The CEO at home

This article was first published in ISB Spandan, Vol. 2, Issue. 2, February 2018; http://flipbook.isb.edu/pages/Spandan/Vol2-Issue2-Feb-2018/html5/index.html?page=1&noflash

“I have been inspired by her. What little success I have achieved, should be credited in large measure to my wife’s influence.”- A rare legacy- Memoirs of Basant Kumar Birla

“Please understand. If I don’t do it, who will? The buck stops at me”. 

The buck is supposed to stop at both of us with regards to our child. But it usually stops at me because you are not around!

“I will be leaving at 4am tomorrow and will be back at around midnight”. But you just came back from Uganda? Must you travel again immediately?

“Anything urgent? I am in a meeting”. Can I only speak to you when there is an urgency?

“Please sleep, I will not be able to call today. Will get free only after 11pm. It will be 2am for you”. But we have just spoken 4 words since you left 4 days back.

These are snippets of regular conversation at home between my husband and me. My husband is a serial entrepreneur. Even as one business is getting established, he moves on to the next one.

When I think of the life that we could have had if he decided to take up a regular job- foreign vacations, attending parents-teachers’ meetings and social outings together and so on- the grass definitely looks greener on the other side and I must admit that the sacrifices do not seem worth it at times.

It is said that behind every successful man, is a woman. I would say that behind every successful man is a wife who spends hours worrying about the time her husband would be back home, managing the family while he travels extensively, taking flak for his absences from the extended family and sometimes not even being able to talk on the phone while he is firefighting.

The journey of an entrepreneur is laced with passion, hence seems pleasurable to the entrepreneur. The wife need not share the same passion and it is difficult to understand the long hours, the ever-shifting goal posts, the failures and hence the opportunity costs.

The role of the wife of an entrepreneur is as important as the entrepreneur himself in the success of the enterprise. She is the Chief Emotional Officer (CEO) who works tirelessly, with patience and perseverance, to maintain stability at home, inculcating the right values in children and their overall upbringing, keeping the communication flowing, being the cheer-leader in an environment of chaos and uncertainty and listening to the stories of challenges at work that never seem to end.

The CEO at home is invisible, plays subtle and less formal roles of supporting, advising, listening and at times emphasizing on the humane aspects of business decisions. Their observations, emotional capital and intuition go a long way in shaping the big picture for the entrepreneur.

Whether a wife is a home-maker or working, it doesn’t matter. Being married to an entrepreneur is not easy, yet exciting. So cheers to the entrepreneurs’ wives and to women in general who have the uncanny ability to handle a variety of situations with aplomb.

Let’s give them a dream who help us achieve our dreams!

This article was first published in ISB Spandan, Vol. 2, Issue. 2, February 2018. It won the second place in a woman’s day special contest.

http://flipbook.isb.edu/pages/Spandan/Vol2-Issue2-Feb-2018/html5/index.html?page=1&noflash

“She isn’t coming tomorrow. You can’t travel on a day she’s not coming”, I said. “But my tickets are booked for a 6.30am flight”, replied Pavan. “Postpone it. Take a post noon flight”, I retorted, clearly irritated. “Ah alright! Your LSS-2 will be at your service till 10am tomorrow. 

Happy?” said Pavan, in an attempt to lighten the mood. “Good”, I replied, feeling relieved, and walked out of the room.

By nature, I worry a lot. I find it difficult to leave unwashed utensils in the sink or clothes lying on the bed or toys spread out in the living room. Her presence ensures that I am not constantly worried about the household chores while at work.

I am assured of entering a neat, clean and orderly home in the evening and finding my kid well fed and in a state where I can still recognize her. Behind my success at work and a happy peaceful life is a good LSS-1 (well, even LSS-2. But this article is about LSS-1. So, another day, another article on LSS-2).

In case you are still wondering about what is LSS-1 and LSS-2, no they aren’t the latest offering from the stable of ISRO or NASA, LSS stands for Life Support System. Pavan, my husband, calls himself my Life Support System-2 and our domestic help as my Life Support System-1.

For many of us, the urban-working-women, our domestic help is an important part of our lives. They are a category of women who see affluence closely and daily, with little hope to experience it themselves.

This is unlike the other category of workers- be it a labourer on a factory site or employed in an infrastructure project or the bottom most in the pyramid employee of a hospital- who do not really see the rich and their lifestyle so closely.

Most of these women are not supported or are left by their husbands to fend for themselves and for their children. They tolerate the abuse at home and often indifference at their work place, while staring at an endless tunnel with no light. They work for mere survival from one day to the next, to put a roof over their heads and some food in their belly.

