Taxation
Tax Tentacles – 1: An Overview
The Indian tax system is devilishly complex, extortive and a patchwork of various haphazard ideas. This is the first part of a multi-part series on the vexing Indian tax system and the path to genuine reforms, adapted from Justice S Rangarajan Memorial Lecture in Bangalore delivered recently 
 
Last year, Dr C Rangarajan closed his speech with this quotation: “The strength of our legal system depends on how quickly we respond to changing situations. As the philosopher Whitehead reminded us, the ‘art of progress is to preserve order amid change and to promote change amid order‘.” My endeavour is to explore how this can be done in the field of personal income tax. 
 
Before we talk of change, we must see what the present system is.
 
Income tax is a progressive tax on total income of the previous year but collected in advance - requires income recognition process and tax rate and rebates.
 
Taxpayers are classified as individual, Association of Persons (AOP), Body of Individuals (BoI), Hindu undivided family (HUF), companies and trusts
 
Income divided into heads - salary, property income, business and other sources
 
Total income concept subject to slab rates supposedly on progressive basis but leaves out dividends and taxes capital gains and lottery income at flat rates
 
Returns to be filed as the source of data for making assessments - at present data from deduction of tax at source as a supplement.
 
Assessment process - returns are to be processed, leading to disputes and ineffective or delayed and costly remedies
 
Collection complicated by tax deduction at source and cost of compliance escalation
 
Untaxed income is called black money tarnishing all genuine cash holdings and transactions.
 
This pattern of taxing total income had developed tentacles, which catch and squeeze the taxpayer in several ways. The aim of the taxing officer is to increase the total income in as many ways as possible - mainly by adding non-income receipts as income and by disallowing legitimate deductions apart from adding items that might have been omitted, deliberately or by oversight. Of course, the taxpayer also tries to minimise the total taxable income by tax planning schemes, which are sometimes dubious. 
 
The overreach goes to the extent of trying to capture transactions, which are not even in this country and not taxable, such as the Vodafone case. When the Supreme Court points this out, the revenue ups it with a retrospective amendment of the law. Therefore, the reaction is: “if I can’t win I will change the rules”. If one tentacle fails, it will grow more. 
 
Not surprisingly the new Finance Minister falls a victim to the ‘Yes, Minister’ sabotage and refrains from repealing an untenable provision, which has the unanticipated result of discouraging investment.  "The Opposition aren't really the opposition. They are only the Government in exile. The Civil Service are the opposition in residence". 
 
The problem of any tax department is the problem of power: its temptations, its dangers, and its tendency to corrupt. Administrative law, far from being a distinctive product of modernity, is thus according to Philip Hamburger the “contemporary expression of the old tendency toward absolute power – toward consolidated power outside and above the law.” In our country, the government servant is the Sarkar, to whom we have to make obeisance. 
 
One of the reasons for this rigid posture is the pressure from audit and vigilance departments. The audit thinks that if an untenable levy is cancelled, revenue is lost and vigilance thinks that there may be other considerations for giving relief. Even courts do not always wear the ‘veil of ignorance’ in deciding issues. "Going behind the veil of ignorance," means not to allow wealth and income to influence the outcome of litigation, to decide on principle and not on the amount involved.
 
(Justice TNC Rangarajan is a former judge of Madras and Andhra Pradesh High Courts. Earlier, for more than 20 years, he was a Judicial Member of Income Tax Appellate Tribunal.)

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COMMENTS

Davidson D

2 years ago

Let the govt. cancel entire income tax act and introduce 5% banking tax based on the credits to the account. On receipt of confirmation from corresponding bank about clear credit , net proceeds can be credited to the accountholders' account which would be final compliance of tax from the accountholders' point of view. The deduction should be attributed to the accountholders' PAN. Even if its cash, irrespective of the limit, 5% TDS has to be effected by the bank acting as a full compliance. There should be no filing of returns or advance tax. There should be no deductions or exemptions. No TDS certificates to be issued, no refunds to be claimed. This will considerably bolster the govt. revenue and also relieve the hapless taxpayer of the draconian provisions of the act. Lower rate of tax would act as incentive to the taxpayer to voluntarily disclose his/her income rather than pay tax @ almost 35% today. Higher disposable income can result in increasing indirect tax revenue thus aiding the govt from both the sides. I think this would be areal simplification. All litigations would be automatically eliminated.

