DAILY NEWS ANALYSIS

Syllabus subtopic: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

News: The Centre has written to all States voicing concern that due to the lower Goods and Services Tax (GST) collections, the compensation cess might not be enough to pay for losses arising out of the tax system

Prelims and Mains focus: About GST, merits and challenges in implementation, Concerns of the states and about the recent shortfall in GST collection and its implications on the centre-state financial relations

Context: The communication comes at a time when several States, including Rajasthan, Kerala, Delhi, Punjab and West Bengal, have publicly urged the Centre to transfer pending compensation payments as they have not received the dues for several months.

The government of Punjab has even said that it may take the matter to the Supreme Court if the Centre does not release the dues. The issue will be discussed in detail at the next GST Council meeting, scheduled for the second fortnight of December.

Issue:

Lower GST and compensation cess collections have been a major concern in the last few months.

The government had budgeted for ?6,63,343 crore in GST collections for the current financial year 2019­20, out of which it has collected only about 50% in the first eight months. It had targeted ?1,09,343 crore of compensation cess collections, of which it has so far collected ?64,528 crore.

The compensation requirements have increased significantly and are unlikely to be met from the compensation cess being collected.

What is its significance?

This situation assumes significance because it was the promise of compensation to the States for losses arising out of GST implementation that convinced a large number of reluctant States to sign on to the new indirect tax regime. The Centre had promised compensation for any shortfall in tax revenue due to GST implementation for a period of five years.

In the letter, the Centre also asked the States to submit their suggestions by December 6 on augmenting GST collections. They were specifically asked to look into ways to review the items currently exempted from GST, review the tax rates and compensation cess rates on various items, and on improving compliance measures. These suggestions will be placed before the Committee of Officers from the States and Centre that has been set up to suggest measures to increase collections.

What is Goods and Services Tax (GST)?

It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as set off. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

What exactly is the concept of destination based tax on consumption?

The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.

Which of the existing taxes are proposed to be subsumed under GST?

The GST would replace the following taxes:

Taxes currently levied and collected by the Centre:

• Central Excise duty
• Duties of Excise (Medicinal and Toilet Preparations)
• Additional Duties of Excise (Goods of Special Importance)
• Additional Duties of Excise (Textiles and Textile Products)
• Additional Duties of Customs (commonly known as CVD)
• Special Additional Duty of Customs (SAD)
• Service Tax
• Central Surcharges and Cesses so far as they relate to supply of goods and services

State taxes that would be subsumed under the GST are:

• State VAT
• Central Sales Tax
• Luxury Tax
• Entry Tax (all forms)
• Entertainment and Amusement Tax (except when levied by the local bodies)
• Taxes on advertisements
• Purchase Tax
• Taxes on lotteries, betting and gambling
• State Surcharges and Cesses so far as they relate to supply of goods and services

The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST.

What principles were adopted for subsuming the above taxes under GST?

The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind:

• Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services.
• Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other.
• The subsumption should result in free flow of tax credit in intra and inter-State levels. The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST.
• Revenue fairness for both the Union and the States individually would need to be attempted.

Which are the commodities proposed to be kept outside the purview of GST?

Article 366(12A) of the Constitution as amended by 101st Constitutional Amendment Act, 2016 defines the Goods and Services tax (GST) as a tax on supply of goods or services or both, except supply of alcoholic liquor for human consumption. So alcohol for human consumption is kept out of GST by way of definition of GST in constitution. Five petroleum products viz. petroleum crude, motor spirit ( petrol), high speed diesel, natural gas and aviation turbine fuel have temporarily been kept out and GST Council shall decide the date from which they shall be included in GST. Furthermore, electricity has been kept out of GST.

What will be the status in respect of taxation of above commodities after introduction of GST?

The existing taxation system (VAT & Central Excise) will continue in respect of the above commodities.

What will be status of Tobacco and Tobacco products under the GST regime?

Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products.

What type of GST is proposed to be implemented?

It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the Central GST (CGST) and that to be levied by the States would be called the State GST (SGST). Similarly Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.

Why is Dual GST required?

India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.

Which authority will levy and administer GST?

