How will the reformed GST impact India's economy
Guest: Sharad Raghavan, Business and Economy Editor, The Hindu
Host: Kunal Shankar, Deputy Business Editor, The Hindu
Edited by Sharmada Venkatasubramanian
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Time of India
an hour ago
- Time of India
Centre, states stare at fiscal tensions from India's big tax cut proposal
Indian Prime Minister Narendra Modi's surprise move to lower consumption taxes within three months is set to spark tough negotiations with states, who will have to shoulder the bulk of the revenue losses. Modi proposed a major rejig of the complex goods and services tax last week, a move many businesses had been pushing for since the system was rolled out in 2017. Stocks rallied as investors bet lower taxes on everyday goods would boost consumer spending and help offset the drag on economic growth from higher US tariffs. The tax proposals — which still need to be approved — are expected to squeeze government revenue, especially for state governments. Economists such as Gaura Sen Gupta at IDFC First Bank estimate the total cost to the exchequer at Rs 1.8 lakh crore ($20.7 billion) annually, with the federal government facing a net revenue hit of about 0.15% of the gross domestic product and states incurring losses of roughly 0.36% of GDP. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Tiger meeting her former zookeeper after 5 years. See what happens next! Story To Hear Undo The uneven hit is likely to sharpen fiscal tensions between New Delhi and the states, which have sparred with Modi's government over revenue-sharing in the past. Some states say they were not adequately compensated for losses when the GST was introduced, leaving them with limited ways to raise revenue on their own. Harpal Singh Cheema, the finance minister of Punjab, told reporters on Wednesday that his state has been losing 210 billion rupees annually since the introduction of the GST, and called for a new mechanism to compensate states for such losses. Wealthier opposition-ruled southern states have also long argued that much of the tax revenue they generate is diverted north, where Modi's ruling party holds greater sway. Live Events 'States fear a further loss in revenue, which in turn increases their dependence on the center in framing their budget targets,' said Shumita Deveshwar, chief economist at Lombard, adding that she still views the reforms as 'positive.' Bloomberg State reactions, so far, have been mixed, with some leaders like Thomas Isaac, the former finance minister of Kerala, calling the move 'devastating' in a post on X, while others say they need more time to weigh the impact. Thangam Thennarasu, the finance minister of Tamil Nadu — an opposition-ruled southern state often in conflict with the Modi government — said they will need to 'study the proposed GST rationalization' and consult other departments to assess the revenue hit. Karnataka's Revenue Minister Krishna Byre Gowda told local media that 'any major shock in GST will fundamentally affect the fiscal health of the states.' To further complicate matters for the opposition, the changes are likely to be announced by the Hindu festival of Diwali in October, which comes ahead of elections in the eastern state of Bihar, where the GST cuts could be used by Modi's government to sway voters. 'Any GST cut, if passed on to the consumers and customers, has a potential to create goodwill for the ruling coalition in Bihar,' said Rasheed Kidwai, a fellow at New Delhi-based Observer Research Foundation. The state is run by a local party led by Nitish Kumar, one of Modi's main allies in the coalition that controls the lower house of the national parliament. The government is pursuing the overhaul with urgency. Home Minister Amit Shah began planning talks with state and federal ministries in July to build consensus, the Indian Express reported. Modi also called on states to support the GST revamp days after he announced the move. States are heavily reliant on GST revenue, which accounts for more than 40% of their tax receipts. Before the GST's introduction, Indian states had the autonomy to levy and raise their own taxes on goods and services. The unified GST stripped states of that power, leaving them able to independently tax only a few items such as petroleum products and alcohol. States such as Punjab, Andhra Pradesh, West Bengal, and Kerala are facing fiscal stress due to weak revenue mobilization, elevated fiscal deficits, heavy debt burdens, and poor quality of expenditure, according to a report by a government think tank Niti Aayog. Officials in New Delhi said federal and state revenues would dip in the short-run after the changes but should be gradually offset by stronger consumption. States can also raise taxes on alcohol and petroleum to bolster their coffers, the officials told reporters, asking not to be identified to discuss private matters. Bloomberg The tax proposals are being discussed this week by a panel of state finance ministers from both Modi's Bharatiya Janata Party and opposition parties. Finance Minister Nirmala Sitharaman on Wednesday presented the federal government's recommendations at the panel meeting. The final recommendations of the panel would then be submitted to the GST Council — which is headed by the finance minister — and comprises all state finance ministers. The council is expected to take up the issue next month or in early October. The council has the final say on tax rate changes. Most decisions so far have been passed by consensus, but proposals can be put to a vote if needed and require a three-fourths majority to pass. In such a scenario, the ruling BJP — which governs 21 of 28 states and eight union territories — would have little trouble pushing the measures through, said Kidwai. 'While they have the majority states, for a democracy to function, the government must take everyone on board,' said Neerja Chowdhury, a New Delhi-based political analyst. The 'trust deficit' between opposition-ruled states and the federal government 'needs to be addressed for the GST reforms to sail through.'
