Demonetization Woes (6) - The Grey india

 (via Sunny Narang)

Desinomics : Why India needs its own R&D , University Departments and theories of studying its complex artisan-traditional-manufacturing-service-internet economy

As I have written many times that India has about a 200-300 million enterprise economy (More than 100 million small landholdings among them ) , and thousands of traditional artisans and trades , which make hybrids with modern manufacturing and exports , eg the Moradabad , Firozabad brass and glass industry which works with artisans and finishes and adds processes in modern factories .

India has always been not just a "Mixed-Economy" of PSU and Private , but of a flourishing "Informal" sector that adapts to all global changes and new innovations . 

For example the Powerloom sector is now primary in weaving fabrics not the Big Mill or the Handloom , which along with Hosiery small sector probably is almost 80% plus of all fabrics made in India .

India is not just a Mixed Economy it is a completely Mixed-Up-Economy where most time the traditional and modern make amazing hybrids .  

Look at any industrial area in India , there are thousands of small casting, repair , rewinding , machining , engineering workshops that sustain the big hundreds of companies . Just like every home needs carpenters , plumbers , masons, painters , electricians , AC mechanics , then they need full time drivers , househelp , gardeners and then vendors like vegetable suppliers , groceries, ready made food .

There are millions of Dhabas , Kirana stores , Paanwallahs , Chaiwallahs who will even keep monthly credit hissab which no online store can give , and even if they do they will charge interest !

Every so-called "Organized" sector "Whiteness" in India , without a single exception hides the "Blackness" .

The workers on contract handled by various contractors , most who will not be deducting the PF and ESI as then the workers will have to deal with the PF and ESI bureaucracy . The small contracts that maintains the roads and railways from repairs to filling mud to breaking stones (and almost all stone crushers are run by mafias ) . The waste dealers in every industry who operate on cash as even Governments have given up on ETP's .

The cigarette and alcohol industry that saves excise by taking out trucks without paying excise and paying the excise bureaucracy . 

The "Grey" markets of mobile phones , fake auto parts and branded goods .

The "Jai Mata Di" and " Sai" Bhajan mandalis who never take cheques or credit cards , and are a bigger music industry than Bollywood and Indie Bands , who themselves hate charging service tax or getting Tax Deducted at Source and love a cash element .

Simply most people do not pay taxes as the state is run by mostly unreliable bureaucrats and politicians .

Add to that under-invoicing for imports as if actual custom duty is paid most goods in India will become anything between 20-100% more expensive . Add to that over-invoicing of exports , so even listed companies can be frauded by few top employees by keeping income outside .

It is time we really honestly looked at how actually India and Indians work . 

From coal mafias to how even the government PSU's cannot expect imported coal to be stolen from railways after its loaded on ports .

None of all that is stopping . 

The thousands of small and big mafias , the haftas that are collected on every bazaar street from hawkers .

"Blackness" is there in every single process of transaction in India somewhere .

Create proper spaces for the Informal hawkers , commercial spaces in urban areas , enough industrial infrastructure for those who need anything from 100 sq feet to 3000 sq feet of space , not 100-500 acres alone .

Let transparency come first in the way every Public contract from a village road to a defense procurement is done .

Look how the states and centre are fighting on how the various GST's are going to be collected .

Only about 400,000 of the 10 million registered VAT enterprises pay Excise , which is for those doing turnover above 1.5 crores in most but in Gold its 15 crores . When only 4% are centrally watched , and rest are small and at state levels how will you understand till the artisan, MSME sector is understood deeply .

There are no studies done on this sector in any US or EU university . There is no reliable data anywhere .

The Indian academia and researchers have failed Indians completely.

I do not blame PM Modi at all.

I blame the absolutely colonised Indian elite academia, media "padha-likha" mind .

But am happy that this Demonetisation has got the so called intellectual elites of our colonised land at least talking about this great "Informality" of India .

The Communists and the Leftists have been the worst as they have only seen these enterprises as Kulaks and Petty-Bourgeois , that Big Public Sector or Unionised Private Sector should displace .

The Capitalists have made peace with this sector as they need the Informality to lower costs .

The Big Centre Politicians funded by Global Capital don't like it much .  

Demonetisation has created Transparency about how actually India works , in a small way.

And that for me is its biggest achievement .

Now for the real work to begin .

Is to make this sector stronger and better by creating institutions that build quality, finance, research , collaboration with them. 

We need an Indian "Trump" from the Informal Sector .

I am sure that will happen . 

Small Scale Industry (SSI) exemption limit for other sectors is `1.5 crore and the government had proposed a special dispensation for this sector while introducing the levy. But, the jewellery industry launched a major protest, including a complete shut down of shops. 

When a retail customer brings jewellery (other than in form of gold or any precious metal) to a jeweller which is converted into new jewellery by the jeweller or a job worker of such jeweller, excise duty will be payable only on value addition, including cost of additional materials and labour charges. 

This was a key concern of jewellers as the sector uses recycled gold to a very large extent. 

