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Direct tax collections till September at Rs 5.47 lakh cr

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New Delhi, Oct 4 :Increasing by 16.7 per cent over last year, the gross direct tax collections for the first half of the current fiscal stood at Rs 5.47 lakh crore, according to provisional figures released by the government.

It added that the gross collections of the corresponding period last year also included collections under the Income Declaration Scheme amounting to Rs 10,254 crore, which did not form part of the current year’s collection.

“Refunds amounting to Rs 1.03 lakh crore have been issued during April to September, which is 30.4 per cent higher than refunds issued during the same period in the preceding year,” an official statement said.

It said the net collection, after adjusting for refunds, increased by 14 per cent to Rs 4.44 lakh crore.

“The net direct tax collections represent 38.6 per cent of the total Budget Estimates of Direct Taxes for FY19,” it added.(IANS)

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‘Economic disruption to deter RBI from quantifying FY21 growth forecast’

The RBI’s MPC (Monetary Policy Committee) is expected to release its resolution on the monetary policy after their meet on September 29 to October 1, 2020.

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Reserve Bank of India RBI

New Delhi, Sep 27 : The dynamic economic upheaval unleashed by Covid-19 pandemic might hinder the Reserve Bank of India (RBI) from giving a pin-pointed growth as well as inflation forecast in the upcoming monetary policy report, experts opined.

The existing legislations mandate the RBI to come out with a growth and inflation forecast twice in an interval of six-months in the monetary policy report.

Expectedly, the report is slated to be issued with the upcoming policy review on October 1. The report was last issued in February.

“Given the continuing uncertainty on the economic revival, it is difficult to say whether RBI will come out with clear forecasts on the GDP print for FY21,” said Suman Chowdhury Chief Analytical Officer at Acuite Ratings and Research.

“It has, however already highlighted the risks of a material contraction in economic output in the previous MPC report. As regards inflation, it is likely to reiterate its expectation of a moderation in the CPI inflation over the next few months due to lesser supply constraints, higher crop output in kharif season and also the favourable base effect kicking in.”

According to Brickwork Ratings said: “With uncertainty regarding the pandemic looming large, the RBI may not provide a GDP forecast for FY21 in the upcoming MPC meeting. As in the previous statements, the RBI may continue to talk about economic contraction without quantifying the magnitude.”

“Given the continued surge in Covid-19 cases in the country’s major hubs, which is hindering the recovery process, we expect the Q2FY21 GDP to shrink by 13.5 per cent.”

In April, the RBI’s Monetary Policy Report said that the global economy may slump into recession in 2020.

The report noted that the the coronavirus pandemic, lockdown and the expected contraction in global output will weigh heavily on the growth outlook. The actual outturn would depend upon the speed with which the outbreak is contained and economic activity returns to normalcy, said the Monetary Policy Report for April 2020.

As per the report, due to the highly fluid circumstances in which incoming data produce shifts in the outlook for growth on a daily basis, forecasts for real GDP growth in India are not provided in the Monetary Policy Report, awaiting a clear fix on the intensity, spread and duration of Covid-19.

It is widely expected that persistently high inflation fanned in part due to supply side disruptions along with seasonal factors will deter the Reserve Bank to administer a dose of lending rate cut during the upcoming monetary policy review.

Notably, the expected move will come at a time when industrial output is at historic low due to the Covid-19 pandemic.

The RBI’s MPC (Monetary Policy Committee) is expected to release its resolution on the monetary policy after their meet on September 29 to October 1, 2020.

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Temporary retention, not diversion: FinMin on CAG audit of GST cess

Time taken in reconciliation of compensation receipts can’t be termed as diversion of GST cess fund when the dues to states were fully released by the central government, they said

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Nirmala Sitharaman

Finance ministry sources have countered CAG audit finding of central government wrongly retaining Rs 47,272 crore of GST compensation cess meant for states, saying temporary retention cannot be termed as diversion.

Days after the Comptroller and Auditor General (CAG) flagged that the Centre in first two years of the GST implementation wrongly retained GST compensation cess that was meant to be used specifically to compensate states for loss of revenue, ministry sources said compensation due for the year 2017-18 and 2018-19 was fully paid to states.

Time taken in reconciliation of compensation receipts can’t be termed as diversion of GST cess fund when the dues to states were fully released by the central government, they said.

