Important Topics: Indirect Tax Reforms - Facilitative Tax Regime
Taxes whether direct or indirect plays a very important role in national building. In the scheme of indirect taxes Central Board of Excise & Custom (CBEC), a statuary body constituted under Central Board of Revenue Act 1963, has been tasked with formulation and implementation of policy concerning indirect taxes which creates a competitive, predictable & clean tax policy environment. Following the policy of 'RAPID' (Revenue, Accountability, Probing, Information, Digitization), which would go some distance in fostering a non-adversarial and facilitative tax regime, CBEC has taken a lot of initiatives to improve the ecosystem for doing business in India.
Some Initiatives Under Taken By CBEC
(i) Make in India: To provide a level playing field to domestic private sector in defence manufacturing, customs and central excise duty exemptions to defence supplies and central excise duty exemptions to defence PSU’s and ordinance factory boards have been withdraw.
(ii) Preparatory steps towards implement of GST:
(a) Excise duty of 1 percent imposed on jewellery.
(b) To reduce multiplicity of taxes, 13 cesses levied by other ministries and administered by Department of Revenue are being abolished.
(c) Service Tax imposed on all services provided by the Government or Local authority to a business entity, except service that are specifically exempted or covered by any other entry in negative list.
(iii) Ease of Doing Business:
(a) Customs clearance facilitation committee (CCFC) has been setup to address the issues relating to custom clearance and infrastructure.
(b) SWIFT (Single Window Interface for Facilitating Trade) clearance from 01.04.2016 onwards allowing traders to lodge their clearances documents electronically at a single point only with the customs.
(c) CBEC enabled that all importers, exporters shipping lines and air lines shall file custom documents under digital signature with effect from 1 Jan. 2016 which will help in reducing the physical/manual submission of documents.
(d) E-payment of central excise and service tax refunds and rebates through RTEGS/NEFT implemented.
(e) Number of Central Excise returns filed by manufacturers reduced from 27 to 13.
(f) CENVAT credit rules amended to improve credit flows and also time limit for CENVAT credit of duty/tax paid on inputs increased from 6 months to 1 year.
(iv) Dispute Resolution and Litigations Management
(a) To encourage compliance and early dispute resolution,the penalty provisions in customs, central excise and service tax have been rationalised.
(b) Threshold limit, below which appeals can't be filed by the department in CESTAT (Custom Excise and Service Tax Appellate Tribunal) and High Courts, hss been raised to 10 lakhs and 15 lakhs respectively.
(c) Pre show cause notice consultation has been made mandatory at the level of principal commissioner/commissioner in all the cases where duty involved is above Rs. 50 lakhs.
All these efforts of CBEC has led to perceptible change in policies of Tax Department by way of becoming liberal in friendly to tax player. Also the reforms taken with regard to clearance procedures pertaining to imports and exports have improved the scorecard of India in logistics performance India (LPI) – (a survey done by world bank group on trade logistics) taking India to 35th position from 54th position.
Goods and Service Tax (GST)
Tax reforms being integral to country's development need to be improved time to time and therefore even the developed countries like UK & US too understood reforms in last few years and thus India is no exceptions to such tax reforms.
Presently, Central Government levies Tax on manufacture, provisions of services, interstate sale of goods and states levy tax on retail sale (VAT), entry of goods in state (entry Tax), Purchase tax etc.
- This fractured mandate of taxation leaves a lot of gap in supply chain and also leaves cascading effects of taxes on produces and consumers.
- Also the variety of VAT tax laws in country with different tax rates divides country into separate economic spheres.
- While the tax to GDP ratio may be progressive, tax to demographic population is abysmal, and hardly 2% population pays tax, therefore, government needs to bring more and more people into the tax net and raise the tax collection buoyancy and GST stands as a critical tax reform in this regard.
Advantages of GST
GST is expected to make consumer the "King" and so the constitution (122nd amendment) Bill was passed by Lok Sabha in May 2015 and then Rajya Sabha. The advantages are:
1) Will help to create a unified national market bringing transparency,
giving boost to foreign investment and "Make in India" by bringing the concept
of "One country one tax"
2) It will prevent cascading of taxes as Input Tax credit will b available across goods and services at every stage of supply.
3) The potential of India being the most dynamic economic in developing world, gets hampered by array of state by state taxcodes as it discourages the 'ease of doing business' Uniform State GST (SGST) and integrated GST (IGST) will reduce the incentive of evasion by eliminating state arbitrage.
4) GST replaces 15 excising state and federal taxes by help India to increase its economic growth by 0.5 and 2% points.
5) Also GST will help promoting 'co-operative federalism' wherein centre and state work together for nation's benefit.
6) Greater use of IT will reduce human interface reducing "tax terrorism" which will go long way in reducing corruption.
7) Will provide more transparent basis for applying the WTO's National Treatment Principle on import of goods by charging additional duty of customs (CVD).
8) It will boost export & manufacturing activity, generating more employment and thus increase GDP with gainful employment, leading to substantive economic growth and reducing poverty.
9) Efficient neutralization of tax especially for exports will make Indian products more competitive in international market.
10) The average tax burden on companies will come down which will reduce prices of products therefore more consumption which in turn leads to more production, thus making India a "Manufacturing hub".
The GST is being hailed as mother of all economic reforms in India which will inspire the confidence of manufactures and investors to push the economy forward and propel GDP growth further.
POSSIBLE QUESTIONS FROM EXAM POINT OF VIEW
Q.1 GST is hailed as mother of all economic reforms in India and the biggest tax reform since 1991 as described by New York Times". In this context discuss the need of GST in Indian economy and the advantages it can bring. (200 words)
Q.2 Following the policy of "RAPID", CBEC has taken lot of initiatives for improving the ecosystem for doing business in India. Explain the initiatives taken by CBEC in this context (200 words).