Blogging about Society, individual and collective behaviour/herd mentality, nudges,economics,business,politics,sports and spirituality and on all the other subjects about which I know very little !!
The GST collections trend in India upto June 2023 in FY23-24:
April 2023: Rs. 1,87,035 crore (highest ever)
May 2023: Rs. 1,57,079 crore
June 2023: Rs. 1,61,497 crore
The average monthly gross GST collection for the first half of FY23-24 is Rs. 1,69,000 crore. This is 12% higher than the average monthly collection for the same period in FY22-23.
The GST collections have been consistently growing in the current financial year. This is due to a number of factors, including the strong growth of the Indian economy, the increasing compliance with the GST law, and the government's efforts to boost digitization and transparency in the tax system.
The average monthly gross GST collection for the first quarter of the FY 2021-22, FY 22-23 & FY 23-24 are Rs. 1.10 lakh crore, Rs. 1.51 lakh crore and Rs. 1.69 lakh crore respectively, the finance ministry said.
The gross revenue has crossed the 1.6 lakh crore mark for the fourth time since the inception of GST in the country.
With the Economy Budgeted to grow at a Nominal Growth rate of 10.5% in this fiscal, the GOI is confident of reaching its GST revenue targets comfortably, if the same momentum is sustained for the rest of the year.
The second half of the year will be crucial in that respect since the Global recession is expected to hit the country's imports and exports and consequently this will impinge on GST revenues.
GOI and RBI may have to work with Growth supporting measures at that time.Let us cross the bridge when we come to it!
FS Dr.TVS rightly mentioned that Tax to GDP ratio should go up.
Couple of thoughts related to this and other Revenue augmentation avenues;
a) Tax exemption except for Primary produce which are Agri products, is anathema to Value Addition. I would say that Value Add abhors tax exemption, with few exceptions!!
It also militates against the concept of Nominal GDP growth rate as it is always zero and so unaffected by inflation or deflation. In the same breath, Agri income should also be taxed at say 0.1% atleast.
Therefore, my humble submission to Govt , is to take a relook at all exempted/zero (0)-rated products under GST etc.Atleast these products should be brought under 1% slab by creating a new slab.
b)Mining Royalty rates should be indexed to inflation.
c) EB overdues to Power generation companies as per PRAAPTI.in is increasing every month which have touched Rs.1.07 lac cr. as of Feb 2022.
You might have noticed that this is a serious drag on the economy, which will have repercussions on the lenders .
d)Local bodies charges, EB tariffs must be indexed to inflation to keep them out of State Politics.
Mr.N.Venkatraman,Additional Solicitor General,GOI, has clearly brought the key aspects of this landmark judgment delivered by SC. The confusion stemmed from the attention-grabbing headlines made by media, stating GST Council recommendations are non-binding on Centre and States and have only persuasive value at the most.
The nuanced reading of this Judgment with its emphasis on cooperative federalism has not been clearly understood by opposition-ruled states like TN. Politicians ruling in the States rarely understand that Cooperative Federalism is a multiway street.CF not only means harmony in the Centre-State relationship, but also means InterState harmony ( not at all seen even between contiguous States like TN,Kerala, Karnataka,AP)and finally also means Intra-state harmony. When they keep harping on the point that States are not consulted by the Centre with respect to Indirect Taxation, they forget to what extent they do consult the Stakeholders like Industry and citizens before bringing in Changes in taxation within their realm say Property Tax,local Bodies Tax etc. within their States.
States lecture about Cooperative Federalism to the Centre only when it is convenient for them on issues that impinge on their rights and ignore when it comes to bilateral or multilateral issues and shift the blame to the Centre. The concepts of 'give and take" and coordinated and synchronized functioning with right balancing of their interests, are a must for a healthy and robust relationship between the various organs of the Union of India which is akin to functioning of a Human body.
Comptroller and Auditor General of India(CAG) is the top Govt Auditor of India, who is a Constitutional authority. He Audits all the Central and State Govt related accounts and gives his report with his findings, lacunae observed in the system, along with necessary corrective measures as per the best practices around the world.
