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Since India introduced the goods and services tax (GST) in July 2017, the tax reform has seen numerous changes. About 18 months into its life, it is still under intense scrutiny. Mint takes a look at GST’s evolution and its future direction. Then and now In the pre-GST tax regime, each commodity would attract up to 17 taxes,  Under the GST, four tax slabs were introduced, with each item taxed at one rate.  The plan is to move towards a single standard rate in the future of around 15%  Since its implementation GST rates have been sharply cut on many items. The highest slab of 28% has only 27 categories of products, down from close to 228 at the time of rollout  Has GST succeeded in achieving its goals? The goods and services tax (GST) replaced 17 central and state taxes that existed before and has led to the removal of check posts at state borders, transforming India into a single market. It cut business costs by removing what is called “tax on tax”. GST has also increased the n

The cost of capital needs to be lowered to support economic growth, said principal economic adviser in the finance ministry Sanjeev Sanyal, building a case for a rate cut by the Reserve Bank of India (RBI) in its February monetary policy review.  The macro environment has by and large improved and conditions are in place for re-acceleration of the economy, Sanyal said in an interview. “Now that we have anchored inflation to a lower level, we need to bring down interest rates to be in sync with the new inflation rates. How we achieve this transition is, of course, the RBI’s and monetary policy committee’s prerogative,” said Sanyal. Sanjeev Sanyal, principal economic adviser in the finance ministry, maintains a fine balance between his profession of an economist advising the government on the financial sector and his interest in reading and writing on history. In an interview, Sanyal talks about supervising more closely the larger systemically important nonbanking financial companies

The Directorate General of GST Intelligence (DGGI) has busted a racket of fraudulent companies engaged in raising fake tax invoices worth Rs 2.2 billion to avail input-tax credit.  According to the DGGI, searches were conducted at several official as well as residential premises last Thursday in Chennai and Coimbatore in Tamil Nadu and busted the racket and arrested two persons.  "Several incriminating documents, including copies of fake invoices, issued on the letterheads of several firms that existed merely on paper, were seized", an official release issued on Sunday by Additional Director General K Balaji Majumdar said. The modus operandi was that several bogus companies and bank accounts were created using PAN and Aadhaar number of family members and employees, and complex transactions were made without the supply of goods, the release said.  According to the documents seized, fake invoices covering goods worth more than Rs 2.2 billion were issued without supply of go

Kolkata tops list with 617 cancellations, Delhi second with 203 Stepping up oversight over credit companies, the Reserve Bank of India has cancelled the registration of 1,490 non-banking financial companies (NBFCs). These included NBFCs that failed to meet prudential norms and those that voluntarily surrendered registration.  Kolkata tops the list with 617 cancellations, and New Delhi stands at second spot with 203, followed by Mumbai at 190, according to the data provided by the RBI for parliamentary questions (Lok Sabha). These cancellations happened owing to non-compliance with mandatory requirements like minimum net-owned funds (NoF) of Rs 20 million, not submitting statutory returns, and companies not being traced at the addresses they gave.  In some cases, NBFCS surrendered the certificate of registration, the RBI said.  The RBI said NBFCs registered with the regulator were subject to on-site inspection and off-site monitoring through return submission and statutory auditors’

The option of “marrying” the insolvency framework with a possible settlement scheme to deal with resolution of debt-laden companies is something that can be considered in the future, said finance and corporate affairs minister Arun Jaitley.  It will be only after the initial batch of bankruptcy cases is cleared, Jaitley said at an event Tuesday. “We have to see if revival is only through the Insolvency and Bankruptcy Code (IBC) or can we revive otherwise,” he said, sounding a note of caution that the various Reserve Bank of India schemes for settling and restructuring debt had not yielded much success. “I think today may not be the right time to go in for this discussion because of the huge rush of companies coming into the insolvency process. But once this rush is off over the next couple of years, business comes back to usual and honest creditor-debtor relationship is restored on account of IBC, a situation may arise when we have to consider a need to marry the two processes, so

The Goods and Services Tax (GST) Council will soon consider a proposal that makes it mandatory for hospitals to bill medicines and hospitalisation charges separately, a move that could help plug any leakage in GST collection from healthcare providers. Such a measure is also seen benefiting consumers as it will make hospital bills more transparent.  Hospital bills typically include charges for both medicines and hospital services. While medicines and consumables attract GST, with some under the maximum retail price (MRP) regime, hospitalisation services usually do not face tax. Tax authorities are worried that hospitals could be charging in-patients for GST on medicines, but the tax may not be reaching the exchequer due to bundling of bill of hospitalisation charges and medication. “There is a thinking that hospitals should have separate bills for medicine and hospital services…This will bring transparency for consumers as well,” an official privy to the proposal told ET. The propos

Demonetisation hit India’s economic activity in the period following the November 8, 2016, event but the impact had dissipated by the summer of 2017, said a working paper by the US-based National Bureau of Economic Research.  “Our results imply demonetisation lowered the growth rate of economic activity by at least 2 percentage points in the quarter of demonetisation,” said the working paper entitled ‘Cash and the Economy: Evidence from India’s Demonetisation.’ It compared the move’s effect to a monetary tightening equivalent to about two percentage points.  The paper, which has not been peer reviewed, said that India’s economic activity declined 3 percentage points or more in November and December 2016 even though its effects were dispelled over the next few months. It also noted some of the possible longer-term benefits of the measure that saw 86% of the currency notes in circulation being withdrawn.  “We conclude that while the cashless limit may appropriately describe economies