TIOL-DDT 2841
09 05 2016
Monday

By G-Bee

WE  often underrate the capabilities of economists. They may have a professorial look with thick glasses. They seem to ponder over data tables, use some jargons and give an impression that they have no connection with the realities. Many of us believe that economists do not cause any impact on the way common man lives, as they spend their lives reading thick books and staring at the computer screens. But believe me, they have enough grey cells under their skull, which can generate ideas that can change the future of a country. In reality they make a lot of difference in the life of common men like us. This fact is proved when we look at the recent history of our country.

In the early nineties, when our Oliver Twist was looking for more and more, the economists (of India and abroad) pointed out that the solution lies in looking for green pasture elsewhere because if they to go back to the same cauldron for more and more helpings it would soon be empty.

Dr Raja Chelliah is a typical economist. A person who can be missed as one the insignificant ones, in a crowd, till he opens his mouth or his pen. Not that he is very authoritative in speech or uses jargons to impress, but when he speaks you are forced to listen. He would ask basic questions and raise basic doubts, and you would wonder why this did not occur to me. When he was (as Chairman of the Tax Reforms Committee, constituted in August 1991) asked to ponder over the problem of empty cauldron, he studied the Indian taxation systems and also looked around for the systems followed by other economies. Amongst other suggestions, he suggested that the quantity of each helping from the cauldron is to be moderated (which means that the tax or duty rates of the existing taxes need downscaling) and new areas for taxation are to be identified.

Bureaucrats too have grey cells, but years of working i.e. following office procedural manual and the horror story called the conduct rules, correcting drafts put up by their subordinates and finding ways and means to send a matter either up or down, train these grey cells to think within a box. Precedence is of great importance for bureaucrat and deviation is often frowned upon. Since the age old practice was to increase rates of duties and taxes to raise more revenue and it was the 'time tested' measure', most bureaucrats had great faith in it.

In this context, you can image what would have been their reaction to the suggestions that  if the excise duty and customs duty rates are reduced,  government would get more revenue from these taxes. I can imagine that some would have thought it to be too theoretical and hoped it would never be implemented. Others may have thought it to be a foreign concept, which the foreign economic powers are trying to smuggle in to destroy our economy (remember  Swadeshi  vs  Videshi). Fortunately, at that point of time we had another economist at the helm of affairs in North Block, who was more willing to accept the out of box views than the time tested ones. It is true that neither the entire credit can be given to the economists nor the entire blame to the bureaucrats, for there were also 'no-changer' economists and 'change-manager' bureaucrats. Further, there were extraneous circumstances, like the one which forced us to take the help of a  videshi  institution and put stringent conditionalities on us. For some, it was an act of selling country to foreigner or to bring back the "East India Company'' days.

The second suggestion of Dr. Chelliah was equally dramatic. He wanted  tax base to expand. For a normal human being it was almost an impossible task. We had the history of taxing every thing. Your income is taxed, so is your wealth or your gifts. Your expenditure is taxed (by way of tax on goods). In fact, even death was not tax-free, the only saving grace was that you were spared from receiving a notice at heaven (probably hell, in my case) as the tax (called the estate duty) was to be paid by those you left behind.

But one had forgotten that there was a large part your expenditure which had remained untaxed. It was the service sector. Why not tax that sector too, the economist suggested?

Let us be clear about one thing. Unlike 'zero', the credit of this brilliant (sadistic, some would say) discovery does not go to India, as many of the countries had already started taxing services. Frankly, I do not know who had this idea at the first place. It must a philosopher who, while getting his beard shaved by a barber, got the bright idea that what the barber is doing is an 'economic activity' and it must be taxed. Probably he would have started running on the street, half shaven, shouting 'Eureka.. Eureka' for he had found resources to meet the expenditure for his emperors' costly habits. However, I could not find any historical evidence to my well thought assumption, as the historians don't seem to record every event like our TV channels.

Again, let me imagine (my power of imagination is certainly increasing while writing this column) the impact of this suggestion would have had on some of the individuals. Taxing services.... Such a thing was unheard of in this country. After all, unlike goods or money, service is intangible. While goods are like bodies, services are like souls. You can operate the body, but how can you operate the soul. There must be heated arguments in the rooms of the North Block and elsewhere. Some smart revenue officer would have questioned,- Hey man I can stop a truck and check whether the goods being carried are duty paid. But how can I check it whether a barber has given 10 shaves or not. Some would have smiled mischievously saying taxing services should start with the 'oldest profession in the world', for it would be nice to go to collect tax from the service providers. But on a serious note, the question is real and difficult.  'WHAT IS SERVICE', after all.

