Nation
One nation + one tax = $ 137 billion For GST
About 42 per cent of the Rs 22 lakh crore ($328 billion) revenue of the central government and 35 states and union territories will now be subsumed under the goods and services tax (GST), passed by parliament's upper house on August 3, 2016 and being touted by some as one of independent India's “boldest reforms”.
 
Around Rs 9.20 lakh crore ($137 billion) of Central and state revenue from 15 taxes --from Central Excise to levies on gambling -- in 2014-15 ($1 = Rs 67) will be brought under the GST, scheduled to be levied from April 1, 2017, although the government might be hard-pressed to make this deadline.
 
Industries and commercial enterprises currently pay various taxes at various stages of a product or service, such as manufacture, transport, wholesale, logistics and retail. The administration of these taxes is often tangled in paperwork, results in slow inter-state movement of products and increases costs for consumers. 
 
Most of these taxes will be subsumed by the GST, barring a few, such as those on vehicles, roads, property and electricity.
 
The law enabling the GST must now go back to the the Lok Sabha, which must clear the new amendments brought in by the government to get political consensus, after which it must be ratified by half of all state legislatures.
 
Simultaneously, the information technology backbone that the GST will require is getting ready, with software testing set for October 2016, the Economic Times reported on August 3, 2016.
 
Hard to implement, but basic design is ready
 
It isn't yet clear what the GST taxation rate will be, but 17 per cent to 18 per cent is likely. Implementing the GST will not be easy because many taxes and their administration must be disentangled and brought online into a single, nationwide system. However, the basic architecture of such a system has been created.
 
As that nationwide system is constructed and brought online, tax administrators will also have to be retrained.
 
“For effective implementation of GST, tax administration staff -- both at the Central and state levels -- would require to be trained properly in terms of concept, legislation and procedure,” Karthik S and Satish Dedhia, tax experts at the PriceWaterhouseCoopers consultancy, wrote in Forbes India in February 2016. “The tax administration staff would also need to change their mindset, approach and attitude towards the tax payers. And for this, they would have to 'learn, unlearn, and relearn' the GST not only in letter but in spirit too.”
 
A GST Council will control the new tax regime across the Centre and the states; it will fix tax rates, exemptions and other issues. The Centre's representatives will control a third of the vote in the council.
 
Two Central representatives (Finance Minister and Minister of State for Finance) account for 33.3 per cent of the vote, while 29 finance ministers account for the remaining 66.7 per cent, according to the 122nd Constitutional Amendment Bill that will give effect to the GST regime.
 
Balancing act ahead, but calculations for UP, Maharashtra show it can work
 
The key challenge for the central government is to ensure both the Centre and the states benefit from the GST -- in other words, get as much as or more money than they currently do.
 
The Centre is likely to compensate states for lost revenue on ‘goods' by increasing their share of taxes on services, according to an analysis by the Institution of Chartered Accountants of India (ICAI).
 
Indian states cannot afford to lose revenue because they are already in debt, as IndiaSpend reported.
 
Maharashtra, India's most industrialised state, and Uttar Pradesh (UP), the most populous, expect to get at least Rs 60,000 crore and Rs 65,000 crore per year, as IndiaSpend‘s calculations revealed in December 2015. We found that these figures, based on data from the Reserve Bank of India's Study of State Finances, are almost equal to the revenue Maharashtra and UP currently receive through a host of taxes, which the GST will replace.
 
We chose Maharashtra for the analysis because it is the state with highest revenue from its own taxes, as a share of total revenue, at 66 per cent; and UP because it has the highest total revenue but no more than 36 per cent from its own taxes.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Nitin K Parekh

6 months ago

GST as a system is alright, but how the bureaucracy drafts the law, the checks and balances, the burden the trade and industry will have to bear to comply with the complicated returns planned will decide its success. The past experience proves that the babus never make any thing simple, lest it may reduce their importance in the scheme of taxation.

Then there is apprehension, even among the bureaucracy, on the division of power between the Central and State staff will be effected. After all it involves huge amount of revenue - both to the government and other unscrupulous elements.

Considering the one decade old VAT experience across the nation, it is highly objectionable to proclaim that GST will help reduce prices. It's utterly a wrong premise to endorse GST; no gain in raising the expectations of the general public. Experience the world over is overwhelmingly points to initial one to two years of inflation. Unless the political takes a strong stand, there is a distinct possibility for the GST legislation to play havoc with compliance.

Capital First Q1 net profit jumps 49% on robust interest income
Capital First Ltd, a non-banking finance company (NBFC) specialising in MSME and consumer financing reported a 49% jump in its June quarter net profit on robust net interest income, the highest quarterly profit the company has earned.
 
For the quarter to end June 2016, Capital First said, its net profit increased to Rs49.2 crore from Rs33.1 crore as its net interest income increased 73% to Rs277.9 crore from Rs160.3 crore, same period a year ago.
 
Commenting on the result, V Vaidyanathan, Chairman of Capital First said, "We are happy to report 49% growth in net profit for the quarter on a year-on-year basis based on a steady growth in assets under management (AUM), on the back of stable asset quality. We continue to see strong growth in all our lines of businesses."
 
