Rahul Mehta Gandhinagar LsCandidate
GST ------ MTP = Missing Trader Problem, proposed solutions of WT and CAM, and how GST without CAM will create slaughter of small / middle businesses
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List of chapters
(1) Missing trader problem
(2) How MTP will slaughter small businesses / manufacturers
(3) "Repeal GST and bring Wealth tax" as solution
(4) CAM = "Controlled Account Method" within GST framework
(5) Giving GST paid as deduction in Income Tax payabl
(6) What can YOU do to bring WT or CAM?
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chap-1 : Missing trader problem
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GST has following problem
(1.1) Say a trader/manufacturer B buys goods from A and say they agree for base price of Rs 1000. Say tax rate is say 20%. Then A's invoice will be Rs 1000 base price + Rs 200 GST = Rs 1200 total
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(1.2) If B is end user or "lumpsump dealer" then there is no issue. But say B is a trader or manufacturer who pays GST at 20% rate.
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(1.3). Say C buys goods from B and say they agree for base price of Rs 1050. Say tax rate is say 20%. Then A's invoice will be Rs 1050 base price + Rs 210 GST = Rs 1260 total
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(1.4) B has to make a statement as
GST collected from C = Rs 210
GST paid via A = INPUT CREDIT = Rs 200
GST to be paid = Rs 10
And B has to pay Rs 10
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(1.5) But if A doesnt pay Rs 200, then B will have to pay Rs 200 again, for all practical purposes. i.e. input credit of Rs 200 will denied.
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Basically, A is the missing trader. And the event that he didnt pay GST is what I called as "Missing Trader Problem".
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The two solution I propose are wealth tax and Tax-accounts
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chap-2 : How MTP will slaughter small /medium businesses?
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Consider a town where there are 1000 small / middle traders and manufacturers , named as as S1 to S1000 and say 10 big traders and manufacturers.say L1 to L10.
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Say S1 to S10 collect GST from their 10000 buyers across India named as B1 to B10000. Say S1 to S10 didnt pay GST. So these 10000 buyers will have to pay GST again. so other sellers S11 to S1000 were honest, but S1 to S10 were dishonest.
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Now say same buyers also bought goods/services etc from L1 to L10. Now each of L1 to L10 will NOT default on GST,. The Large companies will never do such petty white collar fraud. If they want to do fraud, they will bribe Minister and get land for cheap, they will bribe bank CEO and get loans and do NPA, and so on. But they will not do a trackable criminal fraud. Thats because large companies have a lot of asset and they can disappear in month.
So in short, some 1% small / middle business will do Missing Trader Fraud i.e. will not pay GST they collected. And none of the large seller will create MTP.
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Now every buyer will see than 1 to 3 out of 100 small traders / manufacturers create MTP, while none of the large trader / manufacturer do MTP.
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So those who have been cheated by 1-2 small trader / manufacturers will lose faith in ALL small traders / manufacturers !! and they will start dealing with large trader / manufacturer as far as possible.
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So GST with solution to MTP will slaughter small / medium, business and manufacturers.
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So for first 3 years, GST will look great --- tax returns will become simple and businesses will face lesser hassles. But after 2-3 years, missing trader notices will start coming, and the slaughter of smal / medium business will start.
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chap-3 : Wealth tax as solution
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I have proposed removal of excise, cst, sales tax, vat, service tax, gst and replace them by WTMC = Wealth tax minus credits
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I have proposed wealth tax on urban properties as follows
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1% of land's circle rate
plus 1% of construction's actual or circile rate (higher)
minus 250 sqft per person (500 sqft for age above 60 years)
minus 500 sqft per person (1000 sqft for age above 60 years)
minus 15% of salaries paid
minus income tax paid on non-salary incomes
minus 50% of income tax paid on salary income
minus ALL taxes paid such VAT, excise etc as long as they are
minus taxes paid on fuel , electricity if any
minus wealth tax credit of previous year
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If above is negative, then it will get added to WTC = "wealth tax credit" for next year. So WTC = is cumulative
And second proposal is to remove several exemptions from income tax such as SEZ, Mauritius route, tax exemption to infrastructure projects etc
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So GST gets repealed and above WTMC plus streamlined income tax will give more revenue than GST. Also it is less regressive, and will bring down land prices.
