ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Sacchidananda MukherjeeSubscribe to Sacchidananda Mukherjee

Plugging Loopholes in Taxation of Interstate Sales

States may be hesitant to increase sales tax rates on petroleum products out of the goods and service tax’s ambit to cope with the Covid-19-led revenue shock. The risk of revenue loss on account of the interstate purchase of out-of-GST petroleum products at a concessional rate of 2% may not give an opportunity to state governments to enlarge fiscal space and lift the economy out of fiscal shock, given the fall in global price of crude petroleum.

Compensation to Cantonment Boards for Revenue Loss on Account of GST

The introduction of the goods and services tax has resulted in a subsummation of taxes like local body tax, which used to be collected by “local authorities.” Consolidation of tax base under the GST by including various taxes of union, state and local governments resulted in a single tax base. On the consolidated tax base, both union and state governments collect GST concurrently. Since the tax base of LBT is subsumed under the GST, the demand for compensation by the local authorities (including cantonment boards) is justified. Unless there is assignment of new tax handles to local authorities, it is perpetual revenue loss for them.

Issues of Compliance in GST

Debates on compliance audits of the goods and services tax will have to move beyond mere “invoice matching” to more holistic approaches for data reconciliation that can enable effective tax enforcements, and compliance risk assessment and mitigation.

Value Added Tax Efficiency across Indian States

In India, states may be induced to mobilise revenue through alternative channels by the growing demand for public expenditure, limitations in expanding fiscal space, and the limited scope to deviate from the common harmonised tax system, the goods and services tax regime. An assessment of existing tax efficiency and strengthening the tax administration could be one such alternative. The efficiency of tax administration varies across states. Given tax capacity, measuring tax efficiency is important to identify states where enhancing tax efficiency is likely to raise revenue gains considerably.

Estimating Unaccounted Income in India

An alternative methodology to measure the scale of unaccounted income in India (shadow economy) using transport as the universal input is developed. Based on input –output tables and National Accounts Statistics, annual demand for road freight transport is estimated. Correspondingly, annual supply of road freight transport is obtained based on availability of diesel for road freight transport, stock of goods carriages, average freight transport capacity per vehicle, average annual distance travel, and average fuel efficiency per vehicle. The mismatch of supply and demand is broadly considered the unaccounted for portion of the gross domestic product. The methodology is tested for two successive input–output tables and three consecutive financial years. Since the analysis is based on assumptions, a comparative static analysis is carried out to check the sensitivity of estimates to changes in the assumptions.

Policy Options for including Petroleum, Natural Gas and Electricity in the Goods and Services Tax

This study analyses the impact of keeping crude petroleum, natural gas, motor spirit (gasoline/petrol), high-speed diesel (diesel), aviation turbine fuel and electricity out of the value-added tax scheme. Specifically, the paper finds that keeping these items out of the input tax credit mechanism (either partially or fully) would result in cascading. Through an input-output framework, this study proposes some alternatives to the proposed design of the Goods and Services Tax and assesses the implications for cascading and prices. It captures the degree of cascading across 48 sectors under different scenarios and explores alternative policy options to phase out under-recoveries of oil marketing companies on account of sales of diesel and petrol under the administered pricing mechanism.

Nutrient-Based Fertiliser Subsidy: Will Farmers Adopt Agricultural Best Management Practices?

The new nutrient-based fertiliser subsidy policy provides implicit incentives to farmers to test soil samples regularly and get crop-wise recommended doses of nutrients, and offers prospective benefits from the agro-environmental management point of view. A study of six villages in the lower Bhavani Basin in Tamil Nadu reveals that despite a strong willingness on the part of farmers to adopt agricultural best management practices, inadequate infrastructure and the high transaction costs involved in accessing such services make them reluctant to test soil samples regularly. This paper looks at the institutional, infrastructural and agronomic factors influencing farmers' willingness, and concludes that the new policy needs to be supplemented with basic agricultural extension services through public-private partnerships.
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