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Modi Takes a Leap With India’s Biggest-Ever Tax Overhaul
- ultramode 9y agoIndia is the only federal nation with true GST. I am excited about the far reaching effects of GST.
- pvsukale3 9y agoCan you elaborate what is "true" GST and how is it different from others?
- skrause 9y agoThe way https://www.quora.com/What-is-the-difference-between-a-VAT-and-a-GST https://www.quora.com/What-is-the-difference-between-a-VAT-a... describes the difference between VAT and GST to me it seems that GST is very similar to the German Umsatzsteuer which also applies to goods and services equally. And Germany is also a federal nation which has had this unified tax for decades.
- masklinn 9y ago> describes the difference between VAT and GST to me it seems that GST is very similar to the German Umsatzsteuer which also applies to goods and services equally. That link seems to be splitting semantic hairs, VATs usually apply to goods and services equally. That's the case of Switzerland (also a federal nation) with a standard 8% VAT on all goods and services (some goods and services have reduced and null rates). It's also the case of non-federal countries with a VAT e.g. France.
- svennek 9y agoYeah, or Denmark, where our VAT is paltry 25%... on everything...
- fpoling 9y agoIn Norway the situation is similar. There is 25% VAT on most goods and services, but food is taxed at 15% and transportation at 10%. That non-flatness leads to a ridiculous situation when restaurants or other places serving food have to charge different rate depending if the food is take-away or will be consumed inside. The latter is considered a service and must be charged with 25% tax while the former is treated just as food with 15% tax.
- nevdka 9y agoAustralia is a federal nation with a GST. How is India's different?
- khrm 9y agoDon't expect any negative news. Reason: http://www.thehindu.com/news/international/you-have-a-friendly-press-trump-to-modi/article19155891.ece/amp/ http://www.thehindu.com/news/international/you-have-a-friend...
- denzil_correa 9y agoGST will increase revenues for consuming states and decrease revenue for manufacturing states. The government will compensate the manufacturing rates for the revenue loss. That's how all states agreed to a GST. This difference will ultimately come out from tax payers pockets. Basically, the tax payer pays for the government unable to handle compliance. Anyways, there are many products kept out of the GST purview [0] and therefore, this is like release 0.1a of GST. The idea that it will spur economic growth with the projections given is an exaggeration. [0] http://www.hindustantimes.com/india-news/gst-adding-to-economic-growth-is-rubbish-says-niti-aayog-s-debroy/story-n6cluC7L2wxhZK1kINN52I.html http://www.hindustantimes.com/india-news/gst-adding-to-econo...
- dingo_bat 9y agoLooking at the article seems more like a 0.7 version, not 0.1. Also, sometimes it's important to make a release and patch it later
- denzil_correa 9y ago> sometimes it's important to make a release and patch it later Yeah, the trick is to know when these "sometimes" are. For example, the "move fast break things" rule was applied for India's biometric unique ID card which resulted in people climbing trees to authenticate their cards to get their daily food [0], not allowing access to power/education/daily benefits [1] or transferring benefits to someone else due to errors and fighting to get your daily wages because of "system errors" [2]. Life is not software. There are some releases which you cannot patch. [0] http://timesofindia.indiatimes.com/india/need-internet-to-buy-pds-rations-go-climb-a-tree/articleshow/57437975.cms http://timesofindia.indiatimes.com/india/need-internet-to-bu... [1] https://scroll.in/article/834418/by-making-aadhaar-mandatory-delhis-government-schools-are-shutting-their-doors-to-migrant-children https://scroll.in/article/834418/by-making-aadhaar-mandatory... [2] https://scroll.in/article/833487/aadhaar-trouble-how-a-womans-wages-under-mgnrega-were-transferred-to-someone-elses-account https://scroll.in/article/833487/aadhaar-trouble-how-a-woman...
- 9y ago
- imhoguy 9y agoHigh time for unified EU VAT, otherwise we will stay behind. VATMESS and lack of unified digital market rules is what keeps cross-EU online business tough.