Centre will levy and administer CGST & IGST while respective states / UTs will levy and administer SGST / UTST.

Why was the Constitution of India amended recently in the context of GST?

Currently, the fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains. The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax.

Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax. The Constitution of India has been amended by the Constitution (one hundred and first amendment) Act, 2016 recently for this purpose. Article 246A of the Constitution empowers the Centre and the States to levy and collect the GST.

What are the benefits which the Country will accrue from GST?

Introduction of GST would be a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax and allowing set-off of prior-stage taxes, it would mitigate the ill effects of cascading and pave the way for a common national market. For the consumers, the biggest gain would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%. Introduction of GST would also make our products competitive in the domestic and international markets. Studies show that this would instantly spur economic growth. There may also be revenue gain for the Centre and the States due to widening of the tax base, increase in trade volumes and improved 10 11 tax compliance. Last but not the least, this tax, because of its transparent character, would be easier to administer

Syllabus subtopic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation

News: The Lok Sabha passed a Bill to regulate recycling of ships as per international standards

Prelims and Mains focus: key highlights of the Bill and its significance

About the Bill

The Recycling of Ships Bill, 2019 will help the ship recycling industry and generate more jobs.

• The Bill restricts the use of hazardous material on ships and regulates the recycling of ships. Key features of the Bill include:
  
• Applicability of the Bill: The Bill will apply to: (i) any new or existing ship which is registered in India, (ii) ships entering a port or terminal in India, or the territorial waters of India, (iii) any warship, or other ship owned and operated by an administration and used on government non-commercial service, and (iv) ship recycling facilities operating in India.
  
• Ship recycling: The Bill defines ship recycling as the dismantling of a ship at a facility to recover the components and materials for reuse, and taking care of the hazardous material so produced. It includes associated operations such as storage and treatment of materials and components on site.
  
• Requirements for ships: Ships should not use prohibited hazardous materials as notified. The central government may exempt certain categories of ships from this requirement. The National Authority will carry out periodic surveys to verify the prescribed requirements. This Authority will be notified by the central government to administer, supervise and monitor all activities related to ship recycling.
  
• The owner of every new ship must make an application to the National Authority to obtain a certificate on the inventory of hazardous materials. Existing ship owners must apply for the certificate within five years of the commencement of the Act. The certificate must be renewed every five years. It must be maintained and updated through the life of the ship to reflect any changes in the ship’s structure and equipment. The certificate may be suspended for various reasons such as the ship not complying with the particulars of the certificate, or not maintaining the inventory of hazardous materials properly. Using hazardous materials in a ship will be punishable with imprisonment of up to three months, or a fine of up to five lakh rupees, or both.
  
• These requirements will not apply to: (i) any warship, or other ship owned and operated by an administration and used on government non-commercial service, and (ii) ships with internal volume less than 500 tonne
  
• Recycling facilities: Ships will be recycled only in authorised recycling facilities. An application to authorise such a facility must be submitted to the Competent Authority (which will be notified by the central government) along with a ship recycling facility management plan, and prescribed fee. Existing facilities must apply for authorisation within 60 days of the commencement of the Act. A facility will be authorised when the Competent Authority is satisfied that it follows the specified standards. The certificate of authorisation will be valid for a period as specified but not exceeding five years. Contravening these provisions will be punishable with imprisonment of up to one year, or a fine of up to Rs 10 lakh, or both.
  
• Each Ship Recycler must maintain adequate measures for emergency preparedness and response, safety, health, training, and welfare of workers as per the Factories Act, 1948. It must also provide insurance coverage for the regular and temporary workers.
  
• Recycling process: A ship owner must apply to the National Authority for a ready for recycling certificate before recycling his ship. The Ship Recycler must prepare a ship recycling plan which should be approved by the Competent Authority. Each ship will be recycled after obtaining written permission from the Competent Authority. The Authority must grant such permission after physically inspecting the ship.
  
