TIOL-DDT 1259 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"
"http://www.w3.org/TR/html4/loose.dtd">
<html>
<head>
<title>Untitled Document</title>
<meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1">
</head>
<body>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1259</font> <br>
16.12.2009 <br>
Wednesday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Flawless GST from 1st October 2010 - The Discussion Paper released by Empowered Committee of Finance Ministers on 10th November, 2009 envisages an extremely diluted form of GST - Task Force on GST </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IT</strong> is understood that the Task Force on GST has submitted its report yesterday. For some strange reason, the report is not made public but some selected revelation has been made. We are told that a task force member who is slated to join one of the Big Four Consulting Firms has leaked the report to his future bosses. We don't believe such stupid rumours but if you find one of the Task Force members in a consulting firm soon, don't blame us! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Task Force is headed by Mr. Arbind Mody who was till recently the Joint Secretary, TPL, in CBDT. The Task Force did not have a single Member from the CBEC – Central GST or from any State VAT Department! </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The task force has of course expressed its thanks to </font></p>
<table width="450" border="0" align="center" cellpadding="3" cellspacing="0">
<tr>
<td colspan="2"><div align="justify">
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Mr. PV Bhide – the all knowing Revenue Secretary who is retiring next month and who is busy with searching for that +2 job! </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. Mr. Jose Cyriac – the Additional Secretary in the Revenue Department who is junior to all the Chief Commissioners of Customs and Central Excise. </font></p>
</div></td>
</tr>
<tr valign="top">
<td width="247"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Mr. Vivek Johri, JS TRU, CBEC </font></td>
<td width="185" rowspan="4"><div align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These are the four wise men who deal with Central Excise and service Tax at the highest level and they should have been in the Task Force; Instead of that an Income Tax Officer has been made the head of the Task Force. </font></div></td>
</tr>
<tr valign="top">
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. Mr. Gautam Bhattacharya, JS TRU, CBEC </font></td>
</tr>
<tr valign="top">
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. <span style="font-size:10.0pt;font-family:"Verdana","sans-serif";
mso-bidi-font-weight:bold">Mr. R. Sekar, Former JS TRU, CBEC
<o:p></o:p>
</span></font></td>
</tr>
<tr valign="top">
<td><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6.Mr. Sushil Solanki , Commissioner, CBEC </font></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It is not known how Mr. Arbind Mody, an Income Tax Officer had been made the Chairman of the Task Force on GST - and you know the Direct Taxes Code authored by him is attacked by his own Board – the CBDT! </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Couldn't they find any Excise/VAT officer to head the panel? </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TEN Commandments for a pure GST – Thou shall! </strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ACCORDING</strong> to the TASK FORCE the most important <strong>ten </strong>elements of a pure GST are the following:- </font></p>
<blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. The base should extend to <strong>all goods and services </strong>including immovable property; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. There should be a <strong>single low rate </strong>; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The tax should be <strong>destination based </strong>; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">4. The tax should be designed on <strong>invoice-credit method </strong>; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">5. <strong>Full and immediate input tax credit </strong>in respect of <strong>capital goods </strong>; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">6. The GST must <strong>replace all transaction based taxes </strong>on goods and services and factors of production. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">7. There should be <strong>seamless flow of the tax </strong>through all stages of production and distribution so as to stick on “final” consumption; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">8. The <strong>exports </strong>should be <strong>zero rated </strong>and <strong>imports </strong>should be <strong>fully taxed </strong>; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">9. There should be a <strong>threshold exemption </strong>for small dealers; </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">10. <strong>Full computerisation </strong>of the compliance and administrative systems. </font></p>