- henrikschroder 9y agoAgree, the recent change to charge VAT depending on the location of the buyer is pure hell to deal with. As a EU business, I really don't want to have to figure out where in the EU my customers are, and adjust the price according to whatever their country's VAT rates are this month.
- ProblemFactory 9y agoIt is somewhat necessary, to solve the problem of Amazon, Google, Apple and others selling everything via low-VAT countries like Luxembourg. But there would have been ways to make it much less painful to manage for small online businesses. For example a revenue limit (like 1M EUR) on cross-border sales before you have to start dealing with each country, or just an unified EU-wide VAT rate.
- nradov 9y agoWhy is selling from low VAT countries a problem? VAT is only one of many potential government revenue sources.
- ProblemFactory 9y agoVAT is just one source, but at 15-20% of government revenue, it is an important source. Most of it will be generated by business that physically happens in the country, and is unambiguously taxed there, but more and more of business is moving online. Selling from low-VAT countries is a problem because it is a fictional accounting move. If you buy a product from Amazon.co.uk, delivered from an UK warehouse to an UK address - or from Amazon.de, delivered from a German warehouse to a German address - then it is still billed through Luxembourg. Even though by all non-accounting measures it is business happening inside the UK and Germany. The only reason for choosing Luxembourg is tax rate optimisation, not because there's an actual place of business there. It's understandable that most countries in the EU would want to keep taxes on business that happens in their country to themselves. If VAT exists at all, then it makes sense not to gift it to Luxembourg. So the rules were changed to remove this accounting trick.
- allendoerfer 9y agoEU, take note. To me the premise is absolutely true: Further unifying the market will spur growth. European start-ups starting in Europe instead of their tiny home country will be a much bigger competition to their US counterparts, which at the moment can often easily crush them, because they already have conquered their rich, big and English speaking home market.
- henrikschroder 9y agoWhat? It's not exactly VAT rules that are making it hard to expand your business across countries in the EU, it's language and culture barriers.
- xorcist 9y agoIf you sell goods or services online then the different VAT rules becomes a hard problem once you reach the scale where your EU sales are more than a trickle but not large enough to have a presence in each country. This is quite a big part of online commerce.
- shortleon 9y agoI do not think it is a problem. When ordering from a shop, you pay VAT of the country of origin and you won't be taxed in your own when the product arrives. Of course, if the seller tried a little bit harder, they can charge you the tax of your own country and reap the profits.
- xorcist 9y ago> you pay VAT of the country of origin and you won't be taxed in your own No, this is the whole problem. If the total sales volume to the buyer's country is under a certain limit the above holds true. When you reach the sales limit for that country, the seller is responsible for applying that country's VAT instead, and annually clear VAT with the respective tax office. As you can imagine, keeping track of all these things can quickly become tricky. Not business ending tricky but hard enough to become a problem. A consumer should be presented with prices including tax to avoid surprises, but now prices have to be adjusted at the order stage.
- jimnotgym 9y ago>with the requirement to file 37 times a year online. In the UK I do a VAT return 4 times a year!
- prashantganti 9y agoWhile 37 times looks like a huge number but it is not that complex. Most of the data is auto-populated based on your invoices and supplier information. In most cases, all you would be required do is press the "file now" button.
- pandel 9y agoThe number is arrived from the myth that people need to file 3 returns per month and one at the end of the year. Another article[1] quotes Revenue secretary saying "There is only one return with three parts, out of which first part filed by dealer and two other parts auto populated by computer." So effectively 12 + 1 returns every year EDIT: A tweet from the secretary himself: https://twitter.com/adhia03/status/881428128177901570 https://twitter.com/adhia03/status/881428128177901570 [1] http://indianexpress.com/article/business/economy/revenue-secretary-busts-8-gst-myths-says-implementation-and-execution-will-be-transparent-4732070/ http://indianexpress.com/article/business/economy/revenue-se...
