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GST: The Revolutionary Move in Taxes

BENGALURU: A 17-year-old dream, the Goods and Services Tax (GST), finally became a reality on July 1. The move, as claimed, will be a great push for Prime Minister Narendra Modi’s reform for development.GST is said to be the mother of all taxes as it looks at replacing all the indirect taxes making way for a smooth economy. Before one seeks to understand this new system and its functionality, one needs to comprehend what is taxation and how it works.INDIAN TAX SYSTEMA tax is a contribution by an individual or organization to state revenue which is imposed by the government. There are two types of taxes, direct and indirect. Direct tax is something that a person pays directly from his pocket. For example, you earn some income and the government imposes a certain percentage to be deducted directly from your salary. In case of indirect tax, this is something an individual pays through a medium or channel, which means taxes are imposed on goods and services here. For example, you go to a restaurant and you pay a certain amount of tax called, ‘service tax’, ‘VAT’, or ‘sales tax’. Here, the customer ends up paying the tax for the goods or service that has been rendered.Income tax is the most known form of direct tax. This type of tax is applicable to both an organization and an individual. There are various tax slabs that the government decides for various groups. Anyone earning There is no need to get into direct tax, as GST has been implemented for smooth functioning of indirect taxes. It is also expected that GST will improve transparency in taxation and help build a corruption-free economy.HISTORICAL MILESTONES OF GSTThe BJP-led Atal Behari Vajpayee government in the year 2000 introduced the idea of GST which was overlooked by the finance minister of West Bengal, Asim Dasgupta. Later, Mr Vajpayee made a special request to the Chief Minister of West Bengal to let the Finance Minister to design the GST model.In 2006, P Chidambaram, Union Finance Minister, of the Congress, announced that GST would roll out in April 2010. In 2008, the Empowered Committee made a report on the structure and the recommendations that GST required.In 2009, the empowered committee suggested dual GST module, under which there would be two components Central GST and State GST and taxes like excise, state, VAT, entertainment tax, service tax, entry tax, etc,  would be absorbed under the broad umbrella of GST.The empowered committee had to ensure there was development in IT system and infrastructure for smooth functioning of GST, which was overlooked by Nandan Nilekani.GST was officially passed in 2016 by Rajya Sabha with the required amendments.WHY GST?The question now arises, why was GST implemented or even thought of? The rational approach by the central government to implement GST was to streamline all the indirect tax regime which means the tax levied on goods (central and state level) will be streamlined creating a common market for all. So if you look at it, a certain tax is levied on value added goods and services at every stage (sale to purchase). This means, a consumer will bear the GST charged by the last service provider and will not pay anything that has to go to the manufacturer. GST here is breaking the barrier between states and it integrates one single rate throughout. Thus, a great boost for Indian economy.With the introduction of GST, bills now carry ‘CGST’ and ‘SGST’ on our bills now. Here both the central and state government have been assigned with certain fiscal responsibilities and thus had their own tax rates that they levied, but now considering the Indian federalism, both central and state government shall impose 9% tax under GST. WHAT EXACTLY IS CGST AND SGST?One needs to know what CGST and SGST currently means. ‘CGST’ would mean the tax levied on supply of any good and service which is the revenue for the Central Government, the tax that comprise this structure are excise, service, additional tax. The collection of ‘SGST’ means, tax levied on supply of goods which is revenue for the State Government. Tax like VAT, entertainment, luxury and entry tax are merged under this tax.There is another tax, the ‘IGST; which is abbreviated as integrated goods and service tax, while SGST and CGST are essentially the Intra state movement tax under GST. For the supply of goods and services that happens between two states tax is levied at 18 percent.HOW IS IT A BOOST TO THE INDIAN ECONOMY?The implementation of GST it is claimed to boost the Indian economy and create a common market for all taxpayers. THE AREA OF CONCERNGST has affected many sectors in various ways, and while prices have shot up for things like home appliances, charges like school fees, mobile bills, wifi services have become an expensive affair. Also, the bright side of GST being that luxury cars will be cheaper, movie tickets are few of the things that are said to becoming economic.GST has made its impact in many sectors in India. Previously there were different tax rates allotted in each state making it difficult for the flow of foreign investments. Now, it has eased the process of trade or supply by implementing uniform rates. The main concern behind GST was to boost the economy. Petrol, diesel and alcohol were few of the components that the states agreed not to add under the bill of GST because they generate close to 40% revenue for the state. With the implementation of GST, which means no entry tax, the state saw a steep fall in the price of petrol by Rs 3 right after the bill was passed (prices varied from state to state).Every legislation contains its own pros and cons. But, GST weigh with pros higher than cons. it is addressed as a beneficial taxation because ultimately the impact is prices are going to go down.To know about GST Impact on basic expenses  
GST: The Revolutionary Move in Taxes
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GST: The Revolutionary Move in Taxes 54 GST: The Revolutionary Move in Taxes News Article
Saurabh Jain Aug 22, 2017
BENGALURU: A 17-year-old dream, the Goods and Services Tax (GST), finally became a reality on July 1. The move, as claimed, will be a great push for Prime Minister Narendra Modi’s reform for development.GST is said to be the mother of all taxes as ...
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India to Mould Relations with the Uk: Theresa May

