GST Council finalises rates for services
Says exemption for healthcare, education to continue
•The Goods and Services Tax (GST) Council on Friday finalised tax rates for all services, except lottery, under the new indirect tax regime to be rolled out from July 1. Those services already exempted from tax, such as healthcare and education, will continue to enjoy the concession.
•The tax rate on non-AC restaurants will be 12%. It will be 18% on AC restaurants and those with a liquor licence. Restaurants in 5-star hotels will attract a 28% tax, the same as that applicable to these hotels itself. A tax of 18% will be levied for financial services and mobile services. While hotels and lodges with tariff below Rs. 1,000 have been exempted, those with room tariff of Rs. 1,000-Rs. 2,500 will attract 12%, those charging Rs. 2,500-Rs. 5,000 will come under the 18% tax bracket, and those charging any rate above that will be taxed at 28%.
Services categorised
•“Even in the services sector, depending on the nature of service… there are various categorisations that have been made,” Finance Minister Arun Jaitley said at the end of the two-day meeting of the GST Council.
•“There were a set of services that were exempted at present… These exemptions will continue. Besides the exempted category, which include healthcare and education, all other services have been fitted into four different rates of 5%, 12%, the standard rate of 18%, and luxury rate of 28%,” he said.
•“Having multiple rate slabs on services comes as a surprise to the industry, particularly the introduction of the 28% slab, which was not envisaged earlier,” Pratik Jain, partner and leader-indirect tax, PwC said.
•“The proposed tax structure on services is much more complex than we have at present. For hotels, restaurants and transportation, a distinction has been made on the basis of room tariff, turnover of business and so on,” Mr. Jain pointed out.
•“This is not in line with international practice, where a uniform rate is applied on a particular service irrespective of value or status of the business,” he said.
•“Levying GST at the demerit rate of 28% for 5-star hotels could be a dampener for tourism, especially in cases of business travel in a State where the recipient does not have registration,” Sachin Menon, national head, Indirect Tax, KPMG in India, said.
GSLV: too late for changing times
‘It may be ISRO’s short-lived rocket, not its primary satellite vehicle as planned’
•The GSLV space vehicle’s quiet but laudable success earlier this month could be a small solace that has come too late for the Indian Space Research Organisation.
•The late bloomer may even be a short-lived intermediate rocket instead of being ISRO’s primary satellite vehicle as it was planned, as a few ISRO old-timers and industry watchers privately suggest.
Adds to reliability
•Its fine feat of putting the South Asia Satellite perfectly to space on May 5 no doubt adds to the GSLV’s reliability. But ISRO actually needed this achievement at least a good decade ago, when it was still building and using 2,000-2,500-kg communication spacecraft for its own use.
•The GSLV was conceived in the early 1990s to launch Indian communication satellites of 2,000-kg class to an initial and later adjusted distance from Earth, called the ‘GTO’ (geosynchronous transfer orbit). This rocket took about 25 years and 11 flights to be fully realised. GSLV F-09 of May 5 was the fourth to click in a row.
•The GSLV is caught in a glaring mismatch: it cannot lift India’s bigger satellites; and the size that it can lift is out of fashion and does not make economic sense.
•As to why the GSLV could not rise sooner to the occasion, the external geopolitical reasons beyond the agency are well known now.
•While ISRO was perfecting the GSLV and falling behind schedule with the rocket’s crucial cryogenic stage, it progressed on the spacecraft side and upgraded the communication satellites to 3,000-plus kg in 2005. This was done to pack more punch (or transponders) per spacecraft. It would be roughly 24 regular transponders for 2,000 kg; 36 transponders for 3,000 kg and 48 transponders in a four-tonner.
•Replying to a query from The Hindu , Gagan Agrawal, analyst with the U.S.-based space industry consulting firm Northern Sky Research, said: “The communications satellite market is consistently looking at payload sizes greater than four tonnes and the question remains whether the GSLV or [the bigger] MKIII can cater to the market [yet.] ”
Not many customers
•ISRO’s smaller PSLV rocket has made a niche in the world market for light lifts. For the GSLV, there may not be many commercial customers requiring its service.