- sonink 9y agoConsidering the impact of this reform, and the historical messiness of doing something of this scale in India, it is surprising that the govt. even pulled it off. On the ground in Bangalore, the clock stuck 12 and every retail shop started giving receipts with the simplified tax system. Im sure there will be hiccups ahead but the start looks pretty neat. The Indian govt. should be given honorary entry to YC. The world's biggest startup is going lean.
- keithpeter 9y agoAnd it looks like increasing computer literacy and confidence with online transactions in the larger population as well. If it lasts 10 years, then the new ones taking over the small businesses will be fine with it all.
- sonink 9y agoAbsolutely. Pre-GST business could get by without computer/online. GST works online ONLY. This will result in short term pain and cost but bulldoze all these guys online. Companies like ClearTax (YC) will make a killing.
- denzil_correa 9y ago> GST works online ONLY. This will result in short term pain How long will this "short term pain" last?
- shiven 9y agoWhat pain? It's all achche din. Get on with the program bro, drink up the KoolAid now.
- ankush1492 9y agoUnless you don't get your salary with all the things deducted and you have to worry about filing 3 different kinds of GST and have to file for input and take care of all things and hire a person to do all this and after all this, if you make a mistake and you are fyuked, you can't understand that pain. Don't be over-enthusiastic, think for other people as well.
- Inquistiv 9y agoOne of the major problems is multiple tax slabs. For instance, there is a different tax rate for different classes of movie theatre seats or even Air conditioned vs Non-AC restaurants. It will make book-keeping incredibly complicated for certain businesses. It was designed in the interest of maintaining government revenue.
- ForFreedom 9y agoGST is for the central govt which combines all taxes under one umbrella but you still end up pay for income tax as well as respective state tax. So your tax would be GST + State GST. The idea one nation one tax is wrong because if you purchase a car in delhi it is not the same price as the one purchased in nagercoil,TN. Had it been the same price then "One Nation, One Tax" was relevant.
- brajesh 9y agoGST replaces both central and state taxes. States' share is 50% of GST (CGST and SGST). Only alcohol, petroleum and electricity is kept out of GST, which are still taxed at state level.
- ForFreedom 9y agoIf you see the invoices CGST & SGST is mentioned separately.
- rtx 9y agoJust for refrence.
- demonshreder 9y agoTrue but it is as mentioned above 50% each, eg. Eating out is charged 18% GST, half of which would go to state and the other half to the centre. 9% + 9% of the bill value.
- himlukita 9y agoThe system is "One Nation, One Tax" not "One Nation, One Price". Price of a product depends on several factors other than taxes. For example, if GST on a product is 18% then this tax includes CGST of 9% and SGST of 9% (which means 9% tax will go to state government and 9% to central government). There are no separate taxes by states and central govt except on alcohol, petroleum and electricity.
- alok-g 9y agoNewbie question: >> India, long one of the fastest growing economies in the world, ... The number given in support of the above statement is the annual GDP growth rate. However, as I understand, this is before adjustment for inflation, which also is high in India. I have been unable to find the numbers for inflation-adjusted "real" GDP [1] for India and other countries. Is India still the fastest growing economy when the real GDP is considered? [1] https://en.wikipedia.org/wiki/Real_gross_domestic_product https://en.wikipedia.org/wiki/Real_gross_domestic_product
- em500 9y agoYour understanding is incorrect: quoted growth numbers are real/constant-currency/inflation-adjusted, as per default in almost all economic reporting. Global numbers can be found here: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
- alok-g 9y agoThis is great. Where can I read more about the terms (newbie here, looking for guidance) like constant-currency, or more broadly, the methodology used in measuring these numbers. Can I also see similar charts for inflation somewhere?
- em500 9y agoWikipedia has most of the basics covered: https://en.wikipedia.org/wiki/Gross_domestic_product https://en.wikipedia.org/wiki/Gross_domestic_product. Global inflation numbers are also in World bank data: http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG. "official" data sources and aggregators (national statistics bureaus), IMF, World Bank, FRED can be heavy on economics jargon. Trading economics is probably a bit friendlier for the layperson.
