Wednesday, June 17, 2020

They just have to pay their bills.

"Exports bounce back to last year's levels," was the headline. However, the second paragraph reads, "Exports in May shrank 36.47% to $19.05 billion against a 60% contraction in April, which was largely due to overseas orders' cancellation." Since these are calculated year-on-year, the headline is clearly misleading. "Merchandise exports in March stood at $21.41 billion, down by 34.57 percent compared to $32.72 billion in the same month last year." "Export target will be down by at least 30% this financial year," said Mahavir Pratap Sharma of Carpet Export Promotion Council (CEPC). "We are hopeful to start production from June in our units as well, so that we can meet the international season cycle." Which means Christmas. Apparently, 56% of Americans expressed a desire to gift diamonds, which is goods news for the polishing industry in Surat. States in India are demanding that the Central government should pay them a compensation for a shortfall in Good and Services Tax (GST) collections. "The GST Act extends a guarantee to states that any loss in revenues in the first five years of GST implementation (2017-2022) will be made good through a cess. If states' actual revenues are less than projected revenues, the difference would be compensated." "Data presented at the GST Council meeting on Friday showed that GST collections had shot up to over Rs 62,000 crore (Rs 620 billion) in May -- almost twice the level seen in April -- but 38% lower than a year ago." "The Center is not going back on its promise, but should it not enforce the force majeure clause since this is an event triggered by things beyond anyone's control," an official told TOI. 'Force majeure' is "a contractual provision allocating the risk of loss if performance becomes impossible or impracticable" due to "an event or effect that can be neither anticipated nor controlled". However, government officers were known for intentionally not paying bills on time long before anyone had heard of the coronavirus. "More than availing of the benefit of new credit lines and loan related schemes announced by the government, nearly 63.3 million micro, small and medium enterprises (MSMEs) are hoping to get delayed payments from the government in the next 45 days." "The Center must deliver on its promise to compensate the states for five years from 2017-18 for any shortfall in goods and services tax (GST) collections in relation to the past trend. There can be no ifs and buts and act of God appeals on the subject," wrote an editorial in the Economic Times. "Other tax collections have taken a severe hit as  well. That being the case, our states should be ready to accept significantly reduced sums as compensation," wrote an editorial in the Mint. By persuading states to give up their power to levy taxes on goods and services with a promise of compensation the Central government gained control of most of finances of the states and, by extension, on their governments. It must, therefore, honor its commitments. But, the government is known for not honoring contracts. The government is clearly higher than God. In India.

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