Time of India
an hour ago
- Time of India
Online Gaming Bill cleared in Lok Sabha: What does that mean for Esports? 5 key takeaways
Lok Sabha has passed the Online Gaming Bill on August 20. The Lok Sabha passed the Online Gaming Bill on Wednesday that bans money-based games while promoting Esports and social gaming. The bill, supported by many MPs but criticised by Congress MP Shashi Tharoor, aims to address growing concerns about gaming addiction, money laundering, and financial fraud in online platforms. 'The government believes that the harms of addiction, financial loss and even extreme consequences such as suicides associated with online money gaming can be prevented by prevention of such activities,' said a media statement by the government. 'Additionally, online money gaming platforms are often misused for financial fraud, money laundering, terror financing and messaging activity that compromise national security,' it added. India's online gaming industry stands at $3.8 billion, which has drawn global investors and created fantasy sports apps like Dream11, Games24X7 and Mobile Premier League. Union Minister Ashwini Vaishnaw explained that the bill focuses on three main segments. It supports e-sports competitions and social games that don't involve money. However, it strictly prohibits online money games due to their harmful effects on society, including addiction and suicide cases. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Birla New launch - Affordable Luxury 2/3 BHK in Pune Birla Evam Contact Us Undo "When it comes to the interest of the middle class of the society, and if that interest is compared to an industry segment, the interest of the society, the interest of the middle class families, the interest of the youth is greater," Vaishnaw told reporters at Parliament. Shashi Tharoor warned that banning these games might push them underground. "I had written a long article in 2019 stating that by banning online gaming, we are simply driving it underground, whereas it could actually serve as a useful source of revenue for the government if legalised, regulated, and taxed," he said. Several BJP MPs welcomed the bill. Ravi Kishan praised Prime Minister Modi, noting that people were selling their land to play these games. Bansuri Swaraj called it a milestone in curbing addictive online gaming. BJP MP Sanjay Jaiswal accused the Trinamool Congress of protesting the bill stating they allegedly received donations from gaming companies. EPWA raises concern, writes to PM Modi However, the Esports Players Welfare Association (EPWA) has raised concerns. In a letter to Prime Minister Modi, they argued that the blanket ban doesn't distinguish between skill-based and chance-based games. They warned this could affect the livelihoods of thousands of professional gamers, coaches, and content creators. The EPWA highlighted that India's 450 million online gamers could turn to unregulated offshore platforms if legitimate options are banned. They support regulation but oppose a complete ban, suggesting instead a framework that protects players while allowing skill-based gaming to thrive. 5 key points on the Online Gaming Bill 1. Under the Online Gaming Bill, esports will be officially recognised as a legitimate form of competitive sport in India. The Union Ministry of Sports will develop guidelines and standards for the conduct of esports events in the country, as well as establish training academies, research centers, and technology platforms. The bill also envisions incentive schemes, awareness programs, and the integration of esports into the broader sports policy. 2. The Online Gaming Bill enables the government to 'recognise, categorise, and register' online social games. This will be achieved by creating platforms for the development and distribution of safe, age-appropriate social and educational games, with a special emphasis on cultural and educational games that align with Indian values. 