In his latest report on the Income & Corporate Tax department functioning under the Central Govt, he has given some damning statistics. People in the know feel vindicated with his report lashing at the ineptitude of the Dept in tackling the inefficiency of the tax bureaucracy.
Let us look at some of his key observations:(link)
1)Income tax arrears of demand has increased from Rs.11 lac cr.in 2017-18 to Rs.12.3 lac cr, in 2018-19.
2) Out of this Rs.12.3 lac cr. the Tax dept itself says 99% of it is non-collectible or in other words, would be difficult to recover.
3)At the CIT Appeals, which is the first forum of Appeals,the Auditor observed, the number of cases has gone up from 3 lacs in 17-18 to 3.4 lacs in 18-19 and the total amount locked up has gone up from Rs.5.19 lac cr to Rs.5.6 lac cr.
4)The above amount of Rs.5.6 lac cr is more than the revenue deficit of the Central Govt for the relevant year, the CAG has remarked.
5)The total cases pending at the higher courts i.e ITAT/High Court/Supreme Court have gone up from 82000 in 17-18 to 1.35 lacs in 18-19, which is a whopping 65% jump.
6)CAG also observed that "there have been persistent and pervasive irregularities in respect of Corporation tax and Income tax assessments cases over the years.Recurrence of such irregularities, despite being pointed out repeatedly in the earlier Audit reports point to structural weaknesses on the part of the Department as well as the absence of appropriate institutional mechanism to address this".
7)The auditor has reviewed 2.72 lakh out of 2.99 lakh cases taken up by the I-T department for scrutiny during 2017-18. CAG has also audited 60,000 cases of scrutiny assessments completed in the earlier financial years. CAG found an incidence of errors in assessments checked in audit at 6% (19,768 cases), as against 6.45% in the previous year.
8)More than 82% of individual taxpayers faced TDS mismatch problems during the last three years resulting in disallowance of refund and the creation of avoidable harassment of taxpayers who are mostly middle-class salary earners.
All the above are reflections of deep-rooted malaise plaguing the system of assessments, appeals etc. The tax department is afflicted by the disease of "Appealititis" as per one of the earlier observations of CAG. The tax bureaucracy always plays safe disregarding well-founded precedent judgements of ITAT/HC and even SC, which are in favour of assessees.They conjure up a point of differentiation from precedent judgments which may sometime look contrived, trivial,frivolous, flimsy, and they blow it out of proportion to suit their arguments. The tax department is addicted to filing appeals against the hapless and penniless assessees even after SC ruling against it.This is the special caprice of the experts in the Tax dept, which drives the assessees bankrupt , if not mad.
You add the judicial delay to this and the cost of fighting these mostly infructuous appeals and what you get is a heady decoction of endless litigation!!!The cost of all this finally falls on the honest taxpayers.
Honest taxpayers still wait for the fructification of the vision of our PM who has drawn a charter for Honouring the Honest.Hope it does not become an endless wait!
India's FM is an unenviable position. Given the penchant for two steps forward and one step backward in all economic decisions, FM is in the eye of the storm unendingly ever since the pandemic struck India. In fact, even before that, India's GDP was sliding YOY from 2016-17 onwards. It hit a high of 8.26% in 16-17 and hit the lowest so far in Fiscal 19-20 at 4.2%.
GST collections have also ebbed along with the GDP since even Nominal GDP has grown only by 7.2% in Fy 19-20.It was growing at 11.76% in Fiscal 16-17. So, this skidding of the nominal growth rate coupled with a reduction in GST rates in 2018 led to a shortfall in GST collections even though the tax base widened. The good thing about the One Nation, One tax has been the acceptance of this Taxation in lieu of VAT at the individual state level and Excise duty at the Central level. The consensus behind GST has been bought by Arun Jaitley with the commitment for providing Central funds at the growth rate of 14% YOY to the individual States, by levying Compensatory cess on luxury and sin goods. However, the Central Govt is caught on the wrong foot this year due to the pandemic. The tax collections are abysmally low and this has forced the Central Govt. to consider reneging on its promise of providing compensatory funds to the states.