"All these recommendations have been accepted by the government..... Independent of committee's recommendations, the government has also decided to increase — for manufacturers of articles of jewellery or parts of articles of jewellery or both — the SSI eligibility limit from Rs 12 crore to Rs 15 crore and the SSI exemption limit from Rs 6 crore to Rs 10 crore in a financial year and Rs 85 lakh for the month of March, 2016," a Central Board of Excise and Customs statement said on Wednesday. 

http://economictimes.indiatimes.com/industry/cons-products/fashion-/-cosmetics-/-jewellery/fresh-measures-announced-for-gold-jewellery-sector-ssi-eligibility-limit-upped-to-rs-15-crore/articleshow/53200810.cms

Mr. Jaitley’s informal meeting with state finance ministers failed to arrive at a common ground on how Centre and states will control assessees under the new regime that will subsume an array of taxes like excise duty and service tax as well as VAT, multiple ministers participating in the meeting said.

With states unrelenting on their position of being given right to control all assessees with up to Rs 1.5 crore annual turnover, it was decided that officials will meet again tomorrow before the meeting of the all powerful GST Council on November 25.

“The meeting has remained incomplete. Discussions will continue on November 25,” Finance Minister Arun Jaitley told reporters after the over three hour long meeting.

The issue has remained a contentious one during the previous two GST Council meetings and any disagreement at the next meet holds potential of derailing rollout of the GST from the targeted April 1, 2017.

Mr. Jaitley had earlier this month stated that the proposed GST needs to be rolled out by September 16, 2017 before the validity of the Constitutional Amendment brought in by Centre and ratified by states expires.

States like West Bengal, Kerala, Uttarakhand, Uttar Pradesh and Tamil Nadu have insisted on exclusive control over small taxpayers, who earn less than Rs 1.5 crore in annual revenue, for both goods and services.

Uttarakhand Finance Minister Indira Hridayesh said states demanded exclusive control for both goods and service tax assessees of Rs 1.5 crore and below.

“Centre is agreeable on goods, but is not yielding on services. States are looking at their interest to safeguard their revenue. Centre will have to yield to states to get the CGST and IGST bills passed. A middle ground on the issue has to be worked out politically,” she said.

Kerala Finance Minister Thomas Issac said it is a stalemate and his state is unwilling to compromise as it has virtually given up its taxation rights.

Today’s informal meeting was held sans civil servants to arrive at a political solution.

According to sources, many states including West Bengal, Uttar Pradesh, Kerala, Rajasthan, Odisha and Uttarakhand, said that small taxpayers cannot be harassed by dual control.

Rajasthan Urban Development Minister R Shekhawat said Centre and states are working on different permutations and combinations.

Mr. Isaac said Centre prefers to have a vertical split of all dealers for assessment under GST. “They are taking a rigid stand but I hope good sense will prevail at the Centre,” he said.

The GST Council was earlier discussing five proposals for deciding on jurisdiction, but in the last meeting on November 4, arrived at two options — horizontal division and vertical division.

‘Horizontal Division’ would mean taxpayers would be divided both for administrative and audit purposes based on a cut off turnover. Those with a turnover over Rs 1.5 crore would be administered both by the Centre and states, while those with below Rs 1.5 crore would be administered solely by the state.

‘Vertical Division’, based on ratios, assigns taxpayers to a tax administration, Centre or state, for a period of 3 years for all purposes including audit. Taxpayers could be divided in a ratio which would balance the interest of the Centre and the states, both with respect to revenue and spread of numbers.

States feel they have infrastructure deployment at grassroot level and small taxpayers are familiar with state authorities.

Centre, on the other hand is unagreeable to the states’ demand of exclusive control over small entities which earn less than Rs 1.5 crore in annual revenue, as it wants single registration mechanism for ease to service taxpayers.

Instead of horizontally splitting the taxpayers, it has proposed to divide entire taxpayer base vertically.

As a compromise, it is willing to give states administrative power over 2/3rd of taxpayer base, with service tax continuing to be administered by Centre.

At present, the estimated total indirect taxpayer base, including value-added tax, service tax and excise, is around 10 million, of which around 0.4 million are common to the Centre and the states.

This leaves around 9.6 million taxpayers, of which around 6.6 million are value-added tax assessees, 2.6 million are active service tax assessees and around 0.4 million registered under excise.

Under the new system, the states and the Centre will collect identical rates of taxes on goods and services. For instance, if 18 percent is the GST rate on a good across the country, the states and the Centre will get 9 percent each, called the CGST and SGST rates.

The Centre will also levy and collect the Integrated Goods and Services Tax (IGST) on all inter-state supply of goods and services.

The IGST mechanism has been designed to ensure seamless flow of input tax credit from one state to another.

The dual control issue, which was deadlocked in the third and fourth GST Council meetings, has risen because multiple taxes levied by the Centre and the states at present will now be integrated into one tax under the GST regime, which is aimed at removing inter-state barriers to trade and integrating India into one common market.

The next GST Council meeting on November 25 will work to finalise four supplementary bills dealing with CGST, SGST, IGST and the compensation law.

At its last meeting, the Council agreed on a four-slab structure — 5, 12, 18 and 28 per cent — along with a cess on luxury and ‘sin’ goods such as tobacco.

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Sunny	Nov 21 (6 days ago)
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