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The GST Bill is history in the making: P Chidambaram
GST should also subsume state taxes such as VAT, sales tax, entertainment tax and entry tax not levied by local bodies, luxury tax, taxes on lottery, betting and gambling, tax on advertisements, and state surcharges and cesses.
By: P Chidambaram | June 14, 2015 12:25 am
We are witnesses to history in the making. The question is: will it be made?
In the Budget Speech of 2005-06, I had set the goal of a Goods and Services Tax (GST). The GST proposal has had a bumpy ride. The irony is that everyone agrees that a GST is necessary, but cannot agree upon the scope, form and content of the GST.
The promise of Article 301
The fundamental objective of GST is to redeem the promise of Article 301 in Part XIII of the Constitution of India: "Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free."
But the reality is different
The history of inter-state trade and commerce in India is a sordid story of discriminatory taxes, undue preferences, trade and non-trade barriers, entry tax, octroi, and check posts. A newcomer would have thought that India was not one republic but a continent that consisted of many independent republics. The central government and the state governments used their powers of taxation to the hilt. They may have had a good reason to do so, but they failed to see that fewer and lower taxes would actually yield more revenue than numerous stiff taxes.
GST is intended to sweep away many taxes. An ideal GST should subsume central excise duty, service tax, additional duties of excise, additional and special additional duties of customs, and central surcharges and cesses. It should also subsume state taxes such as VAT, sales tax, entertainment tax and entry tax not levied by local bodies, luxury tax, taxes on lottery, betting and gambling, tax on advertisements, and state surcharges and cesses. An ideal GST should also apply to all goods and services with nil or very few exemptions.
After a tortuous journey of nearly six years, the UPA government introduced the Constitution (115th Amendment) Bill in March 2011. Despite a report of the Standing Committee, largely supportive and helpful, the Bill was opposed by some state governments, mainly BJP governments, including Gujarat's. Hence the Bill could not be passed and it lapsed on the dissolution of the 15th Lok Sabha.
The U-turn and the Bill
Thankfully, the BJP did a U-turn and became an ardent supporter of GST. The BJP government introduced the Constitution (122nd Amendment) Bill in December 2014. It differed from the earlier Bill on many crucial aspects.
Nevertheless, there was a Bill, it was a good starting point, it was possible to forge a consensus either in the Standing Committee or on the floor of Parliament, and pass it in both Houses.
Alas, that did not happen. The Standing Committee was by-passed and the Bill was pushed through the Lok Sabha where the BJP has an absolute majority. As expected, it ran into a wall in the Rajya Sabha where the BJP does not have a majority and has landed where it should have landed in the first place — a committee, this time a Select Committee.
Here are some issues for the Select Committee. The path to a good Bill — and passage of the Bill — lies in a satisfactory resolution of these issues:
* What is the indicative aggregate rate of GST (central GST plus state GST)? It is whispered it will be 26 to 28%, which is exorbitant. The GST Council will recommend the rates, including floor rates and bands. In my view, it should be not more than 18%.
* What are the taxes that will be continued alongside GST?
* What are the excluded goods and services? I can understand alcoholic liquors being kept out, but why exclude petroleum products, tobacco and electricity?
* Have the states agreed to dismantle all check posts and entry barriers before a stipulated date?
* Is the IT backbone to support the administration of GST fully ready and in place?
Three more issues
There are three other issues that merit mention separately. The first is Section 18 of the Bill. This provision imposes an additional tax of not more than 1% on goods in the course of inter-state trade that will be assigned to the states (note the plural). It will be for two years, the provision reads, or for such period as the GST Council may recommend.
This is a retrograde provision and negates the very character of GST of a destination-based tax. The chief economic adviser, Dr Arvind Subramanian, has criticised the provision. Section 18 must go.
Secondly, the Bill leaves the dispute resolution mechanism to be decided by the GST Council later. It should be spelt out in the Bill.
The third issue is the date of effect of GST which, under the Bill, is April 1, 2016. The Bill before Parliament is only the amendment to the Constitution. It must be followed by a fleshed-out GST Bill and then by GST rules and regulations. Trade and industry need to invest in IT to comply with the new regime. Stake holders, down to the common citizen, must be educated on GST. Nothing has happened so far in these areas. Nothing will be lost if a new date is fixed, allowing sufficient time for everyone to get fully ready.
We are on the cusp of the most important structural transformation of the indirect tax system. Let us not flunk the test.