- ahiknsr 9y ago" However, as I understand, this is before adjustment for inflation, which also is high in India" . No , India’s Consumer Price Inflation Falls to Record Low of 2.18 Percent ( https://www.bloomberg.com/news/articles/2017-06-12/india-s-may-consumer-prices-fall-to-record-low-of-2-18-percent https://www.bloomberg.com/news/articles/2017-06-12/india-s-m...)
- smdz 9y agoThis implementation is a very hasty one. Go and talk to small-biz-people and you will see the fear and confusion GST instates. Frankly, its scary to me and I have studied quite a bit of tax. Compared to the previous complicated procedures, the new procedures are equally complicated. But these also deviate from previous definitions. And some terms on taxation have changed and have become ambiguous - like the definition of "Supply" Its like "My manager(Govt) is making us(small-biz) fill status spreadsheets for 2-3 hours out of 8 every day. Why? Just because they can" And I also worry about the IT infrastructure being implemented for filing these new invoices. The government has some very smart and efficient in house engineers - but we don't know if they made the backbone or if they outsourced it to the likes of TCS/Infy. For one, I have known a TCS tax filing implementation that fails regularly on the last few days of filing - they do some very bad implementations. I get to talk to some small biz owners here, and very few of them had any clarity on GST as on 30jun. Most of them registered for GST numbers, but know nothing about compliances beyond that. Many don't even use software to create invoices. I got panic calls on "best/good/budget software for GST" on the last day. They didn't know what they needed. Nobody reads the rulebooks and even if they did, it would result into a throbbing headache with no output. So they rely on info from each other and the chartered-accountants who see their business booming. Could it have been done with less haste? NO! But it could have been done with simpler procedures and a couple of months of education. Infact, GST will not be a failure - Even if it is complicated, businesses are just used to adhering unnecessary complicated govt policies - they will adjust soon. But GST is hurting many small businesses right now. This will either lead to a bigger and newer black/gray money market - defeating the purpose do demonetization. Or it will make every Indian pro-tech. I'd assign equal probabilities to both outcomes, there is no middle ground now. What we need to see if it becomes "One nation one tax" or "One nation, 29 taxes" PS: For the record, I do believe that India has the best PM on this planet. I am a pro-BJP and anti-CONG (and anti-AAP). Please don't associate my criticism with political sides.
- intended 9y agoI love how you have to show your party affiliation to be taken seriously by your own party supporters. But i reaffirm your point. Implementation is going to be another points of damage to GDP over the next few months. Hopefully unlikely demonitization, there should be no hidden costs which surface months later.
- jangid 9y agoIn all the talk, I see this as a life time opportunity for freelancers. I remember, in my initial career days, small business owners use to give work of billing softwares to freelancers instead of purchasing of the shelf software.
- baybal2 9y agoNation-wide GST is a Trojan horse for fully-electronic financial reporting. And fully-electronic financial reporting is in itself a Trojan for electronic sales accounting.
- _jgdh 9y agoCould you explain both of those in layman terms?
- baybal2 9y agoThis all is made to sneakily push people towards electronic sales accounting. See, online only VAT submission makes people who make accounting on paper spend quite a lot of effort on data entry from books to computer. Once enought people switch to electronic only bookkeeping, there will be not much of impedement to introduce electronic sales recording
- anuraj 9y agoFirst of all legwork for GST was done by previous UPA government. Modi to his credit has done the diplomatic work to get states ratify the same. And give where credit is due - It is the states with 2/3rd votes in the GST council that did the final negotiations and got GST a success and made uniform tax across the country a reality. The IT infra is woefully inadequate - I expect the pain to last at least 2 years till adequate infra is created by govt and enterprises and till then manual accountants would have huge job opportunity. In the short term we will see a marginal contraction of the economy due to high compliance costs and readjustments in the value chains. In a way GST will also pave way for higher tax sharing between centre and states and shall strengthen federalism - income tax sharing is the next in line. And slowly India shall become a union of states as it should have been.