After Britain left the European Union(EU), India is one of those countries to mould an “ambitious” new trading relationship with the UK, Prime minister Theresa May  announced in the parliament.  "At this summit, I held a number of meetings with other world leaders, all of whom made clear their strong desire to forge ambitious new bilateral trading relationships with the UK after Brexit. This included America, Japan, China and India," she stated.  In the recently held G20 Summit in the House of Commons at Hamburg, May mentioned that in the meeting with PM Narendra Modi, they had discussions covering  a wide range of major issues which also involved modern day slavery.  On the issue of new trade deals, and in response to the opposition party leader Jeremy Corbyn, she stated that, “I am very happy to tell him (Corbyn) that we are already working with the Americans on what a trade deal might look like. We already have a working group with the Australians, and we have a working group with India as well.” "We are working on trade in three areas. Obviously, one area is looking ahead to the trade agreements we can have with those countries we do not currently have them with as a member of the European Union”, May added in one of her recent statements.  "The third area is working with countries such as India and Australia to discuss what changes we can make now, before we leave the EU, to improve our trade relationship."  May was questioned if she had raised the issue of modern day slavery and child prostitution in India in the course of her meeting with Modi, to which she replied that it was an issue conferred formerly with the Indian PM as the US wants  "people around the world to address it".  "We are very clear that we want to see this issue being dealt with. That is one of the reasons why we have put into legislation the requirement for companies here in the UK, which will be manufacturing and will be sourcing products from around the world, to look at their supply chains and report on what they find in them and whether or not modern slavery is taking place within them," she told Parliament. On the sidelines of G20 Summit in Germany, Modi and May had bilateral talks. Modi has brought up the issue of Indian economy and its offenders like liquor baron Vijay Mallya and IPL chief Lalit Modi, and appealed for UK’s cooperation in extraditing them to face the Indian courts.
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India to Mould Relations with the Uk: Theresa May

India to Mould Relations with the Uk: Theresa May

Kranthi Tilak Reddy
After Britain left the European Union(EU), India is one of those countries to mould an “ambitious” new trading relationship with the UK, Prime minister Theresa May  announced in the parliament...
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RBI Refused to Attend Meetings with Center

The MPC(Monetary Policy Committee) is a council of six members that sets benchmark interest rates. Predecessor Raghuram Rajan was given full authority of setting interest rates, but many had opposed and new arrangements were made to set up MPC which is less than a year old now. It is appreciable RBI stood firm in its decision. The committee was questioned on the grounds that Rajan left due to undesirable circumstances and out of the blue event of withdrawing currency from circulation. November onwards, a series of unpleasant situations are being faced by the government.Federal Ministry of Finance decided for a meet at New Delhi and the members of MPC refused for it. MPC anyway knew they were called to cut rates. India was already facing a trouble tackling private sector investments. Yet the MPC had turned a deaf ear to participate in the meeting and kept the rates stable. The resolution stood strong even after inflation rates had fallen down. This emerges from the agreement between central bank and government to shift targeting consumer price inflation. The government is in a baffled situation from then.RBI has not completely ignored, inflation period from 6 months (April-September) consumer price inflation has been revised. It has witnessed sharp decline from 4.5% to between 2% and 3.5% lying below the target rate of 4%.Why the rates are not cut?There are two prominent reasons. Firstly, after the cash shortage there has been significant decrease in inflation rate. Demonetisation has its effects on prices of agricultural  goods, especially on the food staples that dominate India’s CPI , and now facing crash. Secondly, it is government’s duty to revive investment and not the job of MPC.Without dissembling and rather than meeting setups, other ministers are to be questioned about the slow pace of reforms.
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RBI Refused to Attend Meetings with Center

RBI Refused to Attend Meetings with Center

Saurabh Jain
The MPC(Monetary Policy Committee) is a council of six members that sets benchmark interest rates. Predecessor Raghuram Rajan was given full authority of setting interest rates, but many had opposed a...
Continue reading