In the recent 41st GST Council meeting, FM has been compelled to use the insurance phrase of Act of God i.e force majeure(or Hand of China?!), to describe the extraordinary situation due to the Covid pandemic. Due to this compulsion, the Central Govt has presented two options to the States to consider and give their replies in a week's time. Under Option 1 States may borrow Rs.97K cr at a special interest rate and the principal and the interest will be later on paid out of Compensatory cess on Cars, Soft drinks, tobacco, pan masala, and coal. Under Option 2 States can borrow up to Rs.2.35lac cr and States will have to pay interest at the market rates.Only the principal will be paid out of Compensatory Cess later and the interest will have to be provided in the States' Budgets. In this GOI has made a fine distinction between GST implementation loss and Covid induced tax revenue loss which is also hair-splitting and needlessly academic, if not contentious.
Now the overall emerging scenario is one of confrontation between the Centre and the States. All economists are now supporting the States saying that since it is the commitment of the Central Govt. it has to find the resources for funding this GST collection shortfall. Of course, they are of the view that the Central Govt can source this fund at a much cheaper cost than what the States could bargain for.This is an important point. However Finance Secretary has gone on record saying that if the Centre resorts to this borrowings, overall bond yields may go northwards, which will raise the cost of borrowings for both the Public sector and Private Sector. As a consequence, the sovereign rating of the country may be adversely impacted which will be detrimental to the interests of all sectors of the economy. But the moot point is this can happen even if States borrow for this purpose.
In the meantime some of the opposition ruled states are considering approaching SC for a direction to the Central Govt, saying that the Centre is trying to hide behind AG's legal opinions, shirking its responsibility in honoring the revenue commitment in letter and spirit. But such an outcome may not augur well for federal relationships and for the future of cooperative federalism which is touted as the big success point behind GST introduction.
However, in all this surcharged situation over who should shoulder the borrowing burden, the missing point is how well or badly States are containing their deficits in the last few years despite being given higher level of funds without much of efforts from their side. Any additional funds given without caveats are being frittered away by them in giving freebies, free EB and in unplanned revenue expenditure. So who is going to discipline them and rein in their penchant for spending without answering for outcomes? Even in May 20, when Centre gave permission for Additional borrowings through the WMA window, many states incl. Tamilnadu objected to the thinnest of the sticks like DBT transfer of EB subsidy to BPL families, that came with the carrot. States only want the carrot as their right without any strings being attached.
That said, Central Govt. must seize this opportunity to bring to light the importance of fiscal discipline at the State level by finally agreeing to resort to the borrowings on their behalf.
If you consider the Center and the State as the right and the left hands of the same person, sometimes when your right hand is full of weight to be lifted, the left hand also should chip in to bear the weight in order to balance it. Left cannot accuse the right of transferring some of the weight to it!!
We have had four lockdowns and unlocks across the country.To start with it was Complete lockdown, which struck like a bolt from the blue starting from March 24th till May 31st 2020. Many prominent opposition leaders severely criticized the Govt for this lockdown accusing Modi of dictatorship tendency throwing the hungry, poverty-stricken, migrants on the streets and pavements uncared for. The second lockdown little relaxed was in June as experimentation and once the pandemic started spreading wildly, Govt. was again back to stricter lockdowns. But by the end of june, Central Govt realized that the question of livelihood was becoming important and advised staggered unlocks.
But many states ruled by opposition leaders taking a holier than Centre attitude continued with strict lockdowns introducing epasses even for intrastate movements, imposing restrictions like total lockdowns during weekends making life difficult for the common man. There was a tough competition between states as to who leads in making life miserable for the man on the street.
Now the whole world is praising Modi for his foresight in clamping down a total lockdown inorder to control the spread of the pandemic. Opposition leaders have grudgingly acknowledging this, have now started saying that because of lockdown Indian economy is in ruins.