- _jgdh 9y agoThe Centre already shared its revenues from all Central taxes, including income taxes with the States before this reform. They shared 32% earlier and increased that to 42% just before GST. Centralising all taxation isn't necessarily a good thing, at least not for all states. Before GST, taxes were levied at the point of manufacture. This helped states with strong manufacturing bases to raise revenue and set up infrastructure and encourage even more manufacturing. A virtuous cycle. States could be mostly self sufficient, using Central funds to augment their money. If the Centre collected all the revenues, the states would be entirely dependent on the Centre. Sure, 42% of the revenue needs to be shared with the states, but the proportion is at the Centre's discretion. I would expect that the party in power at the Centre would funnel funds towards states which are electorally important (UP, Maharashtra) and away from ones that don't play much of a role in national politics (TN, North Eastern states). That's great if you live in UP, not so much if you're Tamil. In such a situation, I foresee that it could actually fuel resentment in states from where wealth is taken and cause the Union to weaken. We see this happening in Catalonia in Spain, for example. I agree with everything else that you said, that there will be short term contraction but this simplified tax code will be helpful for businesses in the long run. Simplifying it even further and making it a central tax only would be a boon for businesses, but possibly not for the Union.
- 9y ago
- known 9y agoGST is raional only when each state in India has a separate currency;
- palidanx 9y agoFor a great podcast leading up to this, you should listen to http://www.npr.org/sections/money/2017/05/10/527803742/episode-770-when-indias-cash-disappeared-part-one http://www.npr.org/sections/money/2017/05/10/527803742/episo... http://www.npr.org/sections/money/2017/05/12/528181998/episode-771-when-indias-cash-disappeared-part-two http://www.npr.org/sections/money/2017/05/12/528181998/episo...
- virtuabhi 9y agoDid not listen to podcast but the summary says that a person named "Anil Bokil" gave idea of demonetisation to PM Modi. This is not confirmed by PM or sources close to PM. It is only "Anil Bokil" who is claiming credit for this policy. Here is history of demonetisation in India from Wikipedia- "The Indian government had demonetised bank notes on two prior occasions—once in 1946 and then in 1978—and in both cases, the goal was to combat tax evasion by "black money" held outside the formal economic system.[19] In 1946, the pre-independence government hoped demonetisation would penalise Indian businesses that were concealing the fortunes amassed supplying the Allies in World War II.[19] In 1978, the Janata Party coalition government demonetised banknotes of 1000, 5000 and 10,000 rupees, again in the hopes of curbing counterfeit money and black money.[20] In 2012, the Central Board of Direct Taxes had recommended against demonetisation, saying in a report that "demonetisation may not be a solution for tackling black money or economy, which is largely held in the form of benami properties, bullion and jewellery."[21][22] According to data from income tax probes, black money holders kept only 6% or less of their wealth as cash, suggesting that targeting this cash would not be a successful strategy.[23]" https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetisation https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis...
- blackoil 9y agoIt's funny how it is being hailed as Modi's achievement, while during last govt he and his party were one of the major roadblocks to the rollout of GST.
- patrickg_zill 9y agoInteresting comments... the people that have experience with India are less impressed, while others are buying the hype. Same as the HN comments when Modi demonetized certain bills, the naysayers were pooh-poohed; and we know how that turned out.
- walshemj 9y agoI wold be a good idea if the USA did something similar having 52 state plus local City Taxes is very inefficient
- known 9y agoModi fulfilled just 10 out of his 126 poll promises http://www.electionpromisestracker.in/governments/central-government http://www.electionpromisestracker.in/governments/central-go...
- ahamedirshad123 9y agoLolwut: Set up Massive Open Online Courses (MOOC) and virtual classrooms Do u even know about NPTEL? It was even there before Feku became PM.