Revenue neutral rate upsc

July 1, 2021 marks the completion of four years since the roll-out of the Goods and Services Tax (GST). GST, which subsumed almost all domestic indirect taxes (petroleum, alcoholic beverages and stamp duty are the major exceptions) under one head, is perhaps the biggest tax reform in the history of independent India. The consensus on its reformist credentials notwithstanding, the policy took more than a decade of political back and forth to see light of the day. Four years after its implementation, it continues to face significant challenges. GST is slightly different in its fiscal federalism arrangement.(File photo) Was GST’s revenue potential overestimated initially? The short answer is yes. A look at GST collection estimates in the Union Budget proves this. The Union Budget for 2018-19 (the first full year under GST) estimated receipts to the tune of ₹7.43 lakh crore. Actual collections were just 78% of this amount. While the shortfall between Budget Estimates (BE) and actual collections reduced significantly in 2019-20 (the latter was 90% of the former) the BE number itself saw a significant downward revision to ₹6.63 lakh crore. In fact, BE numbers for GST collections in both 2020-21 (made before the pandemic hit) and 2021-22 are still lower than the 2018-19 numbers. That GST collection projections after 2018-19 have been reduced even though nominal GDP has gone up shows that the initial revenue potential from the tax was overestimated. GST’s collection shortfall has ...

The Narendra Modi Government reduced excise duty on petrol and diesel on the eve of Deepavali. While the reduction for petrol was ₹5, duty on diesel came down by ₹10. The Finance Ministry ‘dedicated’ the reduction to farmers for keeping “the economic growth momentum going even during the [COVID-19] lockdown phase” and said the reduction “will come as a boost to the farmers during the upcoming Rabi season”. Not only this, soon after announcing the decision, Bharatiya Janata Party workers in Opposition-ruled States held protests demanding that these Governments decrease Value Added Tax on petrol and diesel. What else can be more hypocritical than this? The Centre has been levying around ₹31 and ₹33 as additional cess on petrol and diesel, respectively, till the beginning of November. We, the Left parties, had stridently voiced our concern when the Centre began this practice of imposing special additional excise and cess on petrol and diesel. I remember moving a statutory motion in the Rajya Sabha during the winter session of 2014 against the overall increase in the excise duty by the then Finance Minister, Arun Jaitley. The Centre then amended the rules to increase the taxes on petrol and diesel. The Constitution does permit the Centre to levy cess and surcharges beyond the basic taxes and duties in extraordinary situations. But making it manifold higher than the basic taxes is nothing but a misuse of such provisions of the Constitution. These additional taxes do not go to a...

MENU MENU • • • • • • • • • • • • • • • • • • • • • Current Affairs • • • • • • Quizzes(Prelims) • • • • • • • Mains • • • • • • • • • Analyticas: Optional Subjects • • • • • • • • • • • • • • • • • • • • • Current Affairs • • • • • • • • • • • • • Quizzes • • • • • • • • Mains • • • Interview • • • Questions Papers & Syllabus • • • • • • • • • • • • • • General Studies – 1 • • • • • • • • • General Studies – 2 • • • • • General Studies – 3 • • • • • • • General Studies – 4 • • • Introduction: It has been claimed that the implementation of the Goods and Services Tax (GST) in India was a grand experiment in cooperative federalism in which both the Union and the Statesjoined hands to rationalise cascading domestic trade taxes and evolve a value-added tax on goods and services. Although the rate structure was presumed to be revenue neutral, the States agreed to forgo their revenue autonomy in favour of tax harmonisation . This was in the hope that it would turn out to be a money machine in the medium term due to improved compliance arising from the self-policing nature of the tax. While States would receive the SGST (State GST) component of the GST, and a share of the IGST (integrated GST), it was agreed that revenue shortfalls arising from the transition to the new indirect taxes regime would be made good from a pooled GST Compensation Fund for a period of five years that is currently set to end in June 2022. What is the GST compensation? The Constitution (One Hundred and Fi...

A single rate of tax that would preserve revenue at pre-GST levelsExplanation: The term revenue neutral rate (RNR) refers to that single rate, which preserves revenue at desired (current) levels. This was one of the major outcomes of the pre-GST negotiation between States and Centre, where the former were experiencing loss of revenue post-GST. The RNR should be distinguished from the “standard” rate defined as that rate in a GST regime which is applied to all goods and services whose taxation is not explicitly specified. Typically, the majority of the base (i.e., majority of goods and services) will be taxed at the standard rate, although this is not always true

Insights into Issues: Goods and Services Tax Goods and Services Tax Introduction GST encapsulates the dictum – “One nation, one indirect tax”. It will make India one unified common market. GST was first mooted in the year 2003 by Kelkar Task Force on indirect taxes, who had suggested subsuming various central and state indirect taxes into one indirect tax. To implement this vision, an Empowered Committee of State Finance Ministers was created and tasked with the responsibilty of ironing out the differences and taking this monumental reform forward. Features of GST • Single tax on supply of goods and services, right from the manufacturer to the consumer • It is a destination based tax unlike the present taxation scheme which is origin based • It is a value based tax as credits of input taxes paid at each stage will be available in the subsequent stages • The final consumer will bear only the GST charged by the last dealer in the supply chain • At the central level, following taxes are being subsumed under GST • Central Excise Duty • Additional Excise Duty • Service Tax • Countervailing Duty • Special Additional Duty of Customs • At the state level, following taxes are being subsumed under GST • State VAT/Sales Tax • Entertainment Tax • Central Sales Tax • Octroi and Entry Tax • Purchase Tax • Luxury Tax • Taxes on lottery, betting and gambling • Administration of GST • Since there is a federal structure in India, there are two components of GST – Central GST and State GST •...