• Every ship recycler must: (i) ensure safe and environmentally sound removal and management of hazardous materials from a ship, and (ii) comply with the specified environmental regulations. They must also ensure that no environmental damage is caused due to such recycling. On contravening these provisions, the ship recycler will be liable to pay environmental damages and cleanup operation compensation as prescribed. In case of an oil spill, a ship recycler will be punishable with: (i) a fine of up to five lakh rupees in case of no response within 12 hours of issue of the first notice, (ii) a fine of up to Rs 10 lakh in case of no response within 24 hours of issue of the second notice, and (iii) imprisonment of up to three months, and a fine of up to Rs 10 lakh in case of no response within 24 hours of issue of the third notice.
  
• Appeals: Decisions of the Competent Authority may be appealed with the National Authority within 30 days of receiving the decision. Decisions of the National Authority may be appealed with the central government within 30 days of receiving the decision.

Syllabus subtopic: Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential; citizens charters, transparency & accountability and institutional and other measures.

News: Notwithstanding the rising incidence of sexual assault on women, the conviction rate in rape cases is as low as 32.2 per cent at the national level, according to the latest report of the National Crime Records Bureau (NCRB).

Prelims and Mains focus: About NCRB, key findings of the report.

Key findings of the report

• The report ‘Crime in India – 2017’ also shows that the conviction rate was even lower in metropolitan cities (27.2 per cent) in 2017, the reference year for which the latest data is available. It shows delay in completion of trial in rape cases, and that conviction rate in cases of rape is even lower than that in cases of murder.

• In 2017, at the national level, the total number of rape cases for trial was 1,46,201 but only 5,822 cases resulted in conviction. The conviction rate in rape cases in 2017 was just 32.2 per cent while it was 43.1 per cent in cases of murder.

• What is more worrying is that the conviction rate in rape cases has increased marginally in recent years but chargesheeting rate has gone down. Data in the NCRB report show that chargesheeting rate in rape cases has come down to 86.6 per cent in 2017 from 95.4 per cent in 2013.

• In 2017, a total of 1,46,201 rape cases were in trail, of which trial in only 18,333 cases were disposed of by courts. Of the total 18,099 rape cases where trial was completed in 2017, only 5,822 cases resulted in conviction while 1,1453 cases resulted in acquittal and 824 cases in discharge.

• Significantly, a total of 28,750 rape cases were sent for trial during 2017, but only 3.5 per cent — 1,010 cases — resulted in conviction. Out of the 1,27,868 rape cases pending trial in 2017 in the country, every third case was older than three years. Moreover, 12,216 rape case trials are pending for more than five years, and 1,840 rape case trials are pending for more than 10 years.

• The NCRB started collecting data on rape cases since 1971. The data show that the number of rape cases increased from 2,487 in 1971 to 32,559 in 2017 — an increase of 1,209 per cent.

• In 2017, majority of cases under crimes against women out of the total IPC crimes against women were registered under ‘Cruelty by Husband or His Relatives’ (33.2%), followed by ‘Assault on Women with Intent to Outrage her Modesty’ (27.3%), ‘Kidnapping & Abduction of Women’ (21%) and ‘Rape’ (10.3%), says the report.

About NCRB

• NCRB is nodal agency under Union Home Ministry for authentic source of data on crime on various parameters including accidents, suicides from across all the states of the country and prisons for policy matters and research.

• It was established in 1986 as the central police organisation.

• It is headquartered in New Delhi.

• It is implementing and monitoring agency of Crime & Criminal Tracking Network System (CCTNS), a Mission Mode Project under the National e-Governance Plan of Government.

• It also imparts training in Information Technology (IT) and Finger Print Science for Indian Police Officers as well Foreign Police officers.

• NCRB publishes 4 annual publications on Crime, Prison Statistics, Accidental Deaths & Suicides and Finger Prints. These publications serve as principal reference points on crime statistics.

Syllabus subtopic: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources, issues relating to poverty and hunger.

News: According to the latest World Economic Forum’s (WEF) Global Gender Gap Report 2018, India ranked 108th out of 149 countries on the gender gap index. The global list was topped by Iceland for the 10th consecutive year, having closed more than 85.8% of its overall gender gap.

