GST Collection Increases Through Effective Tax Compliance – News

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For the railways, the asset monetization program is designed not only to raise resources, but also to upgrade major railway stations through the public-private partnership model.



By HP Ranina

Published: Sat, May 28, 2022, 11:51 PM

Last update: Sat, May 28, 2022, 11:53 PM

Question: India relies heavily on tax revenue to cover capital expenditure on infrastructure projects. The Goods and Services Tax has brought a boon to the government. Does this mean that there will also be a higher tax burden in the future?

GST collection has increased due to measures introduced for more efficient tax compliance as well as due to a noticeable growth in the Indian economy. However, fiscal resources cannot fully finance the capital expenditures needed for infrastructure projects. Therefore, the government has rightly formulated an asset monetization policy. For the current financial year 2022-23, the target figure is set at ₹1.62 trillion.

Resource mobilization targets through asset monetization have been set for different sectors such as roads, railways, power, oil and gas, telecommunications, warehousing, mining, aviation, ports and sports stadiums. For the railways, the asset monetization program is designed not only to raise resources, but also to upgrade major railway stations through the public-private partnership model. Substantial resources have been obtained through the privatization of collieries and mines. This sector has been extremely successful in mobilizing resources. The Domestic Asset Monetization Pipeline has a targeted figure of ₹6 trillion to be raised in the fiscal years 2021-22 to 2024-25.

Crypto investors have lost around $300 billion in the value of their investments over the past few days. Stablecoins have been negatively affected. Many investors are completely confused. Is there an explanation for this?

In the world of cryptocurrencies, so-called stablecoins are supposed to be relatively safe. These are digital tokens that are pegged to currencies like the US dollar. They are designed for volatility such as that seen in traditional currencies which have lower price fluctuations than bitcoin. Stablecoins are primarily used to facilitate trading of other digital assets. However, these stablecoins are not backed by cash or treasury bills, but derive the dollar peg from algorithms.

A few days ago, the algorithm failed to maintain the peg for reasons still unknown. Since crypto assets are unregulated, most investors preferred less risky assets and shed their investments in stablecoins and other crypto assets. Central banks have consistently warned investors to refrain from investing in cryptocurrencies and other assets. In addition, countries like India have developed legislation prohibiting the offsetting of losses from such transactions against any taxable income.

With inflation raging in most parts of the world and foreign exchange reserves dwindling to precarious levels in some South Asian countries, will India be able to survive the critical phase that through the global economy?

In a reversal of the Reserve Bank of India’s accommodative monetary stance over the past few months, the repo rate was raised by 40 basis points and the cash reserve ratio by 50 basis points at the start of the month. This decisive step was taken in an effort to rein in inflation which had risen beyond expectations to 7% and global commodity prices reached historic highs. Another factor that exacerbated inflationary pressures was the revision of electricity tariffs and, of course, the unprecedented war in Eastern Europe.

Therefore, the Reserve Bank has taken timely measures with a view to avoiding severe actions in the near future. Some financial analysts believe that another rate hike may be needed in the coming weeks and that frontloading of rate hikes is necessary to prevent the real rate from turning negative. With regard to foreign exchange reserves in India, the reserves of 596 billion dollars as of May 6 are sufficient to finance ten months of planned imports. The Reserve Bank is monitoring the situation closely as emerging economies face risks of capital outflows and the continuation of the pandemic in China and elsewhere could have a deleterious effect on the global economy.

HP Ranina is a practicing lawyer, specializing in tax management and foreign exchange laws of India.

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