India had to face many unwanted human tragedies in between due to industrial accidents in Vizag, Neyveli,etc.fire accidents, air accident in Kochi, and also serious border clashes with China apart from terrorist incursions in J&K from Pak.
In the meantime, Central Govt unveiled Atmanirbhar initiatives, Agri reforms, and announced Rs.21 lac crore package of measures to revive the economy.
In the melee that followed, India is still left with some white elephants like Air India which are a drain on the exchequer.Air India should have been corporatized, separating the ownership and the management at least five years back. Had Central Govt taken this bold step at that time we would have found real value of the Air India as a Corporate entity. We understand that when Jitendra Bhargava wrote a book "Descent of Air India", it kicked off a political storm with Praful Patel filing a defamation case in the court to get a ban on the book. But the author self-released it in 2016 and is available on Amazon kindle as an e-book.Praful Patel withdrew his defamation suit in 2017.
Now with Air India only its Intangible asset of Bilateral Landing Rights is the most valuable of all assets.This has been brought out by Kumar V.Pratap former Joint Secy,GOI, in his recent article in FE wherein he has said that Planning Commission in 2011,refused permission to publish his earlier article on Privatisation of Air India(see the link) .Now the quotes for the sale of Air India have been invited through a global tendering process. The last date for submission of bids have also been so far postponed 4 times and now the last date stands at 31st Oct.When Travel & tourism and more particularly the aviation sector around the world has been severely crippled by the pandemic , finding a suitable bidder would be highly improbable. But Govt is left with Hobson's choice now.It has to bide its time for a suitor when the airline continues to lose its value and burn tax payers' money.
BPCL sale tendering process also is in the limbo due to the prevailing uncertainty induced by the pandemic. Other PSU divestments are also moving at snail's pace due to lockdowns.
To sum up, the Govt is unable to unlock the value for its assets!!
The only thing certain about Tax is, it is always taxing.
India abolished LTCG(Long Term Capital Gains) tax some years back while STT(Securities Transaction Tax) was introduced. After few years Arun Jaitley,the then FM at the Central Govt, thought it fit to reintroduce LTCG Tax from Fy 18-19, with an exemption if STT had been paid on the transaction. Now many Economists have recommended for abolition of LTCG tax showing the distortion it brings in transactions involving Digital Gold, unlisted shares and the black money generation it encourages in all and sundry especially in Real estate transactions.
The arguments against LTCG Tax are strong and valid. The vagueness it brings in matters of valuation brings lot of confusion and uncertainty giving the incentive to hide part of the consideration received. What demo wanted to flush out, LTCG Tax has encouraged inadvertently. It has sent wrong signals across the economy.
What is the remedy then. One simple alternative is to bring Transaction Tax similar to STT as Gold Transaction Tax and Real Estate Transaction Tax.
Recently Mohandas Pai, on LTCG Tax wrote a column in FE correctly stating that LTCG Tax is anathema to simpler taxation philosophy since it creates a mindset of evasion among tax payers.He has called for abolition of LTCG tax forthwith by rightly pointing out few perverse taxing rates especially with ref. to LTCG tax rates on the sale of unlisted shares.
Once LTCG Tax is abolished Central Govt may want another avenue for Tax revenue and for that I would recommend Gold Transaction Tax and Real Estate Transaction Tax on the same lines that of STT. These Taxes will be much simpler to comprehend and easier to comply with. Even administering it by IT dept will be easier.
Now there is a clamor for a Windfall tax from the stock exchange transactions, as people who dabble in Stock exchanges are generally from well off sections of the society. When the whole nation is battling pandemic induced economic woes, it is quite natural to expect the group of well-heeled rich to contribute something extra by way of tax to the country's cause in fighting this economic downturn. But this windfall tax must be a one-time tax or it can be a temporary increase in STT for 2/3 years.
My preference would be for a temporary increase in STT for 2/3 years.
GST portal has come a long way from a fledgling,fumbling and faltering days to its better days.However it has go a long way to evolve into a mature and more user-friendly phase. Now Central Govt is introducing e Invoicing with unique Invoice Reference Number (IRN) for traceability and matching concept introduction. This IRN will be given by Govt and this is to identify whether it is a valid e Invoice .