Survival of newborns: India ranks lower than Somalia
India falls 11 places, holds 154th position in Global Burden of Disease rankings
•Newborns in India have a lesser chance of survival than babies born in Afghanistan and Somalia, according to the latest Global Burden of Disease (GBD) study published in the medical journalThe Lancet.
•In the GBD rankings for healthcare access and quality (HAQ), India has fallen 11 places, and now ranks 154 out of 195 countries. Further, India’s healthcare index of 44.8 is the lowest among the sub-continental countries, as Sri Lanka (72.8), Bangladesh (51.7), Bhutan (52.7), and Nepal (50.8) all fared better. The top-ranked nation was Andorra with an overall score of 95 and the lowest-ranked nation was Central African Republic at 29.
•India’s downward slide in the rankings indicates that it has failed to achieve health care targets, especially those concerning neonatal disorders, maternal health, tuberculosis, and rheumatic heart disease. Last year, India was ranked 143 among 188 countries.
•In the case of neonatal mortality, on a scale of 1 to 100, India scored 14 in the HAQ index, while Afghanistan scored 19/100 and Somalia, 21/100. Access to tuberculosis treatment in India was scored 26 out of 100, lower than Pakistan (29), Congo (30) and Djibouti (29). For diabetes, chronic kidney diseases, and congenital heart diseases, India scored 38, 20, and 45, respectively.
•The Global Burden of Diseases, Injuries, and Risk Factors study is put together by the Institute for Health Metrics and Evaluation (IHME), an independent population health research centre associated with the University of Washington, along with a consortium of 2,300 researchers in more than 130 countries. The HAQ Index is based on death rates from 32 ailments that could be avoided by timely medical intervention.
‘Quality disturbing’
•“What we have found about health care access and quality is disturbing,” said Dr. Christopher Murray, senior author of the study and Director of IHME.
•“Having a strong economy does not guarantee good health care. Having great medical technology doesn’t either. We know this because people are not getting the care that should be expected for diseases with established treatments,” he said.
•Professor Martin McKee, from the London School of Hygiene & Tropical Medicine, who participated in the study, said, “What makes this study so important is its scope. It draws on the vast data resources assembled by the GBD team to go beyond earlier work in rich countries and cover the entire world in great detail. As the world’s governments move ahead to implement the goal of universal health coverage, to which they have committed in the Sustainable Development Goals, these data will provide a necessary baseline from which they can track progress.”
June 30 not a ‘deadline’ to get Aadhaar, govt. tells SC
Court defers petition to June 27 for omnibus hearing
•The Supreme Court on Friday refrained to order an interim stay on a series of government notifications requiring citizens to have Aadhaar by June 30, 2017, to equally access benefits and entitlements, even as the Centre denied imposing any such ‘deadline” to force people to get Aadhaar.
•The government was responding to a petition challenging 17 notifications issued by various government departments over the past few months, making Aadhaar compulsory after June 30, 2017, to equally access benefits, entitlements, services and welfare schemes. The petition asked the court to stay these notifications as an immediate interim relief.
•A Bench of Justices A.M. Khanwilkar and Navin Sinha deferred to June 27 the hearing on the petition after learning that there were other pleas with identical prayers already pending in the court. The court said it would hear all the pleas in an omnibus hearing on June 27, just three days before the notifications are scheduled to be implemented from June 30.
‘Inbuilt extensions’
•Attorney-General Mukul Rohatgi submitted that there were “inbuilt extensions” in these notifications to help citizens access services and schemes even if they are unable to possess an Aadhaar card by June 30. He said June 30 was not a hard-and-fast “deadline.”
•At one point, when Justice Khanwilkar asked whether the date could be extended beyond June 30, the AG declined, saying that this date was not a hard-and-fast “deadline” and there were alternatives provided.
•“If you don’t have Aadhaar, you just need to enrol and show your enrolment slip. Again, if beneficiaries are not able to enrol by June 30, they just need to register their request for enrolment... Just register your mobile number. Besides, States are obligated to set up enrolment centres,” Mr. Rohatgi submitted.
•But advocate Shyam Divan, appearing for Magsaysay award winner and former National Commission for Protection of Child Rights chairperson Shanta Sinha and feminist researcher Kalyani Sen Menon said the language of the notifications is quite clear. Citizens are forced to either posses an Aadhaar card or show proof — an enrolment slip — to access services and entitlements after June 30.