As on 30 June 2016, the lender says its AUM stood at Rs17,213 crore with its retail loan portfolio contributing to 91.6% of the overall AUM. During the first quarter, Capital First said, its retail loan book grew 41% to Rs15,764 crore from Rs11,187 crore, same period last year.
 
The company said it continued to maintain a high asset quality with gross NPA of 1.18% and Net NPA of 0.60% as on June 2016 as per the Reserve Bank of India (RBI)'s revised 120 DPD NPA recognition norms. Its capital adequacy ratio (CAR) stood at 18.7% as of June 2016, Capital First said.

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Banks must disclose daily business mix to citizens under RTI, rules CIC
In a powerful verdict, a Divisional Bench of Central Information Commissioners, Sharat Sabharwal and Sudhir Bhargava ordered Union Bank of India (UBI) to pro-actively disclose its mix business on a quarterly basis. The Bench at the Central Information Commission (CIC) also observed that daily disclosure of its business mix, is not exempted from the Right to Information (RTI) Act and therefore should be provided to a citizen who seeks it through this route. 
 
The order dated 28 June 2016, states “…that disclosure of the information concerning the daily business mix of a bank does not attract the exemptions from disclosure available under Sections 8 (1) (a) and (d) of the RTI Act and is in larger public interest. At the same time, we are of the view that such information regarding daily business mix should be given to an RTI applicant only in respect of a quarter, the business figures for which have already been made public in keeping with the statutory requirements. This would ensure that even as the information of daily business mix is made public for a particular period through the RTI route, the public also has before it the figures for the end of the quarter, put out by the bank in fulfilment of its statutory obligations.”
 
It is interesting to note that it took three years from the time of RTI application in 2013 to the final CIC decision in 2016, exposing the pendency issue. 
 
The RTI application:
 
On 16 May 2013, Thane-based Nanik Rajwani had filed the RTI application with Central Public Information Officer (CPIO) of Union Bank of India on the backdrop of irregularities performed by banks. In the RTI application he sought information on…
 
a) Details business mix of the bank for the months March and April 2013. (Daily figures of total deposits, total advances and total business mix).  
b) Details of Restructured accounts which have subsequently turned NPA during three year period commencing from 1 April 2011 to 31 March 2013. 
c) Details of action initiated by the bank against Bank Officials who have indulged in window¬dressing of the business mix parameters in past three years.
d) Details of action initiated against Bank officials for classification of accounts as Standard subsequently classified into non-performing asset (NPA) by statutory / Reserve Bank of India (RBI) auditors.
e) Details of action initiated against bank Officials/ Statutory   Auditors classification of accounts as Standard subsequently classified into NPA by RBI Auditors.
 
CPIO denies information claiming it will affect “economic interest”
 
The CPIO on 26 June 2013 denied the information stating that it would affect the economic interest of the bank. He denied information as follows:
"(a) of the application, stated that the information was exempted from disclosure under Section 8 (1) (a) of the RTI Act, since its disclosure would prejudicially affect the economic interest of the Respondent Bank, which is a ‘State’ within the meaning of article 12 of the Constitution of India.” 
He claimed exemption from disclosure of information on point (a) under Section 8 (1) (d) also. 
The information on point (b) was provided, but with regard to points (c) to (e), the CPIO responded that the information sought was not available because it was not held in the form requested and required analysis of data for compilation.
 
First Appellate Authority (FAA) denies information claiming “commercial confidence”
 
In his order on 31 August 2013, the FAA stated that the available information had been provided and added that the information regarding details of the business mix of the bank, sought at point (a), was a matter of commercial confidence under Section 8 (1) (d) and its disclosure would prejudicially affect the economic interest of the bank, which is a ‘State’ within the meaning of article 12 of the Constitution of India.  
 
Division bench hearing on 13 June 2016
 
The RTI applicant, Nanik Rajwani argued as follows:
  • His request is three years old and he is yet to get the information
  • In his view, the information sought would reveal how the actions of the bank are prejudicially affecting the interests of its shareholders. He added that the bank sanctions credit facilities, which remain un-utilised. On the last day of the quarter the un-utilised credit is disbursed to the borrowers and the amount so generated is transferred to their deposit accounts, thereby artificially enhancing both the advances and the deposits of the bank for the purpose of disclosure to public
  • The bank is not furnishing the information of daily business mix because they are apprehensive that it would reveal irregularities committed by them
  • They have computerised data of the daily business mix of the bank and therefore it can be easily disclosed. 
  • The Head Office of the bank does not have to compile such data by getting it from different branches, but gets it from its Regional Offices
  • Price of the shares of the bank is 50% below the market value because the market does not trust the business data put out by the bank. Therefore, disclosure of the information sought by him is also a matter of larger public interest because the shareholders of the bank would come to know the correct picture
  • As peer RBI circulars, the bank has to report its business mix to the RBI on a fortnightly basis and in the event of their not doing so, they are liable to be penalised
  • The bank does not take action against the officers indulging in window-dressing. No action is taken against those officers and statutory auditors, who classify certain loan accounts as standard even though subsequently the same have to be classified as NPA
  • The information concerning the action taken by bank against officers was denied to him because he did not write the RTI application in the correct format.
 
