Petrol prices cut by 1 paise!

After completion of polling in Karnataka, Petrol and Diesel prices were increased relentlessly every day during past 30 days. In the last fortnight Petrol price at Hyderabad was hiked from Rs.79.37 to Rs. 83.13 (an  increase of 4.7% in 15 days). Today oil companies have announced reduction of petrol by Rs.0.60 today and quickly corrected it to Rs.0.01 (1 Paise) citing clerical error is a cruel joke on consumers. While reduction was announced by Oil companies routinely, the correction announcement is suspected to be at the behest of government for unknown reasons. With large scale usage computers and other technologies, citing clerical error is unacceptable non sense. If it is true, that clerk and his superior officers should have got suspension orders right away but no such thing has happened. While oil prices fell by 70% between 2014-17, both central and state governments merrily increased excise duty and VAT and ensured that consumer got the benefit of 15% only while 85% of low price benefit was grabbed by them. Now in 2018, while oil prices have gone up from $30 to $84 per barrel, neither centre nor state(s) are prepared to reduce their taxes and provide relief to consumer. They are insensitive to the inflationary effects their action and inaction.  Ironically, leakages suggested that government is mulling excise duty cut on petrol & diesel and wants states also to cut their VAT and consumers were expecting some big relief, for which Modi & Jaitley were never known for. 

GST and KCR's outbursts

• In November 2016, KCR was the first non-BJP/NDA chief minister to support Modi's demonetization move. Telangana was the first state to pass the GST legislation on Apr 16, 2017. TRS extended unconditional support to BJP's  Ramnath Kovind as NDA's Presidential nominee and Vice President candidate.
• The dalliance between the ruling TRS and the BJP has practically ended with the completion of elections of the President and the vice-president. While the change in tone of KCR may appear at the outset to fight the GST, the battle between the Modi and TRS governments is about much more than what meets the eye. 
• GST Council has already lowered GST rates on  public utility and infrastructure projects from 18% to 12% as requested by several states in its first meeting. The Telangana state government has been asking the Centre not to levy 12% GST on the public utility and infrastructure projects. Telangana wants these projects to be taxed at 5%. 
• Under GST, the tax rate on cement, steel, and concrete — all key ingredients for the projects — has been reduced. This benefit will be pocketed by EPC contractors.
• Due to GST @12% in place of VAT @5%, Telangana government will have to bear the additional burden of Rs.19,500 on all ongoing public utility and infrastructure projects which are worth Rs.2.30 lakh crores.
• Telangana CM K Chandrasekhar Rao declared Goods & Services Tax (GST) is a failure in several Nations. He made it clear success of GST in India depends on how well Centre handles the concerns.
• Now the CM KCR decided to write to Prime Minister Narendra Modi to reduce 12% GST on the ongoing projects. Rao held that since the project estimates have been prepared keeping in view 5%  VAT, it is not possible to change them. He had "threatened" that the state government would engage in a "legal battle" in Supreme Court against the union government over the issue.

KCR walking extra miles to please Modi, devoid of merit and for unknown reasons, in matters of demonetization, GST, President & Vice President elections and expecting all he wants from Modi is not only naive but also stupidity. Modi is only a taker but never a giver. Ask Naveen Patnaik how much he got extra for Odisha from Modi, during past 3 years. Literally zero. The impacts of GST and its rates were well known in advance. Going forward states will become like municipalities of centre with very less freedom to mobilize funds. Centre will become extremely powerful with no direct responsibility of people welfare where as states will become extremely powerless and saddled with total responsibility of people's welfare. This is in contradiction of federal polity of our constitution. Ambedkar's fears of abuse of constitution without amending it are coming true in Modi's India.

GST: Is it a game changer or name changer?

Goods & Services Tax (GST) is a destination based indirect tax throughout India that replaces all indirect taxes levied by the central and state governments. 