CHANDU CHARTIST

2 years ago

vote diya aab note do 10 lakh wale aur mangane hey

Vijay Chandar

2 years ago

A very succinct prologue to an interesting subject. Waiting eagerly for the follow-up

Vishal Modi

2 years ago

Perhaps Sarkar can treat domestic investors the same way it bends backwards to placate disgruntled FPIs!

Why no Chief CIC in Modi Raj?
Signature campaigns, protests in the Parliament, polite letters to the PM, court petitions – RTI activists have tried it all to appeal to the government to fill up the vital Chief Central Information Commissioner’s post. The Modi government ignores it all. Why? Experts speak out
 
We are about to complete one full decade of the Right to Information Act (RTI), which was passed by the Parliament on 15 June 2005, and implemented on 12 October 2005. However, it is for the first time, that the crucial post of the Chief Central Information Commissioner (CCIC) is lying vacant since nine months, with the Narendra Modi government, which otherwise boasts of efficiency and transparency, refusing to fill up this post, under some pretext or the other.
 
To understand the importance of this post, it would suffice to say that it is akin to having a cabinet without the Prime Minister. It also means that crucial and important public authorities like the Prime Minister’s Office (PMO), Comptroller and Auditor General (CAG), Central Bureau of Investigation (CBI), Central Vigilance Commission (CVC), Supreme Court, High Court amongst several others, which are directly under the Chief Central Information Commissioner, are unanswerable for now. Also, the pendency of second appeals has piled up by over 100%. 
 
Is the government deliberately trying to cripple the RTI Act that for the first time since Independence, has empowered citizens to demand transparency and exposed corruption and financial irregularities? RTI has led to public shame of some stalwart politicians and resulted in the defeat of many in the recent Lok Sabha and State Assembly elections, much to the discomfort of the political fraternity. So, one cannot help wonder whether stifling the RTI Act is the best option for this community.
 
However, unlike earlier campaigns like the Congress-led United Progressive Alliance (UPA) wanting to throw file notings out of the RTI ambit, which had led to vocal and vociferous protests by RTI activists and citizens across the country, the case of the non-appointment of CIC has not attracted a strong protest from the masses. It is time that each one of us raised our voice against this deliberate negligence by the Modi government to weaken this citizen-friendly Act, as a thousand voices would compel the government.
 

Moneylife spoke to leading RTI experts and crusaders of the country to understand the danger and repercussions of non-appointment of the CIC. Read on… 

 
Shailesh Gandhi (Former Central Information Commissioner and RTI Activist):
 
In the absence of a CCIC, the Commission has not done reallocation of work. Consequently, the portfolios of the Chief Commissioner are left completely unserved. Similarly no multiple member benches are being formed since conventionally the Chief Commissioner constitutes these. However, most organisations everywhere operate on an acting head or work on unanimity in such situations. Unfortunately, the Commissioners have not adopted this simple method to ensure smooth working. They have waited for the Delhi High Court to tell them this.
 
It is also strange that the government has not found the time to appoint a CIC despite the lapse of nearly nine months. Even in the Parliament, no proper explanation was given for this serious lapse. It appears the Government is not interested in RTI. Most established Institutions are unhappy with RTI. 
 
The former Prime Minister, - harried by the uncovering of various scams by RTI,-said at the Central Information Commission’s convention in October 2012, “There are concerns about frivolous and vexatious use of the Act in demanding information the disclosure of which cannot possibly serve any public purpose.” 
 
The present Prime Minister has taken a pre-emptive action by not appointing a Chief Information Commissioner at all to render it dysfunctional. 
 
The bureaucracy is also hardening its stand and in most cases has realized that the Commissioners are not really committed to transparency. This coupled with the long wait at the Commissions and the reluctance of the Commissions in imposing penalties is slowly making it difficult to get sensitive information which could aid citizens to expose structural shortcomings or corruption.
 
When the power equation changes between those with power and the ordinary citizen, resistance is to be expected. Everyone in power generally feels transparency is good for others, whereas they should be left to work effectively. It is implied that transparency is a hindrance to good governance. 
 
Anjali Bharadwaj (Delhi-based RTI Activist and member, NCPRI):
 
Non-appointment of CCIC is a deliberate, benign neglect
 
We started getting alarmed very soon after the position of the CIC fell vacant because this is one place, which is helping people so much access to information. Non-appointment of the Chief CIC, is really going to weaken the institution of the CIC. The government, on one pretext or the other, has not made the appointment since 22 August 2014 and it is going to be nine months now. For the government that says it is extremely efficient and works promptly, one wonders what prevents it from making such a crucial appointment.
 
