SECURE SYNOPSIS: 10 July 2021 – PuuchoIAS


 

NOTE: Please remember that following ‘answers’ are NOT ‘model answers’. They are NOT synopsis too if we go by definition of the term. What we are providing is content that both meets demand of the question and at the same time gives you extra points in the form of background information.


General Studies – 1


 

1. Discuss the concept of Heat dome and examine the causes of recent historic heatwave in Pacific Ocean region. (250 words)

Reference: Indian Express

Introduction

According to the US-based National Oceanic and Atmospheric Administration (NOAA), a heat dome is created when strong high-pressure atmospheric conditions combine with weather patterns like La Niña, creating vast areas of sweltering heat that get trapped under the high-pressure “dome”. Heat Dome also prevents clouds from forming, allowing for more radiation from the sun to hit the ground.

Recently, the Pacific Northwest and some parts of Canada recorded temperatures around 47 degrees, causing a “historic” heat wave. It has been established that rising temperatures would lead to hotter weather and human-made climatic changes are leading to dangerous weather trends across the world.

Body

In the process known as convection, the temperature difference causes more warm air, heated by the ocean surface, to rise over the ocean surface. That temperature difference creates winds that blow dense, tropical, western air eastward. Eventually that warm air gets trapped in the jet stream—a current of air spinning counter clockwise around the globe—and ends up on the U.S. West Coast, resulting in heatwaves. This strong change in ocean temperature from the west to the east is the reason for the heat dome. The western Pacific ocean’s temperatures have increased in the past few decades and are relatively more than the temperature in the eastern Pacific. A Heat dome is more likely to form during La Niña years like 2021, when waters are cool in the eastern Pacific and warm in the western Pacific.

Impact of a heat dome:

  • Temperatures beyond wet bulb temperature can cause heat related illnesses including heat stroke, heat exhaustion, sunburn and heat rashes. Sometimes these can prove fatal.
  • Trapping of heat can also damage crops, dry out vegetation and result in droughts.
  • The heat wave will also lead to rise in energy demand, especially electricity, leading to pushing up rates.
  • Heat domes can also act as fuel to wildfires, which destroys a lot of land area in the US every year.
  • Heat dome also prevents clouds from forming, allowing for more radiation from the sun to hit the ground.

Measures needed: 

  • There is a need to formulate action plans for the prevention and management of heat waves, outlining four key strategies:
    • Forecasting heat waves and enabling an early warning system
    • Building capacity of healthcare professionals to deal with heat wave-related emergencies
    • Community outreach through various media
    • Inter-agency cooperation as well as engagement with other civil society organizations in the region.
  • Scientific Approach:
    • Climate data from the last 15-20 years can be correlated with the mortality and morbidity data to prepare a heat stress index and city-specific threshold.
    • Vulnerable areas and population could be identified by using GIS and satellite imagery for targeted actions.
  • Advance implementation of local Heat Action Plans, plus effective inter-agency coordination is a vital response which the government can deploy in order to protect vulnerable groups.
  • The Local Cooling Action Plans must emphasize the urgency and need for better planning, zoning and building regulations to prevent Urban Heat Islands
  • This will require identification of “heat hot spots”, analysis of meteorological data and allocation of resources to crisis-prone areas.
  • Provision of public messaging (radio, TV), mobile phone-based text messages, automated phone calls and alerts.
  • Promotion of traditional adaptation practices, such as staying indoors and wearing comfortable clothes.
  • Popularisation of simple design features such as shaded windows, underground water storage tanks and insulating housing materials.

 


General Studies – 2


 

2. The creation of Ministry of cooperation distinguishes the importance of outcomes of cooperative movement supported in the country. Elucidate. (250 words)

Reference: Financial Express

Introduction

The Union government of India recently created a new Ministry of Cooperation for strengthening cooperative movement. It was created for realizing the vision of ‘Sahakar se Samriddhi’ (Prosperity through Cooperation) and to give a new push to the cooperative movement. With this, the Government has signalled its deep commitment to community based developmental partnership. It also fulfils the budget announcement made by the Finance Minister in 2021.