What are their own aspirations? What is their aspiration for their children? Don’t they deserve a better life? A better future? They are not even recognized by the Government. There are no set wages, no regulations regarding the hours of work, about the scope of work, leaves or pension. There is a draft Act on the anvil but it is yet to see the light of the day!

Drawing an analogy with the Gallup State of the American Workplace study- “people leave managers, not companies”, I can say that the poor performance of the domestic help and their frequent job changes has as much to do with us. They were not born to be domestic helps. Circumstances have made them so. They too need training, empathy, support and security, just like we do in our jobs.

This is a tribute to all domestic helpers who make our lives easier and allow us to pursue our dreams while not having any of their own. As women who have moved up the social ladder and are blessed to be where we are, let us all, in whatever capacity we can, make this world a better place for them as well!

India’s Far-Reaching Tax Reform

This article was first published in GARP Risk Intelligence on March 02, 2018; Co-author: Anisha Sircar and Nitya Bodavala

http://www.garp.org/#!/risk-intelligence/market/financial-markets/a1Z1W000003Q23JUAS

The objectives of the Goods and Services Tax are clearly stated, but the implementation is complicated

On July 1, 2017, the Indian economy experienced its second historical policy overhaul in under 12 months (demonetization being the first). The Goods and Services Tax (GST), the most dramatic tax reform in the country since 1947, had been under way in parliamentary dialogues for almost a decade – in contrast to the sudden implementation of demonetization. 

Seeking to unify many central and state taxes and streamline the existing indirect tax system, GST had ambitious goals mapped out for the country’s economy.

The potential positives of GST have been well-touted: the common tax system will reduce the incidence of double taxation, lower business costs across sectors, bring India’s informal sector into the mainstream, and increase exports, benefiting the overall fiscal health of the country.

But there are several issues related to the implementation of the GST, among them: reliability of the information technology, documentation hassles, potential revenue losses, and an abstruse anti-profiteering clause.

What is GST?

The Constitution Amendment Bill for Goods and Services (GST) was passed on August 3, 2016 by the Rajya Sabha, upper house of the Parliament. A single, uniform tax levied across India, on all goods and services, GST was proposed to sew together a common market by removing fiscal barriers between states. 

It was anticipated that India’s tax structure would become more comprehensive, a common market would develop, and the cascading effects of multiple indirect taxes on the movement of goods and services would be reduced.

In theory, GST is simple. The government charges a series of indirect taxes (alongside direct taxes) to raise revenue for public expenditure. Under GST, at least ten types of “indirect taxes” are subsumed under a single system, putting an end to the hitherto several levels of taxes levied on commodities as they move through the production cycle. Taxes under the system are collected on a “value-addition” basis, at each stage of sale or purchase in the supply chain.

Impact on the Economy

GST is viewed as a game-changing reform because it impacts the structure, incidence, computation, payment, and compliance of indirect taxes, as well as credit utilization and reporting. 

Its main purpose was to eliminate the compounding effect by combining central and state indirect taxes and fixing a final tax rate, where all goods and services would fall into five distinct tax categories, and where value-added tax laws did not differ across states, thus making it less problematic for both the producer as well as consumer at each stage of in the supply chain.

Before, myriad taxes were applied at the central and state levels. After the implementation of GST, only three types of taxes are applied:

• Central Goods and Services Tax (CGST), levied by the center on intra-state supply.
• State Goods and Services Tax (SGST), levied by the state on intra-state supply.
• Integrated Goods and Services Tax (IGST), levied on goods and services for intercourse trade or commerce, imports, and exports.

Under the new system, transactions have “slabs” of tax rates, depending on the nature of the good or service. All items, ranging from agricultural and necessity goods to luxury goods and consumer durables are categorized in the five major tax slabs of 0%, 5%, 12%, 18%, and 28%. The range is from zero on items deemed as essential or necessity, 28% on goods deemed as luxury.

‘Level Playing Field’

With this system replacing the multiple-tax structure, a more uniform regime has been implemented, state-specific advantages and disadvantages are set to diminish (because smaller businesses now get to make higher profit margins, and offer lower prices than their competitors, thus “leveling the playing field”). 
The average costs of goods and services across the country are reduced with the elimination of double taxation; inflation may decrease in high-productivity categories; and commodities can easily move across the country, with reduced transaction costs and transportation inefficiencies for businesses.