This numbering system will be similar to cheque MICR no. for the purpose of verifying the genuineness and also for the use in matching it for clearing mechanism. This IRN will also serve similar purposes.More than bigger companies this system will help MSMEs in the longer run.
For MSME bill discounting some of the banks like Axis Bank have introduced a digital platform called TREds so that MSMEs can access cheaper bank finance against their supply invoices. Ministry of Corporate Affairs have also made it mandatory for all Corporates with a turnover of Rs.500 cr and above to register under this for all their MSME suppliers to take advantage of this bill financing platform which will help them in working capital.My suggestion is that TREdS ,which is a standalone platform of the Axis bank, may be linked and integrated with the GST portal so that ,MSMEs need not have to again look for another software to do E invoicing and generating Eway bill through GST portal. If this linking is done ,as and when Eway bill/E invoicing is done in GST portal/software, it is enough to take it to TREds platform and any duplication and time loss can be totally avoided. This will also be a great marketing tool for quicker Adoption of TREds as mandated by MCA.RBI and MCA, MOF and MSME ministries will have to work together to do this immediately which will be a great boon for MSMEs making it easy for them to do business.
Today there is a heartening news that Cabinet has approved the budget decision to amend Factor Regulation Act 2011 to allow non-banking finance companies(NBFCs) to extend invoice financing to the MSMEs through TReDS, an electronic platform for facilitating discounting of trade receivables.
Now Govt should also takeup this digital linking of TReDS and GST portal softwares for MSMEs to really usher in ease of doing business and paying GST .This will also indirectly help Central Govt garnering higher GST revenues through widening of tax base
Import Trade wall or barriers are not new to India. The country had very steep walls in terms of Tariffs, licensing ,quotas etc. all in the name of safeguarding the domestic industry. When the country gained independence, many of the industries were either nascent or anemic and in order to restore their health, Central Govt had no option but to erect some import restrictions so that local industries in the economy are nurtured. This grooming of domestic industry with level playing field took a new turn in the late 1960s and 1970s with widespread nationalisation of private enterprises, ushering in an era of erratic socialism all in the name of protecting the citizens from private profiteering.
This concept led to erecting walls within the country between the commanding heights of Govt. undertakings and the Private enterprises. The private sector was neglected and was left to fend for itself and scaling up an enterprise became a uphill challenge for private sector. Inorder to protect them from imports from manufacturing bases around the world with deep pockets several safeguard duties and tariff walls were made stiff .
But all this had a negative side effects as the local industry became flabby, lethargic,self seeking, ignoring Tech.upgradation, without stiff market competition on Quality , Cost and Delivery.All this was done with the good intention of making India self restraint through import substitution. But the unintended consequences of this led to high cost of manufacuring and poor quality product.This situation was reversed when GOI started reducing tariffs and import restrictions through some pragmatic steps inviting foreign direct investments in the early 1990s.
By the time we missed the bus and Chinese who started this in 1980s had a clear headstart over us. Our two steps forward and one step backward strategy in all these matters of import policy were designed by bureaucrats with the hidden intent of rent seeking politicians, businessmen and babus behind it.
Only after the advent of Japanese, US ,German and South korean companies started their manufacturing bases in India , Quality, Cost and Delivery gained attention and became the guiding lodetones of enterprises keeping them lean and mean. This tough market competition has helped India in achieving the pinnacle of success in Auto sector especially in becoming World's top two wheeler manufacturing base.
That said , now there is lot of discussion on Govt's announcement of Trade tariffs for imports from China and licesing and ban on import of defence equipments, high end TVs etc. The heated debate of back to the moribund policy of import restrictions in the name of Make in India- Atmanirbhar Bharat is indeed a good one.
Does this mean back to the future?
But there can be an argument in terms of supporting this policy of import restrictions.
