government needs to set to rest the apprehensions surrounding the suitability of the dual structure of the GST model, says a survey released by the consultancy firm Deloitte on Tuesday.

The firm surveyed finance executives of leading corporate houses who vouched for the new unified tax, but they questioned the suitability of the dual structure, which seems to be the only practical alternative as of now.

The surveyed executives also shared concern about the possibility that a few states may not join the GST bandwagon. The current tax structure in India consists of federal and state levies on goods and services that are administered by the central and state governments, respectively. It has its own drawbacks such as cascading multiple taxes, higher administration cost and complex compliance.

While presenting the budget for the year 2009-10, the finance minister had indicated that the dual GST structure will be implemented on April 1, 2010. However, the design of the dual GST is yet to be released in the public domain for discussions. Nevertheless, it has been observed that in a typical dual GST structure, the central and state governments concurrently levy tax on a common base for supply of goods and services.

In case the government is not in a position to fully implement GST by April 2010, about half of the correspondents favour central GST being implemented first followed by state GST whereas about one-third respondents favour simultaneous implementation of dual GST in all states.

The respondents were divided over extension of GST to products of conspicuous consumption that attract high tax rate, continuation of existing and fresh incentives or the manner in which tax credit will be made available on capital goods.

Deolitte points out that to adhere to the April 2010 deadline, the government would need to mobilise its infrastructure in an unprecedented way to undertake internal re-organisation of roles and responsibilities, develop business process and audit manuals, train its resources and most importantly to achieve a degree of IT-enabled environment that the checks and balances in GST require.

“The most significant point to note in the survey is the view put forward by many respondents that the appropriate date for GST introduction is April 2011. This clearly shows that there is a perception of lack of preparedness on the part of trade and industry and also the government to handle GST,” said Mr Prashant Deshpande, senior director-Indirect Tax, Deloitte.

RBI Reference Rate for US $ and Euro – 14th October 2009

October 14th, 2009

The Reserve Bank of India’s Reference Rate on October 14, 2009

for the US dollar is Rs. 46.16

for Euro is Rs. 68.70

The corresponding rates for the previous day (October 12, 2009) were Rs. 46.58 and Rs. 68.48 respectively.

GST to Reduce Manufacturing Cost: Expert

October 13th, 2009

The proposed Goods and Services Tax (GST) would reduce manufacturing cost and benefit end-customers, 13th Finance Commission Chairman Vijay Kelkar said here on Monday.

“The new tax regime will reduce prices of manufacturing goods, attract higher investment and create employment due to its rationalisation and simplification of taxes,” Kelkar told reporters on the margins of a conference.

Noting that the Indian manufacturing sector was highly taxed, Kelkar said the elimination of multiple tax structure at central and state levels would make the sector viable and globally competitive.

“Our manufacturing sector is one of the highest taxed sectors in the world. Even a two per cent reduction in production cost will increase profits by over 20 per cent, giving headroom for reducing prices and benefiting end-users,” Kelkar said after addressing the conference on the GST at the national executive meeting of the Federation of Indian Chambers of Commerce and Industry (FICCI).

Hoping that the central and state governments would build a consensus to introduce the GST from April 1, 2010, Kelkar said such a move would perhaps be the single-most important reform stimulus since the 1991-92 economic reforms.

“A flawless GST will remove the historic tax-induced bias against the manufacturing sector and increase the growth in the output, export and blue collar employment,” Kelkar asserted.

Under the terms of reference, the finance commission had set up a task force to study the impact of the GST on the country’s finances and foreign trade.

The panel also commissioned a study by the National Council for Applied Economic Research (NCAER) to assess its impact on the GDP (gross domestic product) growth and exports.

“The study indicated that the GDP can grow by 2-2.5 per cent with the implementation of a well designed GST and exports can be increased by 10-14 per cent,” Kelkar said.

The task force report on GST will be uploaded on the panel’s website by this month-end.

On the states’ demand for a two-slab system in the GST, Kelkar said the empowered committee of the state finance ministers would soon come out with a paper on the pros and cons of a single or twin rate structure.

The GST will be a dual tax with both central and state GST component levied on the same base.

All goods and services barring a few exceptions will be brought into the GST base. There will be no distinction between goods and services for tax purpose with a common legislation applicable to both.

“There should be an identical GST laws across states and the centre for the new tax regime to be effective. A unified approach will simplify procedures, eliminate bottlenecks and reduce transaction costs for dealers,” Kelkar added.

GST not to Affect Trade, Investment: Finance Minister

Government in a Fix over CAT Order on CBDT Chief

New Direct Taxes Code Ignores Small Traders, Industries: TN Chamber

SUGGESTIONS

CFOs see April 2011 more Apt for GST Rollout: Deloitte

RBI Reference Rate for US $ and Euro – 14th October 2009

The Reserve Bank of India’s Reference Rate on October 14, 2009

for the US dollar is Rs. 46.16

for Euro is Rs. 68.70

GST to Reduce Manufacturing Cost: Expert

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