Prelims and Mains focus: about WEF, its various reports and India’s performance, issues related to gender disparity in India

Context:

Despite the continued efforts of activists and policymakers, in many ways, gender equality is still a pipe dream. Research shows gender discrimination mostly against women and in favour of men in many realms, including the workplace.

While India fared better in wage equality for similar work indicator, on which it held the 72nd position, it ranked 142^nd in the economic opportunity and participation subindex.

This dichotomy can be explained by the difference between unequal pay and the gender pay gap.

UNEQUAL PAY VERSUS GENDER PAY GAP

Unequal pay refers to situations where women are paid less than men for doing the same work. To counter this, equal pay is legally enforced in most organized sectors. The gender pay gap, on the other hand, is a measure of the gap in the overall earnings of men and women. It is calculated by considering several parameters applied to the total number of employed members of both genders. This means that it does not account for women who have voluntarily stayed out of the workforce or have taken a sabbatical.

WHAT IS GENDER PAY GAP?

While the gender pay gap is essentially the average difference between the remuneration received by working men and women, there is more nuance here. There are two distinct numbers: the unadjusted pay gap and the adjusted pay gap. The former simply differentiates between mean and median wages of the two genders, the latter takes into account differences in factors like occupation, education and job experience. So the difference is starker if you consider the unadjusted figure.

An often-cited number in this context is the unadjusted salary of the average female in the US, which is supposed to be 78% of the average male salary, whereas the adjusted figure is 80-98%.

The gender pay gap stems from the difference in the number of men versus women who work. It also arises from differences in work tenures and the need for sabbaticals.

WHAT CONTRIBUTES TO THE GAP IN INDIA?

In a country like India, gender pay gap is a little more complicated and can be linked to reasons ranging from the socio-economic to the structural. Girl children are sometimes kept out of schools or made to drop out of school early. Even if they are educated, many women are not allowed to work by their families. Women who do join the workforce often need to take extended leaves for maternity and childcare, and even the healthcare of other family members. All these factors lead up to women as a whole falling well behind men when it comes to their earnings over time. In India, therefore, the gender pay gap is still quite wide.

According to the Monster Salary Index (MSI) published in March 2019, women in the country earn 19% less than men. The survey revealed that the median gross hourly salary for men in India in 2018 was ?242.49, while it was ?196.3 for women, meaning men earned ?46.19 more than women.

According to the survey, the gender pay gap spans across key industries. IT services showed a sharp pay gap of 26% in favour of men, while in the manufacturing sector, men earn 24% more than women.

However, this is only part of the picture. Across the unorganized sector and especially in areas like agriculture, women are routinely paid significantly less than men, citing differences in capability.

Until India’s social stigma against women in the workforce and the general environment of social injustice against women is tackled, the gender pay gap may not show any sign of closing.

About World Economic Forum (WEF):

1. It was established in 1971 by Klaus Schwab as a not-for-profit foundation
2. headquartered in Geneva, Switzerland
3. Formerly called European Management Forum

Motto : Committed to improve the state of the world

• It is the International Organization for Public-Private Cooperation. The Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas.

• It is independent, impartial and not tied to any special interests.

• The Forum strives in all its efforts to demonstrate entrepreneurship in the global public interest while upholding the highest standards of governance. Moral and intellectual integrity is at the heart of everything it does.

Governance

• Chairperson : Founder and Executive Chairman Professor Klaus Schwab

• Board of Trustees : exceptional individuals who act as guardians of its mission and values, and oversee the Forum’s work in promoting true global citizenship. Its membership is divided equally between representatives of the business community and leaders from international organizations and civil society.

• Managing Board : acts as the executive body of the WEF& acts as its representative to outside parties.

• The organization also convenes some six to eight regional meetings each year in locations across Africa, East Asia, and Latin America, and holds two further annual meetings in China, India and the United Arab Emirates

• Until 2012, it had observer status with the United Nations Economic and Social Council; it is under the supervision of the Swiss Federal Council.

Publications

• Global risk report, 2018
• Readiness for the future of production
• Global gender gap report
• Inclusive development index
• Global competitiveness report (index)
• Global human capital report (index)
• Travel and tourism competitiveness report (index)
• Global energy architecture performance index report