I feel this is a deliberate benign neglect by the Modi government in order to stifle the RTI Act. So far, we have all been used to frontal attacks on RTI and time and again, the civil society comes together and fights except that this time because it is a case of non-appointment, it has taken people so long to realise how the government is stealthily trying to weaken the Act.
 
When we filed RTI applications, they kept giving some reason or the other of why there has been no appointment. The first time, when we filed the RTI application, they said, they have given an open advertisement and the last date is November. Now, if the retirement of CCIC Rajiv Mathur was not an emergency retirement, as he did not resign and so the government knew his date of retirement, why did the advertisement process, if there had been one, took place three months after he retired? Till now the tradition has been that the senior most information commissioner is made the chief. Now they have said that they want a different system. 
 
In our subsequent RTI applications, we were told that the PM has desired that a fresh selection be made even for a chief’s post and a search committee be set up. The committee comprised all bureaucrats so we asked the minutes of its meetings. We got a reply stating that no minutes of the meetings were maintained and hence they do not even know who attended. Therefore, there is utter lack of transparency in this process. Even after that, the last stage for applying was November. Even till date they have not been able to shortlist people. Last month the matter went to HC and now the Department of Personnel and Training (DoPT) has said that it will require three months more and the Court has said it would monitor its work.
 
The real crux of the issue is that the CIC has a special position under the RTI Act. So, all powers of superintendence, of management and of direction are with the Chief CIC. Therefore, all administrative and financial powers are also with him including allocation of work. Crucial public authorities for the past nine months have had no adjudicators and no commissioners to look into the violation of the RTI law. Thus, without changing a word of RTI law, today the PMO and other such crucial offices are outside the ambit of the RTI. 
 
We have held protests in this Parliamentary Session and from Jantar Mantar, we have met the DoPT minister who has given us vague answers. We had also undertaken signature campaigns. It is time for more and more people to voice this unpardonable delay in appointing CCIC, thereby killing the RTI Act
 
Vijay Kumbhar (Pune-based RTI activist):
 
Government is breaking faith of citizens
 
The government may not be breaking any rule in the RTI Act by not appointing a CCIC but it certainly is breaking faith of the citizens. Appointment of CCIC or IC’s is no doubt a serious issue, but the bitter truth is that no political party in India likes transparency or good governance. It is only because of pressure from international funding agencies (for their own interest or otherwise) to make good governance and transparency, mandatory for governments from developing countries that the latter, in this case India, has been forced to bring in citizen friendly laws, with enough flaws to dilute the original intent. However, when it comes to implementation, political parties are in solidarity with Babus, to keep them as weak as possible.
 
There is reason to believe in this theory. The three essential elements of good governance are transparency, accountability and responsiveness of the administration. In 1997, at the all-states chief ministers’ conference the then Prime minister realised that (probably due to above mentioned pressure) as the country completes 50 years of independence and as the people are assailed by growing doubts about the accountability, effectiveness and moral standards of administration, the central and state governments should move together to justify the trust of faith of the people in the government by taking up the implementation of the action plan. 
 
The conference also resolved that the central and state governments would work together to concretize the Action Plan dealing with the following themes
I. Accountable and citizen-friendly Government
II. Transparency and Right to Information and
III. Improving the performance and integrity of the public service.
 
Citizens’ Charter, Redressal of Public Grievances, Peoples Participation, Decentralisation and Devolution of Powers were part of all these measures.
 
Thereafter central and state governments introduced so many so-called pro-people legislations. Hence, even 18 years after the chief ministers’ resolution, things have not changed. If you remember the journey of the RTI Act from Freedom of Information Act to Right to Information Act, you will realise that politicians, in solidarity with babus, initially tried to bring a toothless RTI act but had to bow before stalwart activists who compelled it to bring in a strong Act. The same was the fate of public services guaranty act, whistle blowers act, decentralization of powers, eradication of corruption, Lokpal , Lokayukt and all such laws. 
The only way to overcome this situation is citizens should keep raising their voice.
 