Source: Financial Express
India's IP climate deteriorates, China raises profile in IP; Borrowing cost goes up for Cos
India's IP climate deteriorates, China raises profile in IP; Borrowing cost goes up for Cos
MCA revises e-forms for audit
MCA substitutes Forms CRA-2 & CRA-4; Form CRA-2 is required for intimation of appointment of cost auditor by the company to Central Government; Form CRA-4 is required for filing Cost Audit Report with the Central Government : MCA
Click here to read more.
MCA extends time limit for filing audit e-forms
Time limit extended for filing form CRA-2 for appointment of cost auditor for FY 2015-16 till June 30, 2015; Similarly, time limit for filing form CRA-4 for filing cost audit report for FY 2014-15 extended till August 31, 2015; Additional fee on account of delay from prescribed period of 30 days in filing such forms is waived : MCA
Click here to read more.
CLB Chairman, Justice D.R. Deshmukh retires
CLB Chairman, Justice D.R. Deshmukh retires w.e.f June 5, 2015; He was serving his extended tenure of nine months after attaining retirement age on September 5, 2014 : CLB
Click here to read more.
Government issues final notifications providing exemptions to pvt cos., Govt cos., Sec 8 cos & Nidhis
Government issues final notifications under section 462 of the Companies Act, 2013 (Act) that provide exemptions under various provisions of the Act to (i) Private Companies (ii) Government Companies (iii) Section 8 Companies and (iv) Nidhis
Click here to read more.
Gazetted copy of withdrawal of old Ind AS
Govt notifies withdrawal of old Ind AS notified in 2011; Notification published in Offcial Gazette
Click here to read more.
Dear Patrons,
Recently, MCA vide notification dated June 5, 2015 granted several exemptions to private companies. Such exemptions include exemptions relating to related party transactions among private holding-subsidiaries, freedom to have its own class of capital / voting rights, procedural flexibilities in accepting deposits from members. Further, MCA has also removed the restriction of buying its own shares for pvt cos and directors of pvt cos. have been granted a right of participation in the decision making process subject to disclosure of interest.
In this article, the author, Prashant S. Vaishampayan (Practising Company Secretary, Pune), takes us through all the exemptions and their impact. With regard to related party exemption for pvt cos., whereby member of pvt co. (related party) shall be able to vote on resolution, to approve any contract or arrangement which may be entered into by the company, the author states that, "This will help the company to speed-up the processes by avoiding certain procedural hurdles".
Further, with regard to removal of restriction in giving loans for purchase of its own shares u/s 67, author expresses doubt and states that the intention of granting such exemption is not clear. The author concludes by saying that, "These various exemptions have definitely provided an opportunity to private operators to concentrate more on the business than on compliances and various hurdles... and boost 'Make in India' campaign of the Central Government".
Click here to read the article titled "Much awaited respite - Exemptions to Private Companies".
Best Regards
LSI Team
Strikes down AoA clause conferring discretionary powers to directors on share allotment
CLB sets aside disproportionate share allotment in pvt co (family business) that reduced one group of shareholdings, as "oppressive", directs Board of Directors to restore the earlier shareholding pattern; Rejects respondent co's contention that Article 7 of Articles of Association gave blanket powers to the directors to allot shares as they deem fit; Holds that,"no doubt that right of allotment is accrued to the Directors under Article 7.. but here, it is a family company running on partnership line, therefore, it cannot be said that Board is at liberty to change the shareholding pattern at the wish of the management in control"; Observes that pvt ltd cos were closely held cos., i.e., shares were held within the members of the co which was akin to partnerships where partners owe a duty to act with utmost good faith towards each other, thus, "the proportionate right the other family members have in the company cannot be whittle down by an Article of Association"; Further holds that though Articles have given Directors absolute right to make allotment, Articles don't give them right to make disproportionate allotments to the shareholdings already existing in the company, thus, "to beat one section of shareholders, Board cannot take a route of preferential basis and allot shares disproportionately"; Relies on SC ruling in Dale & Carrington Investment (P) Ltd vs P. K. Prathapan:New Delhi CLB
The ruling was delivered by Shri. B.S.V. Prakash Kumar (Judicial Member).
Advocates Sanjay Mishra, Gurpreet Singh and Jatin S Sethi argued on behalf of the petitioner, while respondents were represented Advocates Saurabh Kalia and Harshit Agarwal,Nikita Dwivedi,Vatika Seth,Mohd.Saif Abbasi,Lakshmi Gurung,Surjeet Kr.Mishra.
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Posted by: Dipak Shah <djshah1944@yahoo.com>
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