Taking note of the revenue trend dipping below the revenue neutral rate levels, the Goods and Services Tax (GST) Council will now be looking at a series of measures including rate rationalisations to correct the inverted duty structure and to take steps to augment revenues. The move comes after four years of the rollout of the indirect tax regime, with the acknowledgement that a series of rate cuts across these years and spanning over 500 items has resulted in a strain on finances of both central and state governments with lower-than-expected revenue buoyancy and an inverted duty structure for many items. The Council will now be on a course correction mode as it seeks to correct the inverted duty structure for items such as footwear and textiles sectors beginning January 1. An inverted duty structure arises when the taxes on output or final product is lower than the taxes on inputs, creating an inverse accumulation of input tax credit which in most cases has to be refunded. Inverted duty structure has implied a stream of revenue outflow for the government prompting the government to relook the duty structure. For footwear, the government refunds around Rs 2,000 crore in a year. The GST rate on footwear worth up to Rs 1,000 was reduced to 5 per cent earlier, while those above this value attract a GST rate of 18 per cent. Inputs for footwear such as in-soles, heel cushions attract 18 per cent GST. Footwear is now likely to have a uniform rate of 12 per cent, irrespective of ...

• About us • • • • • • • Prelims • • • • • • • • • • • • • • • • • • • • Practice Quiz • • • • • • • • • • • • • • • • • Mains & Interview • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Current Affairs • • • • • • • • • Drishti Specials • • • • • • • • • • • • • • • Test Series • • • • • • • • • • • • • • • • • • • • • State PCS • • • • • • • • • Videos • • • • • • • • • • • • • • • • • • • • • • • • • • • Quick Links Tags: • • • • Introduction The Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. The GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and services. Main Features of GST • Applicable On supply side: GST is applicable on ‘supply’ of goods or services as against the old concept on the manufacture of goods or on sale of goods or on provision of services. • Destination based Taxation: GST is based on the principle of destination-based consumption taxation as against the present principle of origin-based taxation. • Dual GST: It is a dual GST with the Centre and the States simultaneously levying tax on a common base. GST to be levied by the Centre is called Central GST (CGST) and that to be levied by the States is called State GST (SGST). • Import of goods or services would be treated as inter-state supplies and would be subject to Integrated Goods & Services Tax (IGST) in addition to the applicable customs duties. • GST rates to be mu...

CA Dr Arpit Haldia Understanding Goods and Services Tax #4: All about Fundamentals of Revenue Neutral Rate If anything has been associated from the starting with Implementation of Goods and Services Tax in India, it has been Revenue Neutral Rate in GST and its Impact. Till today also, if we have to name the biggest hurdle in the implementation of GST in India, it’s the consensus over the Revenue Neutral Rate. So what exactly is Revenue Neutral Rate and what are the basic fundamentals in arriving at the Revenue Neutral Rate. This article would try to analyze in detail some of the basic principles which form the foundation in working out the Revenue Neutral Rate (hereinafter referred as “RNR”). The Importance of Revenue Neutrality has been emphasized categorically in the Report by Dr Amaresh Bagchi commonly referred to as Bagchi Report on “ Reform of Domestic Trade Taxes in India: Issues and Options”, National Institute of Public Finance and Policy, New Delhi as follows: “Proposals for tax reform, even when designed on rational principles, are often put aside because of apprehensions of negative implications for revenue. Revenue neutrality thus forms a critical parameter to be kept in view while formulating any scheme of tax reform.” Thus any tax reform even though based upon rationale principle, first seeks to achieve Revenue Neutrality. Revenue Neutrality broadly can be described as measure to ensure that the proposed revenue reform should not result in negative impact on ...

A committee mandated with deciding the crucial revenue neutral rate (RNR) for the proposed rollout of the Goods and Services Tax (GST) regime is likely to submit its report before Friday’s meeting of the Empowered Committee of State Finance Ministers, two finance ministry officials said. The panel, headed by Chief Economic Adviser Arvind Subramanian, was set up in June this year to prescribe a RNR which strikes a balance so that the rate isn’t too high for industry and simultaneously high enough, so that states do not suffer any revenue loss. The RNR report will subsequently be taken up by the Empowered Committee for consideration. Apart from the revenue neutral rate, the committee will suggest the impact of GST rollout on “Though the compensation rate had been decided earlier, the methodology for assessment of revenue loss has not been decided so far. The CEA panel is looking at suggesting a mechanism for calculation of the possible revenue loss when GST comes into effect,” the official said. Subramanian is also likely to present his view regarding the imposition of 1 per cent additional levy provided to manufacturing states in his report, even though it is not included in the charter of the committee, the official said. The proposed indirect tax reform will replace existing levies such as excise duty, service tax and value-added tax. The government was unable to get the Constitution amendment bill for GST passed in A report by the National Institute of Public Finance and...