Commodore Lokesh Batra (retd), (Delhi-based RTI activist and one of the petitioners for appointment of ICs and CICs):
 
Lack of Chief Information Commissioner adversely affects functioning of CIC
 
The reasons why it is important to have the post of the CCIC have been described in our petition to the High Court. They are:
 
A. That the Right to Information Act provides a legal mechanism to enforce and implement the citizen’s right to information guaranteed under Article 19(1)(a) of the Constitution of India. The delay in disposal of the cases by the CIC frustrates the very purpose of the RTI Act.
 
B. That the position of the Chief Information Commissioner is very vital in term of section 12(4) of the RTI Act, 2005 and lack of it can very adversely effect the functioning of the CIC.
 
C. That the RTI Act mandates a time-bound delivery of information to the citizens. Long delays defeat the letter and spirit of this legislation.
 
D. That despite repeated letters of the Chief Information Commissioners to the President and lodging grievance with the Govt. of India, for filling up the vacancies of Information Commissioners and appointment of the Chief Information Commissioner, the Union of India has failed to appoint the Information Commissioners and Chief Information Commissioner in the CIC. Such an action is arbitrary.
 
E. That for more than 100 authorities/departments, there is a vacuum of jurisdiction at CIC, which includes important organizations/institutions like CVC, CBI, UPSC, CAG, President Secretariat, PMO, Hon’ble Supreme Court and High Courts. 
 
F. That Union of India is statutorily bound to make appointments of the Information Commissioners and its has failed to do its statutory duty
 
G. That the indefinite time taken in disposal of the Appeal/Complaints by the CIC, the fundamental right, i.e., right to information of the citizens to access information within the stipulated period is violated. 
 
H. That the Supreme Court in the case of Centre for Public Interest Litigation & Anr. Vs. Union of India & Anr. (2011 (4) SCC 1), has laid down certain guidelines for appointment to watchdog institution like CVC and the same must be followed in selection of Chief Information Commissioner and Information Commissioners.
 
Last fortnight, the High Court ordered:
 
a. Direct the Union of India to forthwith and urgently prepare a shortlist of candidates for the position of Chief Information Commissioner and 3 Information Commissioners in transparent manner on the basis of rational criteria from diverse backgrounds as envisaged under section 12 of the RTI Act and immediately place the said shortlist before the high-powered selection committee, for final selection and appointment, to be concluded in a time bound manner.
 

Chronology after CCIC Rajiv Mathur retired on 22 August 2014

 
23 Aug 2014 - Chief IC post fell vacant after Chief IC Rajiv Mathur retired on 22 August 2014. Since then post of Chief IC is lying vacant.
 
1 Sept 2014 - The 'Special Leave Petition (SLP) of Union of India disposed off as infructuous in view of the statement of ASG.
 
11 Sept 2014 - Former Chief Information Commissioners along with other eminent persons wrote a letter to President of India urging him to appoint the Chief Information Commissioner and highlighting the huge pendency in the CIC. 
 
24 Oct 2014 - Government of India called for the application for the post of Chief IC in CIC.  
 
16 Jan 2015 - First meeting of Search Committee held in the Chairmanship of Cabinet Secretary.
 
06 Apr 2015 - No appointment at CIC has been made. At present there are 4 vacancies at CIC, including that of the Chief Information Commissioner.
 
(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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COMMENTS

Autonomous Shreelay

2 years ago

PM is bluffed with nation on matters of Transparency and accountability. PM has made authoritarian administration, TV actress HRD minister, conflict with independence of Judiciary, and nailing civil society and NGOs.
Flying around the world and insulting previous government's work on which present Government is standing.


Speaking through "Man ki Baat", and being "deaf to public grievances" is special characteristic of Modi Sarkar.

Dharmesh Sampat

2 years ago

A very good article, very high on content and setting out the facts in lucid manner. Loved to read every bit of it as well conversant with the subject of RTI Act.

It was very good on part of author and publisher to have also added the views of well known RTI Activists.

It is a matter of grave concern that Post of CIC has been vacant for such a long time. This shows the mindset of PM in terms of transparency of Govt's functioning. It is for the PM, a cabinet minister chosen by PM & Opposition leader to appoint the CIC.

Our PM has all the time to travel across the world but not appoint CIC.

It is very frustrating to see the attitude of the elected representatives and bureaucrats wherein they consider themselves supreme & look upon the masses in demeaning manner. They should be reminded that they are occupying positions as the people have voted them for service of nation.