‘Stupendous anxiety’
•“You are excluded unless you have Aadhaar or you have to at least apply for it and show proof. If this is not mandatory in nature, what is? This means that, no matter what, you have to start the process of enrolment for Aadhaar before June 30, 2017,” Mr. Divan submitted.
•Mr. Divan said the public at large are waiting for the court’s intervention with “stupendous anxiety.”
•Mr. Rohatgi accused the petitioners of engaging in multiple litigation against Aadhaar and engaging in abuse of the processes of the court. He argued that similar interim reliefs were sought and not granted by the Supreme Court in the past.
•The government's top law officer referred to the recent slew of petitions against the linking of Aadhaar with PAN and the filing of income tax returns. The Supreme Court had refused to stay the law. Mr. Rohatgi submitted that 115 crore people have enrolled for Aadhaar as of date and none of them have challenged the scheme in the SC. “The purpose of the scheme is to get rid of the ghosts in the PDS (Public Distribution System) and mid-day meal schemes,” he said.
•Finally, the AG said the Aadhaar matter should be decided by a Constitution Bench, and that can be done after the court opens post summer vacations on July 1.
•Noting that the compulsory enrolment of citizens fits the profile of a surveillance State, Mr. Divan said the petitioners should be allowed their day in court and this should happen before June 30, 2017. “As a citizen of India, I should not be made to grovel before the SC for a date for hearing my case,” an exasperated Mr. Divan said. The court took exception to this comment, with Justice Khanwilkar pointing out that the “Supreme Court is open to all”.
‘Kudankulam MoU in final stages’
Process for units five and six is at the stage of internal approval, says MEA
•The discussions over the next MoU for units five and six of the Kudankulam Nuclear Power Plant (KKNPP) are at an advanced stage within the government, the Ministry of External Affairs (MEA) announced on Friday. However, it did not confirm whether the MoU will be ready for signing when Prime Minister Narendra Modi meets with Russian President Vladimir Putin in St. Petersburg next month.
•“Discussions have been held on [the] Kudankulam [5 and 6] document. The process is at the stage of internal approval,” the MEA spokesperson said in a statement, indicating the MoU is at the final stages before it can be signed.
Bilateral talks
•Mr. Modi is due to travel to Russia on June 1-3, where he has been invited as one of the chief guests at the St. Petersburg International Economic Forum (SPIEF), and he and President Putin will also hold bilateral talks.
•The General Framework Agreement (GFA) and Credit Protocol for KNPP 5 and 6 to be built in Tamil Nadu is among the deals on the table that was expected to be signed, and has already missed a deadline in 2016. When the two leaders last met in October 2016, the India-Russia joint statement had noted their “intention to conclude the GFA and the Credit Protocol for Kudankulam Nuclear Power Plant (KKNPP) units 5 and 6 by the end of 2016”, which would be executed by Russia’s publicly owned ROSATOM and the Nuclear Power Corporation of India Ltd (NPCIL).
•According to officials quoted by news agency Press Trust of India earlier this week, the GFA has been cleared by an inter-ministerial group and is with the Prime Minister’s Office at present, but that India had so far given no assurance it would be ready in time for PM Modi’s visit.
GST clarity, at last
The challenge now will be to preventthe imposition of additional taxes
•The long wait for the new indirect tax rates that will apply to thousands of goods and services is finally over. The Goods and Services Tax Council that met in Srinagar has released details of the rates at which over 1,200 goods will be taxed when the GST regime takes effect. The rate fitment process has been a subject matter of speculation for months now, accompanied by fears that the new tax rates and slabs would be influenced by special interest lobbies. So it is welcome that the government has offered better clarity. The July 1 rollout of the tax also looks more likely now with the GST Council showing its intent to get things going. Under the new structure, judging from the initial list of 1,211 items, the predominant share (43%) of goods will be taxed at 18%, while 17% and 14% of the notified items will fall under the 12% and 5% tax rate slabs, respectively. Around 7% of the items, which include essential goods such as milk, fruits, cereals and poultry, have been exempted from all taxes. A significant share (19%) of goods, however, has been tucked under the highest tax slab of 28%: many of these cater to the daily needs of the growing middle class. Apart from these four regular tax slabs, additional cess taxes of varying rates have also been imposed on sin and luxury goods such as pan masala, cigarettes and sports utility vehicles to compensate the States for loss of revenue during the initial years.
