TIOL - COB( WEB) - 463
AUGUST 27, 2015

By Shailendra Kumar, Editor

AS a student of economic history I am familiar with the expression 'Black Tuesday'. It happened on October 29, 1929 when the stock prices crashed worldwide. Although the fall was recorded early September but it took a while for the news to swim across all the continents to trigger the collapse. It originated in the United States of America because it was the then most prominent engine of global growth. It was later called 'The Great Depression' only because it led to massive erosion of personal income, profits of companies, tax revenue and commodity prices by as much as 50%. Joblessness grew by 25% in the USA. GDP nosedived by more than 15% across the globe.

Let me now add 'Black Monday' to my personal lexicon of mega financial events. Even as the fragile and Euro-crisis-shaken global economy was groping its way to some sort of recovery, the Chinese 'overheated growth bubble' burst with the Shanghai's Composite Index falling by more than 8.5 per cent last Monday. The Chinese ripples spared none - The Dow Jones nosedived by 588 points and the Indian Sensex by 1600 points. Almost USD one trillion was wiped off globally. Since billionaires usually make most of the killing when the stock prices go up, they were the worst losers as well. Chinese billionaires lost more than USD 14 billion. The collective fortunes of the world's 400 richest shrank by USD 124 billion in a day. Indian tycoons collectively lost 6.7% of their overall wealth. And the key losers were Gautam Adani, Mukesh Ambani, Dilip Shanghvi, Azim Premji, Pallonji Mistry, Lakshmi Mittal, Uday Kotak, Shiv Nadar and many more.

Notwithstanding the double-barrelled measures of the Chinese Central Bank - reduction in interest rate and further loosening of bank lending curbs, the turbulence in the market has not stabilised till yesterday evening. The fall-out of the Chinese crisis has been so devastating that the spectre of yet another phase of recession looks glaring. Double-dip recession is passe now. A debate over 'Triple-dip' recession seems to be gaining wider acceptance among the disparate communities of economists and political leaders. What may lend credence to the 'Triple-Dip' theory is the latest Chinese crisis whereby the global economy appears to be entering into the third phase of negative growth. Some economists fear that with no signs of recovery in the immediate future, the global economy may even witness 'Quadruple-Dip'.

Let's now move to the domestic turf. The stock market mayhem has severely perturbed the political citadel in New Delhi. What seems to be adding salt to the wound is the quota crisis brewing into a long-drawn political battle on Mr Narendra Modi's home ground. On top of all these, the obstinacy of the Congress Party on various reform-linked bills has multiplied the wrinkles on the forehead of the Central Leadership of the NDA Government. A good chunk of Cabinet Ministers feel that in this gloomy backdrop, the passage of GST Bill may prove to be an oasis of comfort not only for the growing impatience of the India Inc but also foreign investors. In this regard, the Cabinet Committee on Political Affairs is likely to meet today and take a decision with respect to the special session of the Parliament. A decision evidently hinges on to what extent the political managers of the Government have so far managed the critical number in the Upper House. A clear signal has been sent to the Opposition that the Government is open to any amendment but only on the floor of the House. But, will it work?

There are two different schools of thought in this respect. One school is of the strong view that the NDA Government has created unbridgeable differences with the Congress Party by avoidably targetting 'RAGA' on not so important issues. Since the Government was aware that it had too many critical bills to pass during the Monsoon Session it should have begun offering olive branch much in advance rather than leaving the boat to the unpredictable currents of time. Now that Congress Party and a couple of its allies are so much offended that they would only like to disrupt the House proceedings rather than allow the Government to take credit for reforms.

Another school is of the opinion that no matter whatever the Government would have done or may do now, it would not have any climbing down effect on the Congress as its present political overtures are linked to a well-thought long-term strategy. And it is - not to let the Government pass the GST Bill till 2016-end. What good it may do to its political fortune? It is speculated that going by the empirical history of GST worldwide, the Congress Party knows that the initial two years of implementation of GST are necessarily going to be inflationary and messy before the credit chain begins to work on the consumer prices of goods. So, if the GST is finally implemented from April 1, 2017, the ensuring mess originating from the unpalatable consequences of the new tax system may benefit Congress Party as most people may blame NAMO. And such a politically volatile ground may be exploited by the Congress in 2019 General Elections.

Although I am personally not inclined to subscribe to any of such opinions but the fact remains that thick clouds of uncertainties hover over the biggest indirect tax reform bill. Even if a Special Session is called in, it may not work in favour of the Government unless a consensus is achieved prior to such a decision.

Meanwhile, let's give credit to the Central Leadership and the MoF policy makers for not allowing any let up in completing their legislative homework. At the two-day Annual Conference of CBEC Chief Commissioners and DGs, a detailed presentation was made by the Member (GST) who not only sensitised the captains of the indirect taxes and field formations about the technicalities of the new reform agenda but also informed that the Draft Model Legislation is going to be ready by mid-September. Even the GSTN Chairman made an elaborate presentation explaining how the new IT Platform is going to work in the GST regime and also how the present IT infrastructure of the CBEC can be aligned with it.

As per the inputs gathered from some of the participants of the conference, a consensus with the States has been achieved that a common e-challan for making payment of all four taxes - CGST, IGST, SGST & 1% additional tax, is going to be made available by the GSTN along with a standardised uniform accounting codes for all four. It has also been decided that December 31 is to be the last date for filing of annual return by all taxpayers and no revision of return would be permitted. Before return is filed, certain details of supply invoices would be required to be uploaded and the tax administration is going to allow input tax credit only after matching the same with the return.

So far as the field structure of Commissionerates goes, the present territorial jurisdiction is going to be retained in most cases. The three-tier system of Commissionerate, Divisions & Ranges would survive. And the territorial jurisdiction of CGST Commissionerates would be coterminous with the States. However, stand-alone Service Tax Commissionerates are going to be rolled back to create a common GST Commissionerate. The CBEC has also proposed to continue with the system of Commissioner(Appeals) and to create a National Tribunal with coordinate Benches in each State capital. The CGST Commissionerates would also perform functions under the Central Excise Act, 1944 to deal with all legacy issues of Central Excise and Service Tax. It has also been proposed that 25% of posts in different grades may be filled up by SGST officers on deputation basis and vice versa. It has also been proposed that common LTU of indirect and direct taxes may be dismantled and new LTU of indirect taxes alone may be set up.

Let's hope all this detailed homework done by the CBEC does not go waste and good sense prevails over our political parties which may be reminded that the national interests must supersede their personal and even collective interests. The GST balloon must not be sandwiched between two inflated egos which cannot afford to grow in size beyond the topography of a nation.