3. The Online Gaming Bill calls for a comprehensive ban on offering, operating, or facilitating online money-based games, regardless of whether they rely on skill, chance, or both. Advertising of these games would be prohibited across all media. Banks and payment systems would be barred from processing payments related to such games. 4. Online money games that are already active in the country would be blocked under the Information Technology Act, 2000. The bill proposes the establishment of a national online gaming authority to oversee these matters. Its functions would include: - Categorisation and registration of online games - Determination of whether a game qualifies as a money game - Handling complaints and grievances related to online games This body would also issue guidelines, orders, and codes of practice to ensure compliance with the country's laws. 5. Penalties outlined in the bill include: - Imprisonment of up to three years and/or a fine of up to ₹1 crore for entities involved in or facilitating online money gaming - Advertising such games would incur a penalty of ₹50 lakh or up to two years of imprisonment - Any financial transaction related to money games could result in imprisonment of up to three years and/or a fine of up to ₹1 crore - Repeat offences would attract harsher penalties, including imprisonment of 3–5 years and fines up to ₹2 crore. Catch Rani Rampal's inspiring story on Game On, Episode 4. Watch Here!
News18
2 hours ago
- News18
Unity In Karnataka, Distance In Bengal: Mamata Likely To Skip PM Modi's Kolkata Metro Inauguration
Sources indicate that Chief Minister Mamata Banerjee is unlikely to attend the inauguration ceremony, despite invitations being sent. When Prime Minister Narendra Modi flagged off the Metro in Karnataka in the first week of August, one frame stood out: PM Modi, Karnataka Chief Minister Siddaramaiah, and Deputy CM DK Shivakumar smiling, chatting, and taking the first ride together. Despite political debates over funding contributions for the project, the inauguration presented a picture of unity. On August 22, however, a different scene may unfold in West Bengal. Prime Minister Modi is set to inaugurate several metro railway projects in Kolkata on Friday, including the opening of a newly constructed 13.61 km network, with services to be launched on multiple routes. Unlike Karnataka, the camaraderie may be missing in Bengal. Sources indicate that Chief Minister Mamata Banerjee is unlikely to attend the inauguration ceremony, despite invitations being sent. While the Trinamool Congress (TMC) has not made an official statement, party insiders told News18 that Mamata Banerjee is unwilling to share the stage with the Prime Minister. According to them, this stems from the TMC's long-standing allegations that the Centre is denying Bengal its due funds, undermining the state's pride (asmita), and harassing Bengali migrants. BJP's Bengal unit has strongly criticised the Chief Minister's stance. State party president Samik Bhattacharya said, 'A small portion of the metro project is incomplete because of the State's non-cooperation. This is what they do. They lack basic courtesy. Because of their non-cooperation, Bengal continues to suffer." Inauguration on August 22 At Jessore Road Metro Station, the Prime Minister will: Flag off the Noapara–Jai Hind Bimanbandar metro service and undertake a round trip on the route. PM Modi will also inaugurate, via video conferencing: Sealdah–Esplanade metro service (cutting travel time from 40 minutes to just 11 minutes). Beleghata–Hemanta Mukhopadhyay metro service (improving access to Kolkata's IT hub). Dedicate a newly constructed subway at Howrah Metro Station. Together, these metro sections will strengthen connectivity across some of the city's busiest corridors, substantially reduce commuting time, and benefit lakhs of passengers daily. In addition, the Prime Minister will lay the foundation stone for the 7.2 km six-lane elevated Kona Expressway, to be built at a cost of over Rs 1,200 crore. The project will ease travel between Howrah, its rural hinterland, and Kolkata, while boosting trade, commerce, and tourism in the region. view comments First Published: Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy. Loading comments...
