News Update

IGI Airport Customs seizes US Dollars worth Rs 2.94 Crore from pax heading for DubaiA Basic Primer on GDPR and its Relevance to the Indian Context (See 'TOG INSIGHT' in '')CX - Internal records showed lesser receipt of base oil - no exercise undertaken to ascertain whether goods were diverted en-route, whether compensation claimed - CENVAT credit not deniable: CESTATReversal of ITC on common capital goods - some apprehensionsI-T - In absence of any yardstick or guideline to determine an expenditure as excessive payment, AO has no discretion to make disallowance: HCST - Late fee for delay in furnishing prescribed returns - Appellant has no ground to seek relief which is not available u/r 7C of STR, 1994: CESTAT5 UTs + 2 States to roll out e-Way Bill from May 25High Level Group constituted for faster expansion of health sectorGovt calls for preventive vigilance to check malfeasanceGST related Petitions should be efficaciously defended by authorized Commissioners only - no transfer/amendment of authorization without express approval of BoardGST - ITC abuse - father-son duo lands behind barsPrabhu releases Paper on Computer Software ExportsIrresponsible Litigation - Rip Van Winkleism Syndrome continues to afflict Union of India!!End Governor's Discretion Raj by undoing Constitutional BlunderI-T - When reasons recorded by AO for reassessment stand approved by JC, it cannot be said that provisions of Sec 151(2) were not fulfilled merely because file erroneously got placed before CIT who also recorded satisfaction: HCCus - Notification 50/2017 amended to increase BCD on Wheat from 20% to 30% - Omits entries pertaining to Shelled almonds and Protein ConcentratesCX - Expression in statute cannot be allowed to be circumscribed on an unfounded interpretation by lower authorities: CESTATGovt exercises emergency powers to increase tariff rate of BCD on Walnuts in shell from 30% to 100% and on Protein concentrates and textured protein substances from 30% to 40%ST - CBEC has clarified that notice for rejection of VCES-1 declaration should be issued within 30 days-notice issued after 1½ years is clearly time barred: CESTAT
Will Budget Premier League deliver?

JUNE 09,2009

By Subhashree Kishore

Legal Corner IconIT is time to get glued to the electrified at times frenzied ‘knowledgeable’ gentlemen. They will tell us what to expect, when, why, wherefrom…… they stake their sleep and sanity to get our attention. The privileged few, as always will climb up Santa’s knee and whisper their wish lists during the consultations.

The Budget Premier League is set to kick off in the first week of July.

In 2008, we were booming and beaming and prayed for sweets from a rich uncle. FM - PC did deliver with income tax cuts and farm waiver. But now the mood is sombre and we are caught between the horns of fiscal prudence and fervent populism. At best we can hope that the uncle will be sweet and release a few riches.

The roar for reforms, disinvestment (in profitable PSUs) and jettisoning subsidies (leaving fuel pricing to gods) is deafening. Yes, they are a convenient way out to close the fiscal deficit without borrowing at interest as well as pleasing the industry. Interestingly America’s fiscal deficit is around 12%. But such deficits are dangerous for us - or so we are told.

Well, we can’t borrow, exports are down and we are finding it difficult to create jobs - without direct cost to the exchequer that is. Yet we don’t find homes being sold for one dollar or top industrialists bicycling to office. We find political parties spending hundreds of crores in ad campaigns alone in the just concluded polls. So, there is money somewhere and before reaching for the family silver we may ponder over these.

The lead box - a la Bessanio

If it were to look in the right places and tap, the government would start building new coffers. A cursory glance at the property ads would reveal that property in the posh localities fetch a minimum of Rs. 50 lakhs in Delhi. Yet the circle rates (govt. fixed minimum rate) revised in 2006 hardly reflect this. Undervaluing of property is still rampant and the revenue loss is estimated at around Rs. 500 crores every year in Delhi alone. The web of property dealers push up prices and get a hefty commission which also do not figure in books. Revenue authorities lose out on registration fee as well as income tax. The well equipped and well read bureaucrats can surely find more such loop holes from where cash cows will certainly emerge.

Ceaseless vigil

The money blacked out by transactions as above rests happily in lockers, ostentatious goods or in fronts. Ranking 132 among 179 countries in UNDP with most Indians getting hardly Rs. 20 per day we cannot say “Hail private property let us all look the other way”. Newspapers are flush with breaking of lockers during anti-corruption raids and even a former FM had quipped that it is common knowledge that lockers are maintained safe from scrutiny. The government could ask for a self-declared list of items to be maintained in the safe lockers. Random scrutiny of lockers in the presence of owner and tallying with the list can be adopted.

If we cannot beat them beseech them

PC in an earlier innings introduced highly successful KVSS, the amnesty scheme yielded around Rs. 10,000 crores. We may consider another amnesty scheme on the same lines followed by an increased crackdown after the deadline. Tax amnesties in general should not be frequent as expectation of the same may encourage evasion, as per theorists. Also, such general pardon has moral overtones. But when it comes to unearthing ill-gotten and unaccounted money, and that too government money stashed in dark corners, morality becomes a non-issue.