•Winners and losers are sure to emerge as tax rates undergo a major revision. But overall, the government has said the new tax regime will be revenue-neutral. If so, the GST’s influence on private spending will possibly remain muted. The four-slab structure of the GST regime gives it the look of a progressive tax code, in contrast to similar consumption-based taxes prevalent in other countries, which are essentially simple, flat taxes. While progressive taxes may be justified given the wide disparities in income levels in India, the principle of simplicity is being compromised. The new tax regime disappoints on earlier expectations that the top tax rate would be capped below 20% too. The middle class will now have to bear the brunt of higher prices. The challenge going forward will be to prevent backdoor rigging of rates through additional levies that are completely discretionary. States that have added significantly to their debt burden in recent years must be kept in check. Or additional discretionary taxes would add to the overall tax burden and particularly compromise on tax predictability. Lastly, the Centre and States must keep their pressing fiscal demands from influencing tax rates upwards in the future. Otherwise, the decision to do away with tax competition among States, in favour of a simple centralised tax system, will be done no justice.
‘GST rates could have aided green goods’
A rate of 18% has been set for commercial LPG, which is a low-emission auto fuel
•The Goods and Services Tax (GST) Council’s treatment of goods such as commercial LPG, hybrid cars, and renewable energy components has missed an opportunity to back environmentally friendly goods, according to an industry official and an economist.
•The GST Council on Thursday finalised the rates and cess for most of the goods under the purview of the tax.
•Among these, it set a rate of 18% for commercial LPG, and 5% for all renewable energy devices and spare parts, although the Ministry of New and Renewable Energy had requested exemption for these items.
•“This is an opportunity lost by the government regarding auto LPG (a type of commercial LPG),” Suyash Gupta, director general of the Indian Auto LPG Coalition, said in an interview.
•“We had asked the government for parity treatment for all kinds of LPG, domestic as well as commercial.”
•LPG for domestic use would be taxed at 5% while LPG used commercially and in cars would be taxed at 18%.
•This would also encourage theft, since people already transfer LPG from domestic cylinders to commercial containers to avoid the higher tax, Mr. Gupta said.
•“Auto LPG also has far lower nitrogen oxide emissions than even CNG, let alone petrol and diesel,” Mr. Gupta added. “The issue is a lack of a policy ecosystem to promote cleaner fuels, whether LPG or battery power.”
•Under GST, the government will also levy cesses on certain sin and luxury goods, over and above the highest tax rate of 28%.
•In this system, it has clubbed together sport-utility vehicles (SUVs), which usually have higher emission levels, and hybrid vehicles, and set the cess at 15%.
•At the same time, the cess on ultra-luxury products, like private planes and yachts, has been set at a relatively low 3%.
‘Wrong impression’
•“What is the message they are trying to give here? That they are as okay with people buying polluting SUVs and cleaner hybrid cars?” asked a senior economist, who did not wish to be identified. “The lower cess rate on private planes (than on hybrid vehicles) also gives a wrong impression.”
•“Solar power prices have gone below grid parity and wind power prices are also almost at grid parity despite only one bid (auction for 1 GW),” Power, New and Renewable Energy, Coal, and Mines Minister Piyush Goyal said at a press conference.
•“Twenty-five years later, other forms of power would be 3-4 times higher than they are now. Solar, wind and hydro would be affordable forms of power. I don't think GST rates will impact my sector’s tariff,” Mr. Goyal had said at the time.
Renewable energy
•In January, the Ministry of New and Renewable Energy had made a presentation to the GST Council seeking zero rate of tax on the ground that any upward impact on tariffs due to GST would have significant adverse effects on the industry.
•“Under GST, it’s not just the output rate that matters, but what also matters is the input rate,” said Anita Rastogi, partner, Indirect Tax, at PwC India.
•“So, renewable energy component providers will have to do the maths to see whether the rate of 5% on their output actually works out to be more expensive.”