Trade Receivables Discounting System (TReDS)

TReDS is an institutional setup for flow of finance to small ,micro and medium (MSME) enterprises at competitive rates through multiple financiers. TReDS are subjected to supervision by RBI and envisages its operation both in primary and secondary market segments. It majorly addresses the gaps in MSME ecosystem as the micro, small and medium enterprises faces challenges in getting their payments on time and thereby create working capital gaps. MSME also faces constraints on obtaining adequate finance in market place. This is an hindrance to drive MSMe sector to the next phase of economy. The existing few legal bindings have been not much effective to ensure timely payments and fairness in trade. Cash availability issues have been caused to the small sector units by big corporates, which depends to source a part of their products from MSME’s.To overcome this issue, RBI has proposed Trade Receivables Discounting System(TReDS) in March 2014 which is a digital platform wherein MSMEs can get access to cash. This plan was published taking into account the consultation of few stakeholders and interest of few entities.To set up electronic bill factoring exchanges, guidelines had been issued by RBI on December 3, 2014  related to Trade Receivable e-Discounting System (TReDS) regulated under the Payment and Settlement System (PSS) Act, 2007. WHAT IS TReDS?TReDS is basically an online process that allows the auctioning of trade receivables, also known as discounting bills. It fills the working capital demands. TReDS facilitate the financing of trade receivables through multiple financiers. This scheme discounts bills of exchanges as well as their invoices. Here, the seller gets credit which is due, and discount is the interest paid to the financier. They include buyers such as government bodies and public sector units who will be direct participants in TReDS. HOW DOES TREDS OPERATE ELECTRONICALLY?Micro,small and medium scale enterprises can upload the invoice on the electronic platform. It goes upto 750 INR for registration. It then goes digitally to buyers like big companies, or retailers like Honda, Mahindra, Tata etc for acceptance within a specified time. The financiers offer discounting rates to the buyers. The seller or the buyer bearing the interest rate gets to accept the final bid. TReDS does the final settlement and the amount gets credited the next working day into the seller’s account through corporates or banks. Later,the amount is repaid to the financer. The invoices cannot be bidden below the marginal cost of funds based lending rate(MCLR) set by the RBI. To ensure there is no window dressing TReDS may initiate random audits and check the authenticity and genuineness of the transactions.During the on boarding process entities are required to submit KYC related documents along with resolutions or specific documents to the authorised personnel of the buyer corporate. ID’s and passwords would be provided to the MSME seller. One time agreement would be drawn upon amongst the participants in TReDS. This is a master agreement where the where the buyer is obligated to pay on the due date once the factoring unit is accepted. To those disputes with respect to quality of goods  there would be no recourse provided and no set offs to be allowed.IMPORTANT PARTIES INVOLVEDAs of now, NSE Strategic Investment Corporation (NSICL) and Small Industries Development Bank (SIDBI)  , Axis bank  and Mynd solutions which runs no1 exchange has been licensed by the RBI. Receivables Exchange Of India Ltd (RXIL) has been furnished under the guidelines of RBI, it is a joint venture between SIDBI and NSE set up to operate a TReDS platform for factoring  of invoices of MSME’s. RXIL is the first one to get authorisation to launch the platform and also the first one to go live on January 9, 2017. These are expected to get MSME corporate buyers and banks together on the TReDS platform to facilitate a smoother flow of the processes.MAJOR BENEFITSTReDS benefits MSME sector by eliminating paperworks as they transact online. The other advantages include competitive discount rates, seamless data flow, standardised practices, important of all easy access to funds and  they work transparently..ISSUES FACED BY TReDSThe registration charges can discourage MSME  sectors by using the TReDS platform. All the transactions has to be approved and registered Central Registry Of Securitisation and Asset Reconstruction and Security Interest Of India. They also require KYC documents. Recommendations have been provided to involve wealthy individuals to expand markets as  TReDS require more entities as financiers. The concept is still incipient and the above three players are trying to pick out corporates and financiers to make this scheme a successful one. TReDS can take off successfully, if supported with a strong debt-recovery mechanism framework.  RBI has also sought  views on the concept paper of trade receivables discounting system in the country . Actionable feedback can be of some use.
Rated /5 based on 20 customer reviews
Trade Receivables Discounting System (TReDS)

Trade Receivables Discounting System (TReDS)

Saurabh Jain
TReDS is an institutional setup for flow of finance to small ,micro and medium (MSME) enterprises at competitive rates through multiple financiers. TReDS are subjected to supervision by RBI and envisa...
Continue reading

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