I would soon publish link , filehash and bittorrenthash for wealth tax, that we voters can send to PM \ MPs via sms\twitter. The goal should be to convince over 45 crore voters to send sms to PM\MPs, and to convince atleast 10 crore voters to send tweets to MPs\PM.
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Please click "follow" on my FB profile, I will soon publish the full SMS, and files with full draft of this wealth tax proposal.
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chap-4 : solution within GST framework - CAM
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The second solution I propose is CAM.= Controlled Account Method. Here, the bank will provide an account named as CAM-account. It will have following features
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(4.1) Say CAM is owned by trader or manufacturer X
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(4.2) Anyone , X or anyone, can deposit money to CAM.
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(4.3) X can move funds from CAM only to another CAM account of GST Govt Account, and not where else
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(4.4) The GST Govt Officer can move funds from CAM account to private account of X or heir of X or GST's Govt account , and no where else
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(4.5) The interest on CAM account will be same as savings account, and it will be same as one year FD on minimum balance of 1 year, and no more.
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(4.6) Now CAM solves MTP. How? Say B has to pay Rs 1000 base price + Rs 200 GST to A. Then B can write two cheque to A --
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(4.6.1) pay Rs 1000 to current or savings account of A
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(4.6.2) pay Rs 200 to CAM-account of A
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(4.6.3) Bank can support multi-receiver cheque , where cequere writer can write both account numbers on same piece of paper, and also write details such as invoice number etc
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So now trader A CANNOT siphon money from CAM account to his own account. Because money in CAM account can be used only to deposit into another CAM account or pay GST account of Govt. Or money will stay in A's CAM account, which govt can later recover from bank. So in any case, B will not suffer due to misaction or inaction of A.
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IOW, CAM-account is owned by A, and all deposits are made by A or by others behalf of GST due on A, But A cant make withdrawals except to pay GST to his sellers or to Govt. And Govt can take money out depending on situation. But that will be Govt's action, and wont create liability on buyers.
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Traders and manufacturers have been suffering from MTP in VAT , CAT etc since 2013 in all states across India. Sadly, no State Govt asked banks to implement CAM
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I would soon publish link , filehash and bittorrenthash for CAM Account, that we voters can send to PM\MPs via sms\twitter. The goal should be to convince over 45 crore voters to send sms to PM\MPs, and to convince atleast 10 crore voters to send tweets to MPs\PM.
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Please click "follow" on my FB profile, I will soon publish the full SMS, and files with full draft of this wealth tax proposal.
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(5) Giving GST paid as deduction in Income Tax payable
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A separate proposal of ours is to let all --- end users as well as traders / manufacturers, to deduct GST from income tax payable. This can be implemented even for end users. When an an end user pays say Rs 1000 price + Rs 200 GST, he can pay by cheque which has two lines --- price and GST. And bank will track the GST he has paid. And likewise, when he pays by card, he the card will also track GST he has paid. and when user pays by cash, he can give his card, and the card will not make any actual payment, but will record "price and GST paid in cash". And hen seller uploads his cashbook with tax dept, the GST dept can cross check. And if buyer doesnt give card at the time of buying or even at a later date, then that GST paid will become Govt property and cannot be reclaimed,
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So GST paid by each citizen and each business, can be tracked, added , and later can be given as deduction from income tax payable.
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But please not --- this proposal reduces double taxation ; this proposal has NOTHING to with MTP of GST or GST per se,
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I would soon publish link , filehash and bittorrenthash for this "GST paid can be deducted from income tax payable" proposal. We voters can send these link etc to PM\MPs via sms\twitter. The goal should be to convince over 45 crore voters to send sms to PM\MPs, and to convince atleast 10 crore voters to send tweets to MPs\PM.
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Please click "follow" on my FB profile, I will soon publish the full SMS, and files with full draft of this wealth tax proposal.
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chap-6 : what can YOU do to solve Missing Trader Problem
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IMO, you can ask MPs and all party workers to provide DRAFT, for the solution they propose to Missing Trader Problem in GST.
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And if you like the wealth tax solution or CAM solution, we have proposed then pls click follow on my profile. And pls like / share this status. I will soon publish full draft, link, filehash and bittorrenthash that you can send to PM\MP.