• GST in its simplest format is 'one nation, one tax'. But in its mangled format consists of CGST, SGST, IGST and six tax slabs. Petroleum products, alcoholic beverages, property registrations, electricity duty etc, which are money spinners for centre and states, are kept outside the purview of GST. Hence GST in India is no different than existing VAT.
• In Singapore GST is 7% on all goods or services.
• USA being a federal republic, state and local governments fiercely defend their autonomy. At present, there is neither federal tax nor GST on goods and services.
• Modi (as Gujarat CM), Jaitley (as opposition leader in Rajya Sabha) and BJP (as opposition party) vehemently opposed GST bill of UPA for several years on the pretext that states will lose their autonomy and is in violation of federal spirit of constitution. And GST Network and databases requirements fulfillment is several years away.
• So far states enjoyed financial autonomy with freedom to levy taxes to fund its governance, welfare & development activities. VAT forms bulk of their revenues and with GST, states are at the mercy of centre until it releases their due share of GST collections and also compensate transition losses for five years. Our central government is notorious for scrutinizing the state's claims for several months before releasing the amounts to states. With GST, Modi has undermined states autonomy and converted them into another level of Municipalities that will survive at the mercy of Centre.
• Now Modi as PM, Jaitley as FM and BJP as ruling party, suddenly discovered that GST could be India's biggest tax reform, that will facilitate ease of doing business and boost GDP growth by two percentage points and will become a game changer. 
• GST Bill which is a constitution amendment bill that requires passage by states also and in the process several items like alcoholic beverages, land registrations, electricity duties etc were kept outside GST. Centre too has its own interest in keeping petroleum products outside GST which yields huge revenues. Also yielding to states instead of one slab taxation we have six slabs viz. 0%, 3%, 5%, 12%, 18% and 28%. And also SGST levied by states, CGST levied by centre and IGST shared by centre & states. Thus Modi & Jaitley squandered a huge opportunity and mangled GST is no different from VAT and hence will become just a 'name changer', not a 'game changer'.
• GST's threshold limit of Rs.20 lakhs and its complexities will compel small entrepreneurs not growing beyond Rs.20 lakhs to avoid GST and mushrooming of small enterprises outside GST is a certainty. 
• GST processes all being online with computers and internet and ironically only cities and most towns have robust connectivity and rest of India is mostly unconnected. Even databases are not fully ready.
• Australia, a country with 24 million population,  introduced GST in 2000 with one full year for transition and databases preparation. Yet economy retracted for several quarters and looked up only after three years. 

Tax policy is as good as its administrators.

Any policy which hurts a honest man on street, is a bad policy.

My View:
Any disturbance or calamity whether man-made or natural, hurts the poorest people most. GST will result in dismantling the existing taxation system and installing new system on a cut off date. How ever simplified GST might be, understanding, clarity and adaption by all spectrum of traders will take several months. In the meantime supply chain of commodities will get disturbed and shortages and inflation is imminent. No one is clear how the impact would effect civic life. Like demonetization, intended good may happen after some time, unintended consequences would be immediate and is sure impact poor peoples lives and livelihoods. How many lakhs of jobs, especially in informal sector, will vanish will never be known. Most Indian laws, rules & policies are good. The problem is with tax administrators saddled deep rooted corruption, indifference and lethargy. Among all virtues of Indians, tax evasion is also an important virtue. Modi & Co so far made no attempt to control corruption except at himself. Not appointing Lok Ayuktha even after 3 years of passage of Act is indication of his respect for constitution and laws of the land. Modi hasn't learned any lesson from 'failed demonetization' which destroyed informal sector and impacted agriculture greatly pulling down GDP growth by 2 percentage points. Now, hurried roll out of GST, mangled beyond recognition, will not have a smooth ride and its impact stories will start surfacing incessantly after 2-3 months. Then nothing can be done except sympathizing poor who will be suffering most due to Modi's reckless adventures only to please FIIs and World Bank rather than people of India. Above all is his deep rooted desire to show off as a greatest reformer of the nation, not knowing what exactly he is doing.