</blockquote>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Flawless GST - Recommendations - Total 12% Tax </strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Task Force has recommended a ‘flawless' GST in the context of the federal structure which would optimise efficiency, equity and effectiveness. The ‘flawless' GST is designed as a consumption type destination VAT based on invoice-credit method. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It provides for a comprehensive base including financial services and immovable property. To the extent there are exemptions, albeit limited to items covered for distribution through the public distribution system, and health and education services, the purity of the GST is diluted. A threshold exemption of Rs. 10 lakh has also been provided for small businesses. Imports into the country are proposed to be taxed in the same manner as domestically produced goods. Like intermediate inputs, full and immediate credit for tax paid on capital goods will also be provided. Further, it also provides for a single rate of tax of 12 percent for all general goods and services across all states, comprising of 5 percent by the Centre and 7 percent by the States. However, products of high value like gold and platinum will be subject to tax at the rate of 1 percent each by the Centre and the States and exports will be zero rated. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There is empirical evidence to suggest that the switchover from the present distortionary taxation of goods and services to a ‘flawless' GST will, amongst others, increase productivity of all factors of production and hence enhance GDP. The switchover has also been analysed to be pro-poor and therefore, further the cause of poverty reduction. Further in the Indian context, a dual VAT type tax concurrently levied by both the Centre and the States would enable the creation of a common market. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Given the benefits of the changeover to the flawless GST, it would be economically rational for all levels of Government to introduce and successfully implement the flawless GST and for the Central Government to invest in incentivising the State Government to adopt the flawless GST. It is recommended that the Central Government should provide a sum of Rs 30,000 crores over the next five years which will be used to compensate the States for revenue loss, if any, and the balance for distribution between the States on the basis of the same formula applicable for tax devolution to the States. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The implications for fiscal management are far-reaching. It will significantly improve fiscal management through higher tax buoyancy. While the RNR for State level <strong><font color="#FF6633">‘TF- taxes'</font> </strong>(including Stamp duty) is only 6 percent, the Task Force has allowed them a higher rate of 7 percent along with the flexibility to phase out the stamp duty over a period of next three years. This has the potential to increase the combined tax revenues of States by an estimated amount of Rs 70,000 crores. In addition, it is also recommended that the States should be provided with an additional Rs 30,000 crores as incentive to adopt a ‘flawless' GST. Therefore, the switch over to the flawless GST will augment the combined resource base of the States by an aggregate sum of Rs 100,000 crores. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Task Force recognises that the levy will be imposed and enforced by a large number of Governments. Therefore, there would be constant pressure on States to deviate from the pure VAT model and trigger harmful tax competition. This would jeopardise the sustainability of the benefits from the implementation of the ‘flawless' GST. Therefore, it is also necessary to establish an institutional mechanism which would be responsible for making any change in the design and structure of the VAT. The recommendation to establish a Council of Finance Ministers is intended to subsume the independent powers of the both the Central and State Governments to levy tax on goods and services in favour of collective exercise of the powers. Therefore, there is no exacerbation in the vertical imbalance in the fiscal powers. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The First Discussion Paper released by the Empowered Committee of Finance Ministers on 10th November, 2009 envisages an extremely diluted form of GST under which, inter alia, (i) a number of cascading taxes including purchase tax will continue to be levied by the States; and (ii) the base is considerably eroded on account of the proposed continuation of the exemptions. The design of the GST as envisaged by the Empowered Committee is a significant dilution of the ‘flawless' GST. Consequently, the potential economic benefits from a switch over to the flawless GST would not be realised. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Task Force has recommended that the implementation of the GST should be postponed to 1st October, 2010. The benefits from the switch over to the GST are contingent upon the purity of the GST design. In the context of VAT, international experience shows that any design-related ‘VAT mistakes are very hard to rectify'. Therefore, it must be ensured that there are no design related mistakes at birth. However, if there is a trade-off between the timeline and the design of the GST, the dilemma must be resolved in favour of design. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further, in order to implement the ‘flawless' GST it would be necessary to undertake constitutional amendments to enable both the Centre and the States to exercise concurrent jurisdiction over the taxation of all goods and services, creation of the proposed Council of Finance Ministers and assignment of part of the GST proceeds to the third-tier of government. These amendments must, inter alia, provide that the taxation of goods and services by both the Centre and the States should be a consumption-type, destination based GST. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The introduction of the ‘flawless' GST is one of the most important reform agenda which can provide a new impetus to Indian industry and inclusive growth. It is an economic game changer. All stakeholders must unite and develop the necessary will to cooperate in introducing the flawless GST. It would be worthwhile to make greater political investment in this endeavour. </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Export of Rice - Minimum Export Price [MEP] - Notification amended</strong></font></p>