Taxing luxury and love

At present wealth tax is levied at 1% on non-productive assets in excess of Rs. 15 lakhs. The minority who are in the bracket want it to be done away with. The authorities argue that collection cost is almost 50% and hence it is not feasible. Unfortunately recession is a time for more progressive taxation. Also, in respect of tax on gifts, gifts among specified list of relatives provides for limitless love and hence, boundless bounties. The common man will be willing to limit his love to Rs. 25 lakhs and pay a nominal 1 or 2% tax on the excess.

Raise (bill) and shine

As a consumer we know, “without bill” transactions, put smiles both on the face of the buyer and the seller, particularly in case of gold, gems and jewellery and tax evasion runs to crores. The jewellery sector has been pleading for sops. It is hardly fair to turn a blind eye to the evasionary aspect. In case of big ticket purchases a KYC may be introduced. This KYC in bank has worked brilliantly in discouraging people from opening too many new accounts. Insisting on proper bill with date and serial number for all transactions and sweeping away cobwebs like transfer to branch, job process, etc., will yield rich dividends. In this land of many ISO 9000 companies and IT parks, kuccha bills and “estimate” slips still rule.

Returning to the studios

Another mind boggling garish display of money is found in the film industry. Hordes of stars and staff travel to foreign locations filming pictures most of which neither entertain nor intrigue. The budget for these runs to hundred crores and beyond. Taking a leaf out of Obama’s book the government may consider incentives for films shot entirely in India. The public can surely make do with Ooty and Darjeeling for few years. Even moving rear screens would be fun.

Austerity begins at home

Much has been said in the foregoing paras about hunting black money, tracking white money and so on. Obviously, the public will feel sore if they see the mobile-wielding netas who do nothing but enjoy and collect pension at the end of five years. Consider this:

Cost of conducting session in Parliament - Rs. 26,000 per minute
Estimated outgo for 545 Members of Parliament -
(taking into account allowance and monetizing
perquisites) - Rs. 855 crores p.a.

Barring odd cases, most of them come from affluent backgrounds or know enough to become affluent in no time. A law can be enacted to freeze for a certain period or totally cut monetary allowances to MPs with other sources of income. Politics is not a career/profession or any wage/salary yielding vocation. It is professed as a service and it was so practiced by the founding fathers’ of our nation. For 5 years of such professed “service”, lifelong pension is totally unjustified.

The government could further set an example by collecting electricity and water dues amounting to few lakhs from MPs and MLAs who unfortunately have not found time to pay for excess usage.

Autumn hues and blues

Death and taxes are certain. So is old age. Apprehensions about medical and maintenance costs have kept pension and pension reforms in limelight. Ironically decisions on pensions are often taken by people who have no inkling of what is life without a regular or full income. Most of our legislators work beyond pensionable age and have taken care to be well provided for life and beyond.

Pension of legislators are charged out of the state fund. The system of defined contribution, revision after review and so on do not apply to them. Only defined benefits accrue. A very different scenario from England; where pension is paid from fund created by contributions from MPs. The contributions are set to be raised as per the latest actuarial reports. Prone to borrowing, we could well borrow this idea without any adverse effect on the budget.

W(h)ither charity

The point of charitable trusts being least trustworthy is perhaps as old as the hills. Though the tax evasion by schools and hospitals in particular run to crores and the Public Accounts Committee (PAC), the media and draft policy on voluntary organization have taken cognizance, very little is done to correct the same. Some countries distinguish between charities run by grants and those functioning on fees and donations collected. Perhaps we could also make the laws stringent to ascertain extent of bon couer (good heart).

The education business has become so vast and profitable that we have an education focused PE fund and setting up of finance company to advance loans for education is on the wish list of companies.

We may now set threshold limits to charity too and insist on a marginal rate of tax being paid by the flourishing trusts on addition to the corpus. Of course they may pass on the additional burden to parents/end users who are unlikely to feel it. They are after all resilient Indians.

Chilling out

Progressivity may also be introduced in Service tax. A primary lesson in Economics is that the responsiveness of demand to change in price in case of necessities and luxuries is minimal. A special higher rate of Service tax can be levied on discotheque, pubs and bars where the more “endowed” chill out in half faded lights. Exclusive clubs, though already under Club or Association service, where the elite relax can also be brought into this ambit of higher rate. Taxing telephone services (a necessity) at the same rate of 10% is not equitable. The people chilling out in naturally in cold winters will not complain. The more endowed patrons of discotheques and clubs cannot have any qualms about double taxation.

Permanent Stimulus

The industry has been almost unanimous in its demand for an investment oriented budget fuelling consumption and reduction of taxes. We will, of course, have the permanent stimulus packages like bad roads and confusing laws which will spur movement of talent, money and involve big spending. The common man, as always, stimulates himself that his household budget deficit will narrow. But let’s not forget that deficits and problems are like Tennyson’s Brook.

“For men may come and men may go but I go on forever”