Body

A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically controlled. The need for profitability is balanced by the needs of the members and the wider interest of the community.

Importance of Cooperatives for India:

  • India is an agricultural country and laid the foundation of World’s biggest cooperative movement in the world.
  • For instance, Amul deals with 16 million milk producers, 1,85,903 dairy cooperatives; 222 district cooperative milk unions; marketed by 28 state marketing federations.
  • There are over 8 lakh cooperatives of all shapes and sizes across sectors in India
  • In India, a Co-operative based economic development model is very relevant where each member works with a spirit of responsibility.
  • It provides agricultural credits and fundswhere state and private sectors have not been able to do very much.
  • It provides strategic inputsfor the agricultural-sector; consumer societies meet their consumption requirements at concessional rates.
  • It is an organization for the poor who wish to solve their problems collectively.
  • It softens the class conflictsand reduces the social cleavages.
  • Itreduces the bureaucratic evils and follies of political factions;
  • It overcomes the constraintsof agricultural development;
  • It creates a conducive environment for small and cottage industries.

Challenges faced by Cooperatives currently:

  • Cooperatives in India are fighting a survival battle or as some experts describe it as a COVID-war equivalent in a sense with some either on ventilator support or banking on oxygen supply and with only a few fit and stable.
  • Lack of genuine cooperation between the states and the centre wrt Cooperatives and centralization of power.
  • There should be a focus on women cooperatives because they are less than three per cent of the 8 lakh cooperatives in the country.
  • In the elections to the governing bodies, money became such a powerful tool that the top posts of chairman and vice-chairman usually went to the richest farmers who manipulated the organization for their benefits.
  • People are not well informed about the objectives of the Movement, rules and regulations of co-operative institutions.
  • Most of these societies are confined to a few members and their operations extended to only one or two villages.
  • The Co-operative Movement has suffered from inadequacy of trained personnel.

Rationale behind creation of Ministry of Co-operation:

  • It will provide aseparate administrative, legal and policy framework for strengthening the cooperative movement in the country.
  • It will help deepen Co-operativesas a true people based movement reaching upto the grassroots.
  • It will work to streamline processes for ‘Ease of doing business’for co-operatives and enable development of Multi-State Co-operatives (MSCS).

Way forward:

  • Implementing the steps provided by the Vaidyanathan committee on credit cooperative societies.
  • The idea of cooperatives must take the agenda beyond agriculture, milk, credit and housing cooperatives
  • New areas are emerging with the advancement of technology and cooperative societies can play a huge role in making people familiar with those areas and technologies.
  • There is a need to create more cooperatives with women at the helm of it.
  • Principle of the cooperative movement is to unite everyone, even while remaining anonymous. The cooperative movement has the capacity to solve people’s problems.
  • However, there are irregularities in cooperatives and to check them there have to be rules and stricter implementation.

 

3. India needs to identify the significance of addressing rising inequalities and develop mechanisms for its management. Elaborate. (250 words)

Reference: The Hindu

Introduction

The world economy is slowly recovering from the devastation caused by the Covid-19 pandemic. However, the recovery is uneven among countries and within countries. It is an emerging universal truth that, in the post-pandemic world, economic inequality is rising sharply in all countries.

Body

Inequalities in India

  • Inequality was alarmingly high and destabilizing social and political order in much of the world even before the pandemic struck. Inequality is widening across the world, and India is no exception.
  • According to the recent Oxfam report, Inequality in India has risen to levels last seen when it was colonized. The additional wealth acquired by India’s 100 billionaires since March when the lockdown was imposed is enough to give every one of the 138 million poorest ₹94,045.
  • Oxfam’s report, ‘An economy for the 99 percent’, shows that the gap between rich and poor is far greater than had been feared.
  • Oxfam has observed that the world’s eight richest people now own as much wealth as the poorest 3.6 billion.
  • The Oxfam report shows that the wealth of the poorest half of the world’s population has fallen by a trillion dollars since 2010, a drop of 38 percent. This has occurred despite the global population increasing by around 400 million people during that period. Meanwhile, the wealth of the richest 62 has increased by more than half a trillion dollars to $1.76tr.
  • An unskilled worker in India would take three years to earn the richest person earned in one second last year.