The Union Bank argued:
  • That, they are a commercial bank listed with SEBI, with shareholding of the government and public. SEBI requires them to publish their business figures at specified intervals and this is being done as per the statutory requirements. Disclosure of the daily business mix figures would have an adverse impact not only the Union Bank but the entire banking industry.
  • Certain figures are reported by the bank to the RBI in keeping with their regulatory requirements in the context of cash reserve ratio etc. but these are not required to be made public. Since Union Bank is a government bank, the disclosure of the daily mix figures, would hurt the interest of the bank, would also affect adversely the national interest.
  • Revelation   of   daily   business   mix   could   lead to comparisons with the business of other banks and result in a run on the bank. In case, the entire banking industry is required to put out the business mix figures on a daily basis, they would be willing to so do so. However, they would not wish to be singled out by being made to disclose daily figures in response to RTI applications.
  • The lower prices of their shares are because of the overall situation of the economy and not on account of the public not trusting the figures put out by them 
  
The division bench of CIC observed:
  • Comparison of the figures for a particular quarter with those of previous quarters could have the same adverse impact on the image of the bank that they claim would result from disclosure of the daily figures
  • The bank is in any case abiding by the statutory regulations to make public its business mix figures on a quarterly basis. There is no reason to believe that disclosure of daily figures in response to an RTI application would make the situation any worse for them
  • It could not be the case of the bank that they would wish to retain the confidence of public and their shareholders by hiding certain information
  • On the contrary, it can be argued that disclosure of such information would enable citizens and shareholders to make informed decisions about their dealings with the bank
  • As per Section 42 (2) of the Reserve Bank of India Act, every scheduled bank has to send to the RBI, on a fortnightly basis, a return containing the amount of its demand and time liabilities, the amount of its borrowings from banks in India, the total amount of legal tender notes and coins held by it in India, the balance held by it at the Bank in India, the balance held by it in other banks, the investment in central and state government securities, the amount of amount of advances in India and the inland bills purchased and discounted in India
  • On the basis of the returns received from scheduled banks, the RTI makes public, on a fortnightly basis, consolidated figures in respect of business of all scheduled commercial banks, concerning liabilities to the banking system, liabilities to others, borrowings from Reserve Bank, cash in hand and a balance with Reserve Bank, assets with the banking system, investments and bank credit
  • The information put out also covers variations over the previous fortnight, previous financial years; as well as comparison on a year to year basis. If publication of such consolidated information in respect of all the scheduled banks in the country does not hurt the economic interests of the State, there is no reason why disclosure of the daily business mix of Union Bank should end up doing so.
  • Any action that results in dissuading commercial entities from indulging in practices such as window-dressing would be in larger public interest.
  • Disclosure of information concerning the daily business mix of bank would be a worthwhile step in the above context
 
 
The Supreme Court in judgment dated 16 December 2015 in Reserve Bank of India vs. Jayantilal N. Mistry (the Court was considering certain cases involving requests for information concerning reports of inspections of banks conducted by RBI, irregularities committed by banks, details of loan defaulters and NPA accounts etc.):- "61. The baseless and unsubstantiated argument of the RBI that the disclosure would hurt the economic interest of the country is totally misconceived. In the impugned order, the CIC has given several reasons to state why the disclosure of the information sought by the respondents would hugely serve public interest, and nondisclosure would be significantly detrimental to public interest and not in the economic interest of India. RBI's argument that if people, who are sovereign, are made aware of the irregularities being committed by the banks then the country's economic security would be endangered, is not only absurd but is equally misconceived and baseless. 65. And in this case the RBI and the Banks have sidestepped the General public's demand to give the requisite information on the pretext of "Fiduciary relationship" and "Economic Interest". This attitude of the RBI will only attract more suspicion and disbelief in them. RBI as a regulatory authority should work to make the Banks accountable to their actions."
 
 
CIC Decision
  • The disclosure of the information concerning the daily business mix of a bank does not attract the exemptions from disclosure under Section 8 (1) (a) and (d) of the RTI Act and is in larger public interest
  • At the same time, we are of the view that such information regarding daily business should be given to an RTI applicant only in respect of a quarter, the business figure for which have already been made public in keeping with statutory requirements
  • This would ensure that even as the information of daily business mix is made public for a particular period through the RTI route, the public also has before it the figures for the end of the quarter, put out by the bank in fulfilment of the statutory obligations.
  • Accordingly, the CPIO of the Respondent Bank is directed to provide to the Appellant the information in response to point (a) of his RTI application dated 16 May 2013. This information should be provided, free of charge, within thirty days of the receipt of this order.
 
(Vinita Deshmukh is consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”.)
 

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Venkatasubramanian Pasupathy

7 months ago

I think indian banks follow branch banking system and window dressing is not done by all the branches there are checks to find this quarterly data on important parameters should be sufficient

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