An ancillary benefit is that the threshold for companies exempt from paying indirect taxes has been reduced from Rs. 15 million to Rs. 1 to 2 million, depending on the location of the company, thereby attempting to bring the informal sector into the fold of the formal sector of the economy.

Further, taxes paid by the consumer are not only structurally straightforward and transparent (as opposed to a slew of overlapping and elusive taxes), but the final tax itself is set to reduce, thereby having a positive effect on consumption and boosting the economy at large. In this way, the simplicity of the tax structure appears set to bring about greater tax compliance, increasing the tax base and, in turn, revenue for the government.

With an overall decrease in production costs, and with GST not levied on exported goods and services, India’s international competitiveness is expected to increase.

From a macroeconomic perspective, then, the long-term impact of GST on the economy seems favourable: improving efficiency, widening the tax base, narrowing the gap between the informal and formal sector, and increasing overall fiscal health.

Technology and Other Challenges

One of the hallmarks of this tax reform is the introduction of the Goods and Services Tax Network (GSTN), which records all GST transactions and is supposed to be conducive to seamless documentation, debit recording, and credit disposal.

However, a lack of timely migration into the network can be detrimental to the viability of the tax program, because the IT infrastructure is the only means to track and implement the new system.

Also, verifying and legitimizing the data provided online is a mammoth task, given its estimated 70 million users. Because GSTN has refused the Comptroller and Auditor General of India access, citing its “private entry status,” there is little scope for auditing the authenticity of GSTN information, which could compromise public trust.

Additionally, particularly in the short-term, small and medium-size businesses are facing difficulties in integrating and transitioning to the new system, in terms of cumbersome documentation requirements, complex and unaudited IT systems, and adapting to the new taxation on their businesses. 

There have been day-to-day business disruptions and revenue losses during the transition phase. And lower thresholds for tax exemption imply that a manufacturer, service provider, or retailer who did not face a tax levy, will now enter the GST network, which could increase their costs.

The fundamental drawback with the tax code is that the onus is placed on the purchaser, who is responsible for filing all documentation on behalf of the supplier, in order to acquire input tax credit. Problems could arise if inconsistencies are found in suppliers’ documentation at later stages, in which case the buyer would end up having to pay for not only his/her share of tax, but also for the supplier’s share – or be forced to pay back the tax reimbursement to the government with interest. 

This problem could be fixed in the long run by market forces, which ensure non-compliant suppliers lose out on customers; and by a government mechanism to allow customers to pinpoint such defaulters, which is expected to take effect in the future.

Finally, the anti-profiteering clause requires that businesses pass on any benefits of the changes to the final consumer. However, because of ambiguity in the framing of this clause, firms might be affected as tax authorities will be given the leeway to make arbitrary judgments about whether a business is engaged in profiteering or not.

 Simultaneously, consumers will be affected because of the lack of transparency in the ruling, giving rise to fears that political connections or corrupt practices will affect these judgments. Again, this ties in to a compromise in the public confidence in GST – a fundamental determinant of the success or failure of the new tax regime.

Course Corrections

The GST Council, empowered to oversee tax rates and regulations, and composed of finance ministers from the states and center, has been meeting monthly to take stock and propose alterations with respect to the implementation of GST. The council has lowered the rates on several items to help distressed industries and eased the burden of compliance in response to problems faced by traders. The deadline for firms to file their forms was also extended, which was welcomed as a huge relief for businesses.

While these are welcome alterations, several issues remain unaddressed. The GST system is expected to span the country by April 2018. It remains unclear how inter-state business interactions will be impacted, and industries have good reason to worry about extant as well as fresh complications. 

But amidst the flurry of documentation requirements, IT adjustments, and anti-profiteering provisions, it would bode best for the government to work to bring more clarity to the remaining grey areas and instill a stronger sense of confidence, for both producers and consumers, in the theoretically promising policy endeavor. Most strikingly, the issues surrounding GSTN and auditing the complex IT infrastructure remain a fundamental barrier to all-important public confidence.

If implemented correctly, the outcomes from the reform will reflect its much-needed economic rationale. Eliminating double taxation and multiple tax hassles, increasing efficiency, assimilating the informal sector, lowering transaction costs and product prices, and intra- and inter-state movement of goods and services could be overwhelmingly positive boosts for Indian markets.

 Perhaps with a committee to oversee complaints, a more comprehensive auditing system, more specific delineation of what is “anti-profiteering,” and more widespread educational efforts, much-needed corporate and public confidence in GST could be instilled.