Some Conclusion Point in GST india 2017 - GST In India

Friday, 19 January 2018

Some Conclusion Point in GST india 2017

This paper has examined the determination of the optimal threshold value for Goods and Services Tax (GST) for imported units arising from internet orders. At the optimal threshold, the marginal cost of funds from GST is equated to the ratio of the marginal value of public funds to their marginal social value, reflecting the value judgements of a decision maker. The marginal cost of funds allows both for compliance costs and the marginal excess burden of taxation. This concept of an optimal threshold therefore involves a higher threshold than that resulting from simply the maximisation of tax revenue net of administrative costs.
The condition for an optimal threshold is derived from the general first-order condition for an optimal tax system, namely that the perceived marginal cost of taxation is equal to the marginal benefit from public expenditure, for all taxes and related parameters and all types of expenditure. This condition clearly does not hold in practice. In considering just one component of the GST structure, the threshold value for imported units, there is nevertheless an implicit assumption that the remainder of the tax structure is in fact optimal. For example, the marginal cost of funds from income taxation is equated to the required ratio, so that in an optimal system, the GST threshold should be adjusted so that its marginal cost of funds is equal to that from the alternative. If it is lower, the threshold should lowered and more tax obtained from imported units, and if it is higher, the threshold should be raised and any additional required revenue obtained from the alternative source.
It was found that if the average and marginal administrative and compliance costs are constant, the determination of the optimal GST threshold does not depend on either the number of units imported or its distribution by value. This is a useful property because it means that changes in the distribution over time would not give rise to a need to adjust the threshold. These costs are unlikely in practice to be constant over the whole range of possible thresholds, but may be considered to be constant over the relevant range: that is, very low and very high thresholds are ruled out.
Precise details about the cost components and the demand elasticity, along with the marginal cost of funds from alternative tax sources, are extremely difficult to obtain for New Zealand. In the absence of reliable estimates, illustrative numerical values were reported, showing the sensitivity to administrative costs, the demand elasticity and, importantly, value judgements.
It must be acknowledged that the information needed to determine an optimal threshold is not available and is not likely to become available in the near future. However, this is of course not unusual in public finance analyses: the same is true regarding, for example, the income tax and benefit structure, and excise taxes. An analysis of this kind can provide an indication of the relevant relationships and the orders of magnitude involved. There is no value-free or simple way to determine an optimal value, but the analysis suggests that the case for substantially reducing the existing threshold depends on the argument that administrative costs can be reduced to relatively low levels[23] and that the marginal cost of funds from alternative sources is relatively high.
GST Conclusion :
1. Now goods not conducive or harmful to the health of people are taxed extra by means known as 'Sin Tax',or 'deterrent tax' . Thus tobacco and tobacco related items are penalised making cost of Cigarettes etc more. Kerala state has started a'Fat Tax' on Pizza etc. That was to discourage and even prevent people from falling victims to such habits. That serves a social –health responsibility of the government. Now they are all out of extra taxation and are taxed as any other goods. This will pave way for higher social health cost which will only help to increase further taxation.

2. The government ha not agreed to put any higher cap for tax rates. That very clearly shows that there is always chance of higher rates of taxes. This will tear away the arguments of those who say that GST is good.
3. GST does not do away with or replace all kinds of taxation. It has just merged just a handful or less different taxes and fused them in one name.
4. Service tax is subsumed, but all services are included in GST as akin to goods. Those sectors now excluded may first resist an try to avoid but if compelled will simply transfer the burden on the final service user. So in effect there will be more items coming under service tax in the guise of GST.
5. The supporters of GST claim that litigation on tax matters will be reduced. That is not true. It depends on how clearly terms of implementation are worded and interpreted. Going from the experience of 'officialise' or the jargons and clause- in-clause wordings of our laws and rules, I am not that optimistic. The legal sector itself will be one which may start litigations as now they also come under service taxes if interpreted correctly.
6. The service sectors will try to avoid or reduce tax liability by terming the major part of service costs as reimbursements or revenue expenses etc which could be got back and tax exemptions obtained. That can defeat the expectation of higher tax revenue from service sector by GST.

7. The possible favourable points I see are (a) E commerce will get boost and more respectability. However as online shopping does not deal in day to day items generally, common man is not going to get much out of it. Moreover, as of now the scene is controlled by big multinationals.
8. There will be a little more ease for tax machinery. That is for the government and not for common man. Retailers have to continue with same formalities as earlier though in different names and forms.
9. The inclusion of petroleum products in GST is going to be a boon for the oil companies, which also mainly goes to the private corporate. Thos who had not reduced cost when internationalprice of crude fell by morethan half cannot be expected to reduce costs by a small cosmeticchange in taxa mechanis. This will actually leadto more price rise only.
10. As price control is not there GST will not prevent the manufacturers or providers from taking extra profit obtained from the subsuming of excise, service tax etc. Thus, my ultimate inference is that GST will be beneficial to corporate manufacturesr,traders and service providers. It has come out of the necessity of bringing investment especially in regard to 'Make in India' as the FDI investors need concesion and benefits. There is not even an iota of intention or aim of benefit and help to common man.
11. The only prayer is that let things not go worse to the common man who is already suffering and seeing the real colour of the government of not reducing even one rupee in railway tickets, but making railways also a greedy commercial corporate entity.