THE HINDU Editorial Vocabulary- November 5, 2016- Topic 2
Still unwieldy but just in time
Finance Minister Arun Jaitley has
managed to break the stalemate with States at the Goods and Services Tax Council’s fourth round of deliberations over the contentious issue
of tax rates for the new tax regime. He did this by retaining the standard
rates of 12 per cent and 18 per cent proposed at the Council’s last meeting,
but tweaking the highest and lowest tax slabs from 26 per cent to 28 per cent
and 6 per cent to 5 per cent, respectively. Concerns of States that levy Value
Added Tax at 5 per cent on items of mass consumption were met by lowering the
threshold GST rate. Foodgrains and other items considered essential, that
together constitute roughly half the consumer price inflation index, have been
exempted from GST. Since inflation is a tax on the poor and indirect taxes are
regressive, this would help check worries about inflationary repercussions. But
raising the highest tax slab to 28 per cent to balance the fiscal books is a
surprise, especially since it would be levied on items such as consumer
durables and cars that are now taxed at 30-31 per cent. Even if producers do
pass on this rate differential to customers, this is hardly likely to spur the
kind of consumption that could drive more manufacturing investment, create jobs
and bolster economic growth.
The cess on top of
GST to be levied
on luxury and sin goods is neither desirable nor efficient. Unless its levy is
restricted to end-use products at the point of sale, it would further distort
the efficiency gains from GST as input credit for cess paid on intermediary
goods is unlikely. The government has argued that the cess will help compensate
States for five years and that the Council can take a call on doing away with
it thereafter. Similar visibility should be provided on dovetailing the
multiple tax rates into two or three in the coming years, if not the
international norm of a single GST rate. Multiple rates will not just pose an
administrative challenge but also spur ugly corporate lobbying of the kind that
the Finance Minister wanted to nix by phasing out exemptions in direct taxes.
Days before he became Niti Aayog Vice-Chairman, Arvind Panagariya had flagged
the cost of focussing too much on one reform, which spills over into other
reforms being delayed. That the recently constituted GST Council has covered
much ground with unanimous consensus augurs well for the GST deadline,
including refining the model GST law and ensuring industry and the tax
department are ready to make the GST switch by April 1, 2017. But the proposed
rate structure is still too complicated to meet the objective of radically
simplifying tax compliance.
Vocabulary
Stalemate: a position counting as a draw, in which a player is not in check but cannot
move except into check.
Example: The often-criticized rule that stalemate is a draw also increases Chess's
drama, by giving a player hope of salvaging something even after he can no
longer win.
Contentious: causing or likely to cause an argument; controversial.
Example: A contentious issue
Synonyms: controversial, disputable, debatable, disputed, open
to debate, vexed
Threshold: a strip of wood, metal, or stone forming the bottom of a doorway and
crossed in entering a house or room.
Example: George enters the house, crossing its threshold with one broad step.
Synonyms: doorstep, doorway, entrance, entry, door, gate, gateway, portal
Regressive: becoming less advanced; returning to a former or less developed state.
Example: The regressive, infantile wish for the perfect parent of early childhood
Repercussion: an unintended consequence occurring some time after an event or action,
especially an unwelcome one.
Example: The move would have grave repercussions for the entire region
Synonyms: consequence, result, effect, outcome, reverberation
Spur: a thing that prompts or encourages someone; an incentive.
Example: Profit was both the spur and the reward of enterprise
Synonyms: stimulus, incentive, encouragement, inducement, impetus, prod, motivation
Distort: pull or twist out of shape.
Example: A grimace distorted her fine mouth
Dovetailing: a joint formed by one or more tapered projections (tenons) on one piece
that interlock with corresponding notches or recesses (mortises) in another.
Example: The joints would all be familiar to a carpenter - mortise and tenons,
dovetails and wedges - but this was the traditional way in which iron
structures were joined at the time.
Synonyms: join, fit together, splice, mortise, tenon
Compliance: the action or fact of complying with a wish or command.
Example: They must secure each other's cooperation or compliance
