GK & Current Affairs!

CURRENT AFFAIRS - BILLS AND ACTS Cabinet approves draft bill on surrogacy | 24-Aug-2016 16:55

The Union Cabinet today approved a draft bill on surrogacy. Highly placed sources said the draft Bill is aimed at safeguarding the rights of surrogate mothers. It will also regulate commissioning surrogacy in the country.

The government had recently admitted that in the absence of a statutory mechanism to control commissioning of surrogacy, there have been cases of pregnancies by way of surrogacy, including in rural and tribal areas, leading to possible exploitation of women by unscrupulous elements.

To prevent exploitation of women, especially those in rural and tribal areas, the government has prohibited foreigners from commissioning surrogacy in the country and has drafted this comprehensive legislation.

Why the GST reform is transformational? | 04-Aug-2016 21:22

Why the GST reform is transformational?

And finally it happened, India’s disagreeing political class were able to sideline their vote-seeking differences on an issue unrelated to politics- an economic reform. Nearly ten years after the first step towards a national common market by creating a Goods and Services Tax, the Parliament has passed it.

The move is simply transformational – tax boundaries will not divide India from within. There is no meaning in saying that you are moving a good from Tamil Nadu to Maharashtra or from Haryana to West Bengal. There will be only one tax identity – a pan Indian identity and rate structure; that is the GST.

Till now, for the last seven decades, barricades and tax points were set at state boundaries to collect harassing state entry taxes – a situation you can see only when you move from one country to another. With GST, the taxes like CST and Octroi that divided our big economy into different pieces are no more. States need not deploy their tax officials and semi-security persons across state borders to check smuggling and the like. India is emerging like a common market for the first time in history.

There are other positives from GST, like better tax revenue with little pain to the economy. The GST’s identity is that it belongs to the family of Value Added Taxation. So far the countries who embraced GST recognize that as a tax method, the GST is the best as it least disturbs (‘distort’ is the technical term) economic activities at the same time giving tax revenue. There is good tax compliance as well (means less evasion).

Now for the first time, state sales taxes (state VAT) and the central excise duties (CENVAT) are tied in a single knot. One knows each other. A state while imposing ten per cent tax on a Rs 10 commodity should knew that out of this, only 8 Rs is the value added of the commodity and the remaining Rs 2 has occurred due to excise duties paid to the Centre. Hence the state’s sales tax will be only on the Rs 8 and not on Rs 10. This means that the tax on tax (or cost cascading effect of a tax) is eliminated with GST.

The reform steps are just started and there remains issues like deciding the tax rate that need consensus among the states and between states and the centre. But we can hope that the present positive momentum can continue to finish the remaining work for GST.

GST is all set to make India a common market | 03-Aug-2016 19:12

GST is all set to make India a common market

The biggest indirect tax reform in India’s history – the Goods and Service Tax (GST) is almost on the launch pad with the Rajya Sabha is about to pass it today. Congress party has instructed its members to ratify the bill.

There are three major amendments to the 2014 bill and the major one is the deletion of the 1% additonal tax on supply of goods that tries to compensate the producer states while agreeing for a destination based tax.

Deletion of this 1% tax makes GST more purposeful as it would have become a distortion on economic activities by posing an additional tax burden for the consumers.

The amendment also makes it mandatory for center to compensate for any revenue loss for the states. This change has attracted all states to rally behind the new tax regime.

There are two important achievements with GST. Frist, India is emerging as a unified tax jurisdiction with respect to indirect taxes and this will make the country a common market.

Tax implication of movement of goods and services within the country will be the same. This tax structure is the ideal one for a unified economy. Existence of entry taxes like Central Sales Tax, Octroi etc. are not there with the GST.

The elimination of tax on tax problem or what is known as cost cascading effect of a tax is another positive element of the GST. Unifying the major central and state taxes means there is firm understanding about the incidence of central taxes like excise duties on a product when the state is imposing sales tax on it. A deduction for excise duty will reduce the tax impact of sales tax.

Second, GST belongs to the family of Value Added Taxation. The VAT itself is a more refined version of indirect taxation though some difficulty may come from the administrative angle for a short time. VAT structure will give more compliance and revenue realization for GST.