When fledgling industry is sought to be setup like in high end tech products, these specific products may require some sort of support or sops for a initial few years. When foreign direct investment is invited for huge sunrise industries, such import walls will be helpful but all but temporarily. If there is a sunset clause introduced for all these tariff or sops or subsidies, it should be welcome. Govt. should make it a point to insert a sunset clause for all these import walls except in very few strategic sectors which may not exceed five on the whole.Govt should not give an impression that it is interested in augmenting its tax revenue through these high import duties.
India has given a great fillip to Make in India- Atmanirbhar in some of the industries like Auto, Smartphones etc which has generated huge employment opportunities in the country. Inorder to give a temporary boost to this policy, Govt has done the right thing by introducing few Tariff walls in order to promote the above stated policy and these Tariff barriers should neither be seen as a way of revenue rising, nor as a permanent fixture to protect the domestic industry.
Whenever any change in the IT Act is contemplated it should be put through only one filter which is "simplification" of the tax. Revenue considerations, whether an increase or decrease, not to enter as a filter for any piecemeal or Adhoc changes during the course of the year. Simplification, reduction of tax, widening of tax base may be used as multiple filters for once a year changes in the Budget. Many times an amendment is done in the name of maximizing tax revenues and plugging loopholes. This is a pure travesty of truth. Instead, Govt should move towards simplification and ease of compliance. This obsession with revenue maximization is a colonial hangover.
Very often IRS officers and CBDT also complain about CAG Damocles sword over their heads if they don't plug loopholes. Indirectly such a plethora of amendments and tinkering goads loophole industry to become more innovative.CAs, lawyers enjoy and thrive on this.More the loopholes and more the plugging.More they change,more they remain the same!!!
Probably many are trying to say if simplified ,more taxes thro voluntary compliance can be collected. They also suggest a remedy like new simple Direct Tax Code ( DTC),which is good but may throw more complications ,uncertainty ,unintended consequences into the moribund system if this new tax code is introduced all of a sudden (like that of GST).So at least in the short to medium term, Central govt should work towards only simplification in terms of return filing, assessments, presumptive tax , reducing litigation etc and keep revenue maximization in the back burner.
One of the important points in this context needs some elaboration.AOs, CIT Appeals have a tendency to overrule a precedent Court judgment by taking a flimsy, perverted, convoluted argument or a trivial or a vexatious finding to make the court ruling inapplicable,just to maximize revenue collections and reach their targets for the year.Then deliberately they will make mistakes in calculations just to boost unpaid tax amount and threaten the assessees subtly showing it as arrears in demand.These are all euphemistically called "high pitched" assessments.!!
Few funny examples of unintended consequences or "Cobra effect" are given below:
1)Under IndAs, Redeemable Preference shares will have to be grouped under Borrowings and not to be included under Share Capital. This is in line with IFRS ,since Redeemable Pref.Shares with a fixed dividend payments have the substance similar to that of a borrowing even though by name they are called Shares.
However under our Cos. Act, 2013, the Redeemable Pref.Shares are continued to be classified as part of paidup Share capital.
This dichotomy, apart from skewing Debt:Equity ratios create other unintended consequences in the declaration of ShareCapital for the appointment of KMPs etc. and for presentation to the Lending institutions, Credit Rating Agencies etc.
An amendment in Cos. Act to align this with IndAs is long pending and would be a welcome step.
2)Similar is the case with depreciation calculation under Cos. Act and Indian Income Tax Act. Depreciation under IT Act can be charged at a higher rate (accelerated rate) allowable under the Act for claiming higher tax rebate whereas Cos. Act & IndAs prescribe lower rates for presenting the Financial Statements for declaration of dividend etc. Due to this anomaly every year Indian companies will have to work out Deferred Tax liability for deferring the tax by availing higher depreciation. Over the period the profits under Tax and IndAs will be smoothened out. This is pure legislative fiction. By aligning the tax rates under both the legislations this fiction can be easily removed. Is our Govt listening to simplification or trying to complicate things in the name of simplification.!!!
If anybody wagers on Russian roulette, most of the time winning it would depend on your luck and stars, and similar is the case of somebody wading through the muddy waters of Indian Income tax Act.