GST Mangled beyond recognition

Goods and Services Tax (GST) is a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India to replace taxes levied by the central and state governments applicable w.e.f. July 01, 2017. GST is a consumption based tax, therefore, taxes are paid to the state which the goods or services are consumed not the state in which they were produced.

• GST is a tax reform, impacting every sphere of business activity, as number of business decisions taken based on the current tax structure may no longer be relevant in the new GST regime. Centre would levy Central GST (CGST) and States would levy State GST (SGST) on every supply of goods and services within a State. Integrated GST (IGST) would be levied on all inter-state supplies by the Centre. IGST would have to be paid on all inter-state supplies, be it in the nature of a sale or stock transfer.
• Five slabs have been approved by the council. These are zero, 5%, 12%, 18% and 28%. For bullion GST is 3%.
• Cess and surcharges are subsumed in GST. Except for the cess on demerit, luxury and polluting items such as tobacco, luxury cars, aerated drinks and coal over the peak rate of 28%. It would be used for compensating states for any revenue loss due to GST for the first five years from this July 1, 2017. It would be there for these five years only.
• The problem is that most states are revenue starved and would surely like to use provisions under the GST laws to raise tax levels and reduce their budgetary deficits. They have already succeeded in keeping alcohol out of the purview of GST. Petroleum products have also been kept out of GST as these are huge cash cow for the Central government. 
• Real estate, except for land leasing, alcohol and electricity are excluded. 
• The problem is that most states are worried that the introduction of GST will reduce their revenues from state level taxes. While centre assures to compensate such losses for a period five years from the cess, no one trusts centre that it will fulfill its obligations in time.
• Uniform GST across the nation undermines federal spirit of our constitution granting fiscal autonomy for states. USA does not have GST as it ensures high autonomy for the states.

Multiple GST rates, cess, and exclusion of certain items -- all these goes contrary to the entire spirit of "One nation - One Tax" GST. Instead of the original concept of having a single-point tax at the retail level, there will now be a multiplicity of taxes. One may try to explain GST as a tax that replaces all others, but ultimately, it has now become a hydra-headed creature with several layers of taxation. 

The GST is being publicized as a panacea for many ills in the economy. The projection is that it would raise GDP growth by at least 1- 2 per cent, besides making it much easier to do business in the country. The fact is, however, that in the current mangled format, GST may not have the desired impact at least immediately. It could actually lead to higher inflation because of the increased tax levels on a range of products. Some years ago, we were told that VAT would do away with incongruities and corruption in the system, but this is nowhere to be seen. Although corruption is prevalent in all the arms of administration in India, its existence in the administration of VAT is mind-boggling.

It would have been a bold experiment worth taking if it was rolled out closer to the original format. Now in the mangled format beyond recognition, the results are uncertain. One can only hope that many of these infirmities are ironed out quickly, so that GST becomes a boon rather than a burden to the common man.

In order to produce a baby it takes one woman and nine month's time. 

Definitely not nine woman and one month time.

My View:
GST in  India is supposed to unite all indirect taxes under one umbrella and facilitate Indian businesses to be globally competitive. The Indian GST case is structured for efficient tax collection, reduction in corruption, easy inter-state movement of goods etc. But in its mangled format, GST resulting in GDP growth by 1-2% and meeting its stated objectives is highly unlikely at least immediately. On the contrary its contributing to higher inflation will hurt lower classes badly. While other countries has GST with one or two rate slabs and took almost an year for smooth transition, our Modi & Jaitley duo attempting for transition within three months is height of insanity. We, the people of India, must thank our stars, if GST doesn't create ripples and hardships to common man in next six months, similar to that of demonetization - whose effects are still haunting even after seven months. When will our Modi stop his wild adventures at the expense of common man just for his publicity of 'bold' reforms without proper analysis, thorough preparation, risk mitigation and at favorable time?