<p><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per <a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2009/dgft09not005.htm" target="_blank">DGFT Notification No. 5/2009-2014 dated 7.09.2009</a>, </font></strong></p>
<blockquote>
<p><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“2. Export permitted only if the Minimum Export Price (MEP) is US $ 900 per ton or Rs. 41,400/-per ton FOB.” </font></em></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. Export of Basmati rice, as above shall be subject to the additional condition that foreign commission upto 12.5% is to be allowed for computation of MEP and any discount /commission in excess of 12.5% will not be allowed for calculation of MEP (and FOB price will have to be higher to that extent). </font></p>
</blockquote>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now this para 3 is changed to read as:- </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">“In case any foreign commission is paid at the time of exports or subsequently then MEP shall be higher than US $ 900 per ton, to the extent of foreign commission paid / payable and MEP of US $ 900 per ton shall be maintained, exclusive of the foreign commission.” </font></em></p>
</blockquote>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=45&filename=notification/dgft/2009/dgft09not021.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>DGFT Notification No. 21 /2009-2014, Dated: December 14, 2009 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Tariff Value of Brass Scrap increased </strong></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</strong> has increased the Tariff Value of Brass Scrap from US Dollars 3402 to 3435 per MT. All other items remain unchanged. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=24&filename=notification/custom/2009/cnt09_182.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>NOTIFICATION NO. 182/2009-CUSTOMS (N.T.) Dated: December 15, 2009 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Fake Currency in India Negligible? </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RESERVE</strong> Bank of India maintains that the volume of fake currency is negligible, at less than 0. 001% (8 notes per million pieces) of the total notes in circulation and, therefore, there is no serious threat to the economy on this account. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This information was given by Minister of State for Finance, Shri Namo Narain Meena in written reply to a question raised in Rajya Sabha yesterday. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> – Thursday's cases</font></strong></font></strong></font></p>
<p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left">Central Excise</strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Rebate – assessee advised to withdraw appeal with revision Authority, to grant rebate – Assistant Commissioner sanctions rebate and appeals against his own order. How can Assistant Commissioner challenge his own orders, wonders High Court – matter remanded to revision Authority – HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> department on one hand persuaded the petitioners to withdraw their revision applications assuring grant of rebate benefit and once those revision applications were withdrawn, the orders granting rebate are taken in review and the grant of rebate benefit has been withdrawn which is causing double jeopardy to the petitioners. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Conversion of DTA unit to STPI unit – eligible for deduction under Section 10A - ITAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> agitation by the revenue is that the assessee company was not entitled to deduction under section 10A as the CIT(A) failed to appreciate the fact that the assessee had commenced manufacture, production of software prior to its registration as STPI and the STPI authorities had granted approval on 18.3.2000 for setting up a new undertaking and not for the existing unit and therefore the company was not entitled to benefit of the deduction under section 10A of the Income Tax Act, 1961. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Cardiac Stents imported are eligible for exemption under Notification No 17/2001 Cus dated 1.3.2001 – CESTAT. </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>INDIA</strong> has reportedly emerged as the world capital for heart diseases. According to the World Health Organization (WHO), 60 percent of the world's cardiac patients will be Indian by 2010. Cardiac Stents which are mostly imported are widely used to treat heart patients. The respondents in the instant case also imported the Cardiac Stents claiming exemption under <strong><em><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=23&filename=notification/custom/2001/ctarif017.htm">Notification 17/2001 Cus dated 1.3.2001 </a></em></strong>. But the exemption was denied to the appellants on the ground that the Cardiac Stents are not covered under the exemption as the same cannot be treated as accessories of Cardiac Catheters. </font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements </font></strong></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more<strong> DDT</strong> </font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice day. </font></p>
<p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p>
</body>
</html>