Sri. Krishnamurthy Subramanian, Chief Economic Advisor to Central Govt,yesterday, has gone on record saying that further demand stimulus measures will be announced after vaccine becomes available. Why should we link stimulus to vaccine availability is not clear. What kind of vaccine he is expecting and if the vaccine falls short of his expectations whether he would not allow roll out of stimulus?
It may become too late to wait till then.Why because, the common man has started saving his meagre earnings due to his fear about his future earnings and not due to Covid pandemic per se.In order to allay his fear about his employment and future earnings, Govt must sacrifice some near term revenue and announce some economic incentives for kick starting the economy.What better place to start than with Indirect Tax cuts. Auto sector is the biggest in manufacturing in terms of GDP and reducing GST on it from 28% and converge it with Revenue Neutral Rate(RNR) of 18% will give a huge boost to demand, and thereby to the generation of employment.The multiplier effect will be huge on the rest of the economy with ripple effects cascading throughout the economy.Difficult times demand drastic steps in terms of revenue sacrifice by Govt in the near term.The Govt.will get back more than half its sacrificed revenue by way of huge jump in volumes of goods and services produced.The feel good factor this can generate will negative the fear over the pandemic and will give a greater fillip to PM's call for "Atma nirbhar Bharat" and "Make in India" initiatives.So, one should not wait for Vaccines to announce this.We must do it on war footing. We have anecdotal examples at hand. Like Mr.Mukesh Ambani bringing in huge FDI even during Covid without waiting for it to end, the Govt. must take a cue from his proactive action and give this relief to the economy.Thiruvalluvar also says "தூங்குக தூங்கிச் செயற்பால் தூங்கற்க தூங்காது செய்யும் வினை."(Sleep over such actions as may be slept over, but not over such actions which require quick actions) This calls for immediate action on the ground to kickstart demand and to restore the confidence of common man in his future earnings, income, and employment.
Pl. see the below page from the Central Govt published data.link
Regular IT assessments done by Dept is yielding only 7 to 8% of total Gross Direct tax collected where as Adv. Tax, TDS and SA Tax is 92% i.e the voluntary compliance .
Is there not a strong case for abolishing Assts for atleast individuals who have good track record of say 10 continuous years and have limited scrutiny assessments only for Corporates/Companies with incentives for exemption from assessments if they remit Tax at least 15% more year on year.This will take care of tax buoyancy ratio and reduce assessment costs drastically.
Mr.Sunil Jain of FE recently sent a tweet to FM saying that IT dept is following up with him on some assessment notice despite complying with it and paying tax. Everyone of us have similar experiences on IT assessments despite computerisation. Straightaway all these scrutiny assessments can be called " IT Harassments "-no euphemism.
But it should also be emphasized that the scale of high pitched assessments has substantially come down over the last one/2 years but still more needs to be done in order to totally move away from Tax Terrorism to augment direct tax revenue. I am not making a case for tax evaders or dodgers who r small percentage and who will anyway continue to do so.
My firm conviction is ,if assessments are done away with , then more small businessmen will voluntarily pay under presumptive tax, file return and forget.Another indicator is the difference between how many assessees have paid tax/TDS and the no. who have filed returns.Almost 2 crore nos.!! Is it not sounding another loud bell for doing away with Assessments /Scrutiny assessments but with safeguards like good track record or yoy 15% inc. in tax remittance etc.
One last point. Out of such Tax assessed and shown collected by the Dept how much is contested in appeals before CITs, Tribunals , HCs and SCs.Huge burden on these Courts will also come down and unnecessary litigation is avoided. Lots of multiplier effects can be seen if assessments are abolished.
For encouraging people to file their Income Tax return, Govt can run a lottery or even give atleast health insurance policy under Ayushman Bharat free of cost.
"Putting fruit at the eye level" is a Nudge. Nudge proposes positive reinforcements to influence the behaviour and decision making at individual level and at a societal level.