Sources said that in 2017-18, Rs 62,611 crore was collected, out of which the government released full compensation dues of Rs 41,146 crore to the states and union territories (UTs).

In 2018-19, an amount of Rs 95,081 crore was collected, out of which Rs 69,275 crore was paid as full compensation dues to states and UTs.

They said an amount of Rs 47,271 crore collected in the 2017-18 and 2018-19 had remained unutilised for reconciliation post full payment of GST compensation dues.

For the year 2019-20, the central government released Rs 1,65,302 crore as GST compensation against a cess collection of Rs 95,444 crore which it could do so with the unutilised cess of Rs 47,271 crore.

The GST (Compensation to States) Act guarantees all states an annual growth rate of 14 per cent in their GST revenue in the first five years of implementation of GST beginning July 2017. It was introduced as a relief for states for the loss of revenues arising from the implementation of GST.

If a state’s revenue grows slower than 14 per cent, it is supposed to be compensated by the Centre using the funds specifically collected as compensation cess. To provide these grants, a GST compensation cess is levied on certain luxury and sin goods.

The collected compensation cess flows into the consolidated fund of India (CFI), and is then transferred to the Public Account of India, where a GST compensation cess account has been created. States are compensated bi-monthly from the accumulated funds in this account.

However, instead of transferring the entire GST cess amount to the GST compensation fund during 2017-18 and 2018-19, the CAG found that the Centre retained these funds in the CFI and used it for other purposes.

The finance ministry sources said the compensation receipt in the CFI was subject to reconciliation in the coming months, as usual, in the forthcoming financial year.

If for that reason the amount remained in the CFI, how can that be treated as diversion, they asked adding even the CAG in its report has not said so.

The amount collected under compensation cess fund has been regularly and fully distributed to states as per their dues and budgetary provisions and by the end of July 2020, everything has been accounted for and released, source added.

The CAG in its report tabled in Parliament earlier this week said out of the Rs 62,612 crore GST Compensation Cess collected in 2017-18, Rs 56,146 crore was transferred to the non-lapsable fund.

In the following year (2018-19), Rs 54,275 crore out of Rs 95,081 crore collected was transferred to the fund.

The short transfer in 2017-18 was Rs 6,466 crore and in 2018-19 it was Rs 40,806 crore, the CAG said adding the Centre used this money for “other purposes” which “led to an overstatement of revenue receipts and understatement of fiscal deficit for the year”.

Sources explained that all amounts including taxes and cess that are collected by the Centre should, under the Article 266 of the Constitution, get credited first to the CFI and then only it could be transferred to any other fund through a budget head in Union Budget.

The government makes all efforts to transfer all amounts collected by the end of every financial year into the fund by making necessary budget provisions, they said.

In case of compensation cess, since the final accounts of amounts collected are known only after the end of financial year, any amount collected over and above the estimate will remain in the CFI temporarily, they said adding after reconciliation, the amount is transferred to Compensation Fund and from that fund to states as per their compensation formula.

Therefore, such temporary retention of GST cess in CFI pending reconciliation cannot be treated as diversion by any stretch of imagination, sources said.

Since the cess collected by the Government has been used for full payment of due compensation, then it cannot be alleged that unutilizedcess amount has been diverted for other purposes, they insisted.

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Vodafone Wins Arbitration Against India In Rs 20K Cr Retrospective Tax Dispute Case

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New Delhi: Vodafone has won the case against India over a retrospective tax demand of more than Rs 20,000 crore.

The Permanent Court of Arbitration at The Hague has ruled that the conduct of India’s tax department is in breach of “fair and equitable” treatment.

Voafone had moved the International Court of Justice (ICJ) in 2016 due to a lack of consensus between the parties’ arbitrators in finalising a judge for the tax dispute.

Following this, a tribunal was constituted in June 2016 after Vodafone challenged India’s use of a 2012 legislation that gave it powers to retrospectively tax deals like Vodafone’s $11 billion acquisition of a 67 per cent stake in Hutchison Whampoa in 2007. The retrospective tax law had been enacted after the Supreme Court judgement went in Vodafone’s favour.

Vodafone had challenged the tax department’s demand of Rs 7,990 crore as capital gains taxes (Rs 22,100 crore after including interest and penalty) under the Netherlands-India Bilateral Investment Treaty (BIT).

Buoyed by the arbitration award, Vodafone Idea stock closed 12 per cent higher at Rs 10.20.

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