I have personally experienced that RTI Act is being gradually diluted & the PIO's are meaning multiple ways to tweak it & deny information directly/indirectly. They are conveniently using the clauses to suit their purpose and deliberately denying information.

There are several other instances where the mindset of strangulating the act is witness. One such instance is in case of creating pressure on the applicant by divulging personal details of the RTI applicant to other parties under the grab of 'Third Party Information'. The mindset of PIO's is very regressive and needs to be exposed.

I also feel we need Digests of State information Commissions decisions which is not available.
There is only one publisher which publishes digest on Central Information Commissions decisions or quotes such rulings in the commentaries on RTI Law books.

RTI Act is a major tool in the hands of public to keep the Government functioning in check. If it is strangulated in such manner, I am afraid we citizens would have nothing in our hands to control corruption, nepotism, arbitrary decision etc.

The matter of strangulation of RTI Act, delay in appointment of CIC is indeed very very serious & people must be proactive in conveying this to the PM & convey disenchantment otherwise. This issue must not be just be left in hands of activists who fight so much for the betterment of the nation, but also be taken up by every citizen. We need to create intense public pressure for such matter.

The opposition must not allow the Parliament to function unless the CIC is appointed. In the interest of saving the Act, disruption would be affordable keeping in view the purpose of the Act & it's systematised strangulation.

Let's hope the elected representatives realise the strong sense of despair and anger in the public over the issue of appointment of CIC.

Dharmesh Sampat

2 years ago

A very good article, very high on content and setting out the facts in lucid manner. Loved to read every bit of it as well conversant with the subject of RTI Act.

It was very good on part of author and publisher to have also added the views of well known RTI Activists.

It is a matter of grave concern that Post of CIC has been vacant for such a long time. This shows the mindset of PM in terms of transparency of Govt's functioning. It is for the PM, a cabinet minister chosen by PM & Opposition leader to appoint the CIC.

Our PM has all the time to travel across the world but not appoint CIC.

It is very frustrating to see the attitude of the elected representatives and bureaucrats wherein they consider themselves supreme & look upon the masses in demeaning manner. They should be reminded that they are occupying positions as the people have voted them for service of nation.

I have personally experienced that RTI Act is being gradually diluted & the PIO's are meaning multiple ways to tweak it & deny information directly/indirectly. They are conveniently using the clauses to suit their purpose and deliberately denying information.

There are several other instances where the mindset of strangulating the act is witness. One such instance is in case of creating pressure on the applicant by divulging personal details of the RTI applicant to other parties under the grab of 'Third Party Information'. The mindset of PIO's is very regressive and needs to be exposed.

I also feel we need Digests of State information Commissions decisions which is not available.
There is only one publisher which publishes digest on Central Information Commissions decisions or quotes such rulings in the commentaries on RTI Law books.

RTI Act is a major tool in the hands of public to keep the Government functioning in check. If it is strangulated in such manner, I am afraid we citizens would have nothing in our hands to control corruption, nepotism, arbitrary decision etc.

The matter of strangulation of RTI Act, delay in appointment of CIC is indeed very very serious & people must be proactive in conveying this to the PM & convey disenchantment otherwise. This issue must not be just be left in hands of activists who fight so much for the betterment of the nation, but also be taken up by every citizen. We need to create intense public pressure for such matter.

The opposition must not allow the Parliament to function unless the CIC is appointed. In the interest of saving the Act, disruption would be affordable keeping in view the purpose of the Act & it's systematised strangulation.

Let's hope the elected representatives realise the strong sense of despair and anger in the public over the issue of appointment of CIC.

CR KRISHNAMURTHY

2 years ago

The way Modi government is systematically destroying and/or negating the democratic instutitons, the writing on the wall is increasingly becoming clear. First, the Delhi election to be followed by Bihar year end and other states later. It is time the Government becomes sensitive of the disenchantment of the vast majority of citizens, whom it considers immature for transparency, and put in place course correction mechanism quickly.

CHANDU CHARTIST

2 years ago

kisi ke bap ki taqat nahi ki cic ki post bhare .congress ne galti ki rti dene ki me kiya pagal lagta hun ? i want only "POPAT" nothing else achhe achhe POPAT dhundh lao sub ko achhi jagah bithanga

Pattamadai Nagarajan

2 years ago

The delay in the appointment of CIC is nothing surprising when the tactics of Narendra Modi as CM of Gujerat towards the State Information Commission - delays, non responses and so on.
For the record it should not be forgotten that it is the much maligned UPA of Manmohan and Sonia which got the bill with the help of Non Governmental Organizations and individuals.