Richard Thaler and Cass Sunstein in their book Nudge: Improving Decisions About Health, Wealth, and Happiness have written on Nudges as the key method for influencing the human behaviour which has huge ramifications for the economic and political spheres of every country. Thaler won Nobel Prize for this path-breaking behavioural economics concept. The theory itself was built on the heuristic human behaviour concept of Daniel Kahnemann-Tversky model.Daniel Kahnemann in his book Thinking: Fast and Slow mentions System 1 and System 2 of human thinking process in which System 1 is quick, fast, hunch-based,heuristic and System 2 based on some primitive level analysis to arrive at prefered choice or option. When people have to contend with many choices/constraints or facing time constraint, System 1 will override System 2. leading to a sub-optimal outcome. WYSIATI(what you see is all there is) is an important underpinning guide in most of the human decisions made and Daniel Kahnemann has extensively dealt with this in his book. Nudges as a persuasive concept as opposed to any directive,coercive action is an adult to adult interactive mode (Transactional analysis?). Some very interesting Nudges that are used all over the worldlink. Traffic signal lottery, Piano stairs and cigarette butt voting dust bins will be all inducing good behaviour changing habits. In the realm of Macro economics inorder to improve tax return filing compliance, some Govts. introduced free health insurance with tax filing compliance. However the question of ethics of Nudging or is it some sort of psychological manipulation of human behaviour , remains open for discussion at the global level. India has always talked about Sama, Dhana, Bheda and Dhanda for influencing human behaviours, always starting with Sama/Dhana. Is the concept of Dhana not the same as "Putting a fruit at the eye level"- a Nudge?!! Closely connected with it is the Art of Choosing written by Sheena Iyengar in marketing parlance. She found out with jam flavour experimentation that too many choices confuse people in decision making . She demonstrated that people who tasted limited no. of jam flavours are ten times more likely to buy jams than those given more flavours to taste.But she is of the view that neither more choices nor very little are good ,but optimum lies somewhere in between. Daniel Kahnemann's System 1 will always take over human decision making when confronted with too many choices/options and this has been clearly brought out by Sheena's experiment. The same will hold good for Nudges also. Therefore some of the marketers have started offering a simple default option which will be a win-win for both the seller and the buyer. But lot of ground work to be done to decide on this default option for the buyer to perceive it that way!! As Sheena Iyengar says humans are born to create meaning and also to choose, science can help us to become skillful choosers ,but ultimate decision for zeroing in on a choice is still an art. Tax return filings is still an art?!We wudn't budge with Nudges?!!
"Buy land, they're not making it anymore"-Mark Twain
Govt. is in the process of identifying land parcels for attracting industries moving out of China for want of safe haven. If big land parcels can be earmarked for setting up Industrial parks and industrial clusters, it will give a huge fillip for Make in India campaign.
As PM said India has the Intent, it paves way for Inclusion, provides Infrastructure. attracts Investment and enables Innovation. But what is stopping it from leap frogging. It is redtapism in land acquisition ,lackadaisical Court procedures and the greed of politicians that put paid to ambitions of growth in Make in India. Even smaller countries like Vietnam, Indonesia are able to attract industries moving out of China in a big way but the sleeping giant like India falters.
Despite improving the ranking in Ease of Doing Business has the economy really energised itself to become an aspiring industrial giant. There are green shoots here and there , but one swallow does not make a summer. We know of several projects that are languishing due to land acquisition hurdles like Chennai MRTS last leg of just 500 meters upto St Thomas Mount for more than a decade. Who pays for the time, cost over runs. Nothing is free in economics and only the poor taxpayer foots the additional bill and he gets empty rhetoric but gets no infra facility for decades.
Some out of the box solutions for land parcels will have to be found out. We know that land is not manufactured anymore.Is it really? Can we not flatten some of the mounds, hillocks around our cities and build industrial parks.
For example near Chennai airport there are few hillocks and if they are removed or flattened reasonably, many industries can be located. If these rocks removed from such hillocks are deposited near our Coastline can we build small islands to locate some industries over there?
Can we start manufacturing lands as part of Make in India initiative?