Concerns Associated with Inequalities

  • The Periodic Labour Force Survey (PLFS) 2017-18 showed a dramatic drop in women’s work participation rates, to only 16.5 per cent, while unemployment rates for the economy as a whole continued to climb.
  • At a time when resolving the gender wealth gap is predicated on increasing women’s incomes, this economic outlook only points to the deepening of this divide as millennial women remain both underpaid and underemployed.
  • Growing wealth inequality is also symptomatic of the rise of an entrenched rentier class which looks to leverage their fixed assets in the form of land and property to extract the greatest possible rents from tenants and leases.
  • With a 2019 study by the Reserve Bank confirming that housing affordability has significantly deteriorated over the last four years, it is unsurprising how millennials now choose to rent rather than bear the increasingly unaffordable burden of high EMIs.
  • However, the current drying up of demand may be symptomatic of income (if not wealth) inequality being pushed to its very limits.
  • Normalization of Inequalities: Many major economists worldwide try to justify growing inequalities as an inevitable by-product of economic growth that led to the reduction of absolute poverty.
    • Due to this, the distribution of new wealth between capital and labour has become so one-sided that workers are constantly being pushed to penury while the rich are getting richer.
    • Further, the worsening inequality in income and opportunities impacts some sections disproportionately due to discrimination based on gender, caste, and other factors.
  • Creation of Monopolies: Despite its alleged commitment to market competition, the neoliberal economic agenda instead brought the decline of competition and the rise of close to monopoly power in vast swaths of the economy: pharmaceuticals, telecom, airlines, agriculture, banking, industrials, and retail.
  • Unsustainable Economic Growth: One of the chief characteristics of economic development is the intensification of energy use. There is an unprecedented concentration of high energy density in all economic development strategies.
    • The bulk of the energy continues to be generated from non-renewable sources.
    • The developed world’s primary objective is to capture energy-generating resources from across continents and put them to use to push their GDP growth to greater heights.
    • This unsustainable economic growth model is against the concept of sustainability, as it sacrifices the need of future generations for the welfare of present generations.

Way Forward

  • Nordic Economic Model:To make the current redistribution of wealth more equitable, the current neo-liberal model can be replaced by the ‘Nordic Economic Model.’
  • Nordic Economic Model consists of effective welfare safety nets for all, corruption-free governance, the fundamental right to quality education & healthcare, high taxes for the rich, etc.
  • 4P Model of Capitalism:Rather than just rhetoric, the new capitalism model should focus on 4P’s viz. ‘Profit, People, Planet, Purpose and it should be the government’s task to ensure that the corporates adhere to this model.

Conclusion

Unlike in the 20th century, India can and must actively contribute to the framing of new rules to govern global capitalism and the reshaping of international institutions. Simultaneously, as the Great Reset narrative unfolds, it must also reform its economy and society to make it more equitable, sustainable, and capable of coping with rapid external change.

 

4. There’s a need for streamlining Indian extradition law and procedures to check criminals from going undetected. Analyse. (250 words)

Reference: The Hindu

Introduction

As defined by Hon’ble Supreme Court of India, ‘Extradition is the delivery on the part of one State to another of those whom it is desired to deal with for crimes of which they have been accused or convicted and are justifiable in the Courts of the other State’.

Recently, the UK’s Home Department has approved the extradition of Nirav Modi, a diamond merchant to India in connection with the Rs. 13,758-crore Punjab National Bank (PNB) fraud. India and the UK entered into an extradition treaty in 1992.

Body

Principles Governing Extradition

Apart from the Principle of Specialty, there are other principles as well in extradition. This includes,

  • Principle of Dual Criminality:This requires that the offence that the fugitive is alleged to have committed, should be an offence both in the requesting as well as the requested state.
  • Principle of Reciprocity:Countries must show reciprocity in the exchange for fugitives between requesting and requested State.
  • Principle of Competence: The requested state must be satisfied that the requesting state has a right to prosecute the fugitive.
  • Principle of proportionality between offence and sentence: Punishment for a particular crime should not be excessively harsh or inhuman upon the fugitive. European countries generally don’t extradite when the requesting country has the potential to inflict capital punishment on the fugitive.
  • Principle of relative Seriousness of the offence: Extradition is usually permissible only for relatively more serious offences, and not for trivial misdemeanours or petty offences.