Good Bye G - Bee

IT is with deep sorrow that we report the sad demise of our dear friend, Principal Commissioner of Service Tax, Pune, Gautam Bhattacharya - G Bee to some of his friends.

He wrote a few articles for us with the byline G-Bee. We started our column, "ST se GST Tak" with him on 6th August 2007 and the article given above was carried by us on 21.08.2007. We have been running this column for the last nine years, though GST seems to be elusive.

We in TIOL had a very exciting friendship with him. He addressed many of our seminars and could easily win over an audience with his knowledge and humility.

The memories of the hours spent with him come in flashes. It is difficult to believe that the sweet smile is gone - forever.

Goodbye Gautam, we miss you.

From our archives:

A day with Mr Gautam Bhattacharya

Gautam Bhattacharya floors Hyderabad

Finance Act 2007 : Hi-voltage workshop in Hyderabad

TIOL's Power Packed Seminar in Hyderabad

CBEC Chairman in Vizag - for our Seminar

TIOL's Post Budget seminars off to a good start at Hyderabad

Amount of Excise Duty - not to include Post Manufacturing Expenses - Supreme Court

ONCE upon a time there was a rule that when inputs or capital goods, on which credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under Section 4 of the said Central Excise Act.

In a case relating to such clearances, 2005-TIOL-1086-CESTAT-MUM, the tribunal held that Post manufacturing expenses cannot possibly amount to a duty of excise leviable on such goods and therefore all amounts paid under the debit notes could not be added to the value of those goods.

The Supreme Court agreed on Friday holding that the Tribunal was also correct in holding that post manufacturing expenses cannot be loaded on to the amount equal to the duty of excise leviable on such goods as this amount would, then, cease to be an amount equal to the duty of excise but would be something more.

Does it mean that post manufacturing expenses are not includible in the assessable value? They would say this judgement is in a different context!.

We bring you this judgement today. Please see Breaking News

FTP-New ANF5A

THE DGFT has notified the revised ANF5A, ANF5B, ANF5C and Appendix 5C of Appendices & Aayat Niryat Forms of FTP 2015-20. These shall come into force with immediate effect.

DGFT Public Notice No. 08/2015-2020., Dated May 06 2016

Revenue Steps for boosting up growth and employment generation

GOVERNMENT in a Press Release states that the Revenue Department of the Ministry of Finance takes several steps for boosting-upgrowth and employment generation:

(a) Lowering the Corporate tax rates to  25%  for new manufacturing companies

(b) Extending tax benefits for  housing sector  so as to promote construction industry

(c) Rate of tax on  royalty and fees for technical services  reduced from  25% to 10%

(d) Tax incentives for  Start-up India

Similarly, it has taken various steps to give relief to the small taxpayers and to the small business and professionals:

The limit of deduction that can be claimed under section 80C of Income tax Act 1961 has been enhanced from  Rs. 1 lakh  per annum to  Rs. 2 lakh  per annum, subject to the additional Rs. 50,000/- being contributed to NPS.  Further, the scope of presumptive taxation regime for small businesses has been extended by increasing the turnover up to  Rs. 2 crores.  The presumptive taxation benefit is now available for professionals having turnover upto  Rs. 50,00,000/-.

CIC Issues Notice to Sonia Gandhi

THE Central Information Commission has issued a fresh notice to Congress President Sonia Gandhi and to the CPIO of the Congress Party to explain their case before its Full Bench.

A Full Bench of the Commission comprising Information Commissioner Bimal Julka, Sridhar Acharyulu and Sudhir Bhargava will hear the complaint filed by ELT Editor R K Jain.

The fresh notice was issued after the orders of the Delhi High Court which had directed in August 2014 that the "complaint filed by the petitioner (RK Jain) be considered expeditiously and preferably within a period of six months" and subsequent complaint to the Commission by RK Jain against its registrar.

Until Tomorrow with more DDT

Have a nice day.

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