J. P. Shah

2 years ago

Basically this is situation in all other states where BJP is in power and also in some other parties ruled states, since no politician or babu wants to be exposed of his misdeeds. BJP thinks citizens are not mature enough to enjoy transparency. It is against right based rights but wants to give as charity to public in a democracy. PM has not walked the talk as far as corruption and transparency is concerned.

J. P. Shah

2 years ago

This is what Gujarat Information Com faced in last decade.

Jitendra Desai

2 years ago

Corruption grew many fold during last decade after introduction of RTI.RTI only created one more band of activists out to grab attention, publicity and what not.Was not Arvind Kejriwal an RTI activist?
RTI has failed to prevent corruption.Way out is to reduce the incidence of governance rather than preponderance of information through RTI.

REPLY

Vinita Deshmukh

In Reply to Jitendra Desai 2 years ago

Using RTI to grab attention? Pl do not insult the work of thousands of citizens who have been empowered by the RTI Act. Use of RTI Act is not restricted to some group of activists for heaven's sake. I hope you are doing your own bit to prevent corruption through other means, if not RTI and not indulging in mere arm-chair talk.

Carlos De Souza

In Reply to Vinita Deshmukh 2 years ago

We are with you, Vinita. People like Jitendra are sycophants of Modi or plain dumb. The people of India were taken for a ride once. I am ready to bet they will not be fooled again.

Excise duty collection jumps 112% contradicting 2% IIP growth
While the IIP is showing tepid growth, the actual tax collections are showing a huge jump reflecting stronger manufacturing. Which one would you rather believe? 
 
The indirect tax revenue (provisional) collections in April 2015 increased 46.2% to Rs47,747 crore from Rs32,661 crore same month a year ago. This high growth was due to a huge jump in central excise duty collections, which rose 112% during April 2015. However, the question is can excise duty which is a tax on production that leaves factories shoot up without production actually rising? On the day when the government put out the huge figure of jump in actual excise duty, it also published Index of Industrial Production (IIP) of March 2015, which shows meagre growth of 2%. The question is which one, the actual revenue collection or the IIP survey figures are more reliable, factual and right? 
 
According to data released by the Finance Ministry, central excise collections during April rose 112.3% to Rs18,373 crore from Rs8,655 crore a year ago. During the same month, customs collections increased 23.6% to Rs14,286 crore from Rs11,555 crore while service tax collections rose 21.2% to Rs15,088 crore from Rs12,451 crore in April 2014.
 
 
The IIP data from Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation shows that the index was at 197.3 in March, a growth of 2.1% compared with a year ago period. For the IIP, the CSO uses 2004-05 as base.
 
 
While the figures declared by the Finance Ministry are of actual collections, the IIP is a number compiled and published monthly by CSO, six weeks after the reference month ends. The actual tax collection is the money in the treasury, paid by factories. The IIP is merely a survey conducted by government officials.
 
In fact, the IIP data may (most of the times) underestimate the real industrial cycle. And this anomaly gets corrected only when the final data is released by the CSO. 
 
Last year a Committee headed by Saumitra Chowdhuri had suggested changing the base year in IIP to 2009-10 and subsequently to 2011-12 from 2004-05 to make the index more relevant with the present time. However, there is no change in the base year for IIP data, thus making it lag behind the more real time indicators like wholesale price index (WPI) and consumer price index (CPI).
 

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COMMENTS

Deepak mata

2 years ago

Part of the increase in Central Excise and Service tax revenue is on account of increase in ST rate from 12.36% to 14%. Such an increase makes an huge impact on the revenue collections in the intitial month after the increase is affected.

For Instance a company makes goods Rs.100/- from the raw materials worth Rs.90/-. Thus. assuming tax rate of 10% for the sake of simplicity, Rs.10/- is paid through Rs.9/- credit and Rs. 1/- in cash. After the increase lets say to 11%, the cenvat credit on raw material is still 9( in the initial months as raw material was already purchased earlier), tax paid is Rs.2/-(11-9), thus showing an increase of 100% for a one percent rise in tax. However this is seen only in initial months and the effect get petered down later.

R Varadarajan

2 years ago

The author has probably missed out the extra Excise Duty on petroleum products collected by the Govt. Perhaps this analysis will have a meaning if these are properly adjusted

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