Status of extradition in India

Extradition Law in India: In India, the extradition of a fugitive criminal is governed under the Indian Extradition Act, 1962.This is for both extraditing persons to India and from India to foreign countries.

The basis of the extradition could be a treaty between India and another country.
At present India has an Extradition treaty with more than 40 countries and Extradition agreement with 11 countries.

Extradition Treaty:  Section 2(d) of The Indian Extradition Act 1962 defines an ‘Extradition Treaty’ as a Treaty, Agreement or Arrangement made by India with a Foreign State, relating to the extradition of fugitive criminals which extends to and is binding on India. Extradition treaties are traditionally bilateral in character.

India has been able to extradite back many of the fugitive offenders in the past. However, failures were also witnessed in the case of many offenders.

Successful cases of Extradition  

  • AgustaWestland chopper dealco-accused Rajiv Saxena was extradited from the United Arab Emirates in Jan 2019.
  • Mohammed Yahya, who faced cases of cheating, forgery, and criminal conspiracy, was extradited from Indonesia on October 12, 2018.
  • Vinay Mittal, who faces cases of cheating, forgery, and criminal conspiracy, was extradited from Indonesia on September 9, 2018.
  • Chhota Rajan was extradited from Indonesia on November 6, 2015, on charges of murder and kidnapping.
  • Abu Salem was extradited from Portugal in 2005 to face trial in the 1993 Mumbai bomb blasts case.

Ongoing extradition cases

  • India is in the process of extraditing Mehul Choksi and Vijay Mallya from the U.K. for their criminal charges of financial frauds.
  • Similarly, Tahawwur Rana, a key accused in the 26/11 Mumbai terror attack, will soon be extradited from the US.

Failed

  • India failed to Extradite Lalit Modi (IPL Betting Case) from the UK
  • Similarly, India also failed to extradite David Headley (Conspirator of 2008 Mumbai attacks) from the US

Need for Extradition 

  • Sovereign constraint:Since the territorial constraints stop the victim state to effectively exercise its jurisdiction, extradition alone offers the legal avenue to overcome the jurisdictional hardship.
  • Upholding Justice: Bringing back offenders from foreign countries is essential for providing timely justice and grievance redressal.
  • Provides a sense of gratification:Punishment of the criminal in the same country in which the crime is committed provides a sense of gratification and security for the public of that country.
  • Act as deterrence: It serves as a deterrent against offenders who consider escape as an easy way to subvert India’s justice system.

Challenges with Extradition

  • Delayed Response by Indian Agencies: This sometimes gives an impression that the requesting state is not serious about extraditing the fugitive. It results in the denial of an extradition request by the extraditing state.
  • Eg: The extradition request against former IPL chief Lalit Modi was filed after a decade.
  • Poor Prison Conditions: The Indian prisons fall short of desired facilities like quality food, bedding, and health facilities, etc. This discourages western nations from extraditing fugitives on grounds of human rights violations.
  • Eg – Karamjit Singh Chahal (charges of separatism), Sanjeev Chawla (illegal betting) and Kim Davy (terrorism) escaped extradition due to poor prison conditions.
  • Disregard to extradition clauses:India was criticized by Portugal for the violation of the Principle of SpecialtyAs India imposed additional cases on Abu Saleem. The same is also feasible in the current extradition cases also. This damages India’s image for upholding extradition laws, especially from the EU.
  • Less number of bilateral extradition treaties: India has a fewer number (43) of bilateral extradition treaties compared to other countries. The US and the UK, for example, have extradition treaties with over 100 countries each.
  • Political Nature: It is often argued that extradition is as much a political process as it is a judicial one. Therefore, it sometimes gets rejection on political grounds in spite of passing the judicial test.
  • Eg – Warren Martin Anderson was not extradited by the U.S to India in spite of being the CEO of Union Carbide Corporation. UCC was the parent company of UC India limited that was responsible for the Bhopal Gas tragedy in 1984.
  • Double standards for Wealthy individuals:Countries are sometimes accused of having a soft corner for wealthy fugitives. For instance, Jan Marsalek of the Wirecard scandal and former Renault CEO Carlos Ghosn were not extradited by Russia and Lebanon respectively.
  • Double jeopardy: The “double jeopardy” clause debars punishment for the same crime twice. This is the primary reason why India has been unable to extradite David Headley from the US.

Suggestions to improve extradition

  • India needs to sign the UN Convention against Torture that will generate greater trust in its prisons and police personnel.
  • The country needs to improve the capacity and efficiency of investigating agencies to conduct speedy investigations. The government should establish a central agency to take up larger cases involving extradition.
  • The Justice Malimath Committee report (2003)recommended setting up a Central Agency, on similar lines with the Federal Bureau of Investigation (USA). This would exercise jurisdiction over crimes and offences affecting national security.
  • India should push the adoption of its nine-point agenda by the G 20 countries. The agenda contains a comprehensive framework of action against fugitive economic offenders.
  • The country should enact complementary legislation that smoothens the extradition process. For instance, the government can change some of the critical provisions in the Fugitive Economic Offenders Act.

Conclusion

India needs to strengthen its domestic framework and maintain harmonious relations with other countries. The fulfilment of these twin objectives are a requirement in ensuring a smooth, transparent, and speedy extradition process.

 


General Studies – 3


 

6. Present an overview of Indian pharmaceutical industry and what discuss the challenges they are facing. (250 words)

Reference: orfonline.org

Introduction

The Indian pharmaceutical industry is one of the major contributors to the Indian economy and it is the world’s third-largest industry by volume. The Indian pharmaceutical industry’s success can be credited to its world-class capabilities in formulation development, entrepreneurial abilities of its people, and the vision of its business leaders to establish India’s footprint in the United States and other large international markets.

In 1969, Indian pharmaceuticals had a 5 per cent share of the market in India, and global pharma had a 95 per cent share. By 2020, it was the reverse, with Indian pharma having an almost 85 per cent share and global, 15 per cent.

Body

India’s potential to be the “pharmacy of the world”

  • Potential of Pharma sector: The Indian pharmaceutical industry, valued at $41 billion, is expected to grow to $65 billion by 2024 and $120-130 billion by 2030, noted the new Economic survey.
  • Rise in exports: During April-October 2020, India’s pharmaceutical exports of $ 11.1 billion witnessed a growth of 18 percent against $ 9.4 billion in the year-ago period.
  • Positive growth: Drug formulations, biologicals have consistently registered positive growth and the highest increase in absolute terms in recent months.
    • This led to a rise in its share to 7.1 percent in April-November 2020 from 5 percent in April-November 2019, making it the second-largest exported commodity among the top 10 export commodities.
    • This shows that India has the potential to be the ‘pharmacy of the world’”, the survey said.
  • Significant advantage: The availability of a significant raw material base and skilled workforce have enabled India to emerge as an international manufacturing hub for generic medicines.
  • Further, India is the only country with the largest number of USFDA compliant pharma plants (more than 262 including APIs) outside of the US.
  • Capacity: The COVID-19 pandemic has shown that India can not only innovate but also rapidly distribute time-critical drugs to every part of the globe that needs it.
  • Global leader: Presently, over 80% of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms.

Issues facing the Pharma industry:

  • Overdependence: Indian pharma industries import about 80% of Active Pharmaceutical Ingredients(API) from China. The API forms the base of drugs. With trade-wars at global levels and wavering bilateral relations, there is a looming threat which can stall the Indian pharma industries. In FY19, Indian pharma companies imported bulk drugs and intermediates worth $2.4 million from China.
  • Compliance issues and good manufacturing practices: Diversifying the global market has been a problem with countries China and USA imposing Sanitary and Phyto-Sanitary(SPS) barriers of WTO against generic drugs. The selective targeting by US Food and Drug Administration and Chinese Drug regulators are a problem still.
  • Drug Price Control Order: The companies sight that the reforms of the Government for the essential medicines has caused them to lower the price of drugs. This has been done by the Government for the betterment of the public.
  • Stronger IP regulations: IP regulation has always been a thorn in the skin for the companies, especially the foreign companies. The companies strongly feel that the rules have to be amended and the so-called victim of the lax regulations have been the foreign entrants.
  • Because of fewer costs associated with generic medicines, multiple applications for generic drugs are often approved to market a single product; this creates competition in the marketplace globally, typically resulting in lower prices. Pharma sector in India is also facing steep headwinds on account of this.
  • There is a lack of proper assessment of the performance of the pharmaceutical industry and its efficiency and productivity and due to this many plants have not survived.
  • Unregulated online pharmacies or e-pharmacies emerging in India have been a major concern for authorized setups.
  • There has been a significant drop in the flow of prescriptions as the Indian pharmaceutical industry has been witnessing a decline in the overall quality of its medical representatives (MRs). This is mainly on account of lack of training and support by the industry.
  • In countries such as Russia, one requires to be a medical graduate to be a pharma sales representative. In the European Union, one needs to pass stringent examinations to become an MR. Once they qualify, they need to renew their certification every three years. But in India, even non-graduates are performing as MRs without proper guidance.

Measures needed:

  • India’s strong innovation capabilities aided partnerships would help in overcoming these problems.
  • Developing our R&D sector to reduce dependency on foreign countries for raw materials
  • The introduction of pharmaceutical product patents and the mandatory implementation of good manufacturing practices is the need of the hour.
  • It is necessary for the Indian pharmaceutical industry to become globally competitive through world-class manufacturing capabilities, with improved quality and a higher efficiency of production, and there is a need to stress on the up-gradation of R&D capabilities.
  • Training and development of human resources for the pharmaceutical industry and drug research and development should be done accordingly;
  • There is also a need to promote public-private partnership for the development of the pharmaceuticals industry; promote environmentally sustainable development of the pharmaceutical industry; and enable the availability, accessibility, and affordability of drugs.
  • Improvement in industrial practices to provide better training and support services for employees to perform their job functions.
  • Using multilateral organisation like WTO against the illegal trade practices.
  • Funding for the pharma companies might be a way to move forward.
  • IPR Think Tank formed by the Government to draft stronger national IP policies.

Conclusion:

The affordability of healthcare is an issue of concern even in India, and people here would welcome some clarity on the principles of fair pricing vis-à-vis medical products. It is important that the accused companies are given a good hearing. The Government of India has taken up a number of initiatives to create an ecosystem that fosters manufacturing in pharma industries.

 

7. Implementation of Goods and Services (GST) system brought in outstanding gains on multiple fronts, yet there is a need to reform, refine and strengthen the system to address challenges at hand. Discuss. (250 words)

Reference: Economic Times

Introduction

The Goods and Services Tax is an indirect tax system which was rolled out in 2017 with the aim of ‘One Nation, one tax’. The Comptroller and Auditor General of India (CAG) has pointed out lacunae in the GST regime, saying that system-validated input tax credit through invoice matching is not in place and a non-intrusive e-tax system still remains elusive after two years of its rollout.

Body:

Gains of GST Regime:

  • Introduced as one of the biggest economic reforms by the incumbent government, the GST kicked off with the promise to streamline taxation and compliance burden.
  • Based on the one nation one tax ideology, GST has helped in reducing the cascading effect of tax considerably.
  • Also, multiplicity of compliances under various indirect taxes has been reduced.
  • Hence, introduction of GST in India has brought in efficiencies in indirect tax compliance, incidence and reduced the number of indirect tax authorities that a taxpayer needed to interact with
  • Another positive is the concept of e-invoicing which seeks to ensure greater transparency in supplier-receiver transactions.
  • The introduction of e-way bill coupled with the crackdown on fake invoicing has helped in bringing in a substantial portion of GST revenues, which were either being evaded or under-reported, in order.

Shortcomings of GST regime:

  • Input Tax Credit (ITC) is an area which has certain limitations that need to be addressed. The GST regime sought to have a seamless flow of ITC, however, conditions for availing ITC being stringent, many taxpayers lost out on ITC. Also, taxpayers lose their ITC due to non-reporting or mistakes by their suppliers.
  • Compliance issues: taxpayers are also complaining about the imposing an arbitrary monetary limit on availing input tax credit through Rule 36(4) and mandating that a certain percentage of GST has to be paid in cash. These laws are making life difficult for even the most honest taxpayers.
  • Difficulty in tax administration: Goes against the canons of taxation. A modern tax system should be fair, uncomplicated, transparent and easy to administer. It must yield revenues sufficient to cover the cost of government services and public goods.
    • Lack of clarity on many rules is also leading to various litigation and different interpretations (of the same laws) by Advanced Ruling Authorities in different states.
  • Complicated taxation structure: A World Bank study published in May 2018 said that the Indian GST rate was the second highest among the 115 countries with a national value-added tax. It was also the most complicated, with five main tax rates, several exemptions, a cess and a special rate for gold. The multilateral lender said that only five countries had four or more non-zero tax rates—India, Italy, Pakistan, Luxembourg and Ghana.
    • Falling revenue amid disruptions caused by the Covid-19 pandemic has continuously delayed the reform, leaving a large number of items in high tax slabs.
  • GST revenue potential overestimated: The Union Budget for 2018-19 (the first full year under GST) estimated receipts to the tune of ₹7.43 lakh crore. Actual collections were just 78% of this amount. While the shortfall between Budget Estimates (BE) and actual collections reduced significantly in 2019-20 (the latter was 90% of the former) the BE number itself saw a significant downward revision to ₹6.63 lakh crore.
  • High compliance costs: are also arising because the prevalence of multiple tax rates implies a need to classify inputs and outputs based on the applicable tax rate. Along with the need to apply the correct rate, firms are required to match invoices between their outputs and inputs to be eligible for full input tax credit, which increases compliance costs further.
  • Tax-Sharing issues: alleged deviation in the way GST revenue is shared with states. To determine how integrated GST is to be split up, the report notes, the government has followed a formula prescribed by the Finance Commission, though it should have gone by the Constitution and Integrated GST Act.
    • The nationwide lockdown, however, intensified the problem of revenue shortfall for states with the Centre not paying up the dues on time. Also with coffers drying up and with social and health spending going up, states are growing disenchanted with the system
    • Last year, the GST Council had borrowed `1.1 lakh crore to pay the states in order to make up for the shortfall. Still, `63,000 crore is pending which the Centre intends to pay this year.
  • GST Council meetings: the meetings of the GST Council are not as frequent as they were earlier, if the recent incidents are anything to go by, and it often end up with disagreement, fight and strong letters and statements. States have also accused the Centre of cornering a substantial portion of tax in forms of cess.
  • There has been lack of coordination between the Department of Revenue, the Central Board of Indirect Taxes and Customs and the GST Network

 Way Forward:

  • The first target should be to move to at least a three-rate structure, a lower rate for essential goods, a relatively high rate for luxury goods, and a standard rate for the majority of goods and services.
  • The next step would be simplifying the tax returns process.
  • The scope for lowering the GST rate is umbilically linked to direct tax reform.
  • A better way to make a tax system more just is by lowering regressive indirect tax rates while widening the base for progressive direct taxes on income and corporate profits.
  • The government needs to establish GST Tribunals to reduce litigation timelines and the pressure on courts.
  • The state authorities for Advance Ruling should ideally also have an independent jurist member, apart from a representative from the tax department.
  • Many goods are still outside the GST net, which comes in the way of seamless flow of input tax credit. Key items outside its ambit are electricity, alcohol, petroleum goods and real estate. This aspect need to be looked into.
  • Emulating the best practices. The GST in New Zealand, widely regarded as the most efficient in the world, has a single standard rate of 12.5 percent across all industry groups.
  • The Fifteenth finance commission, in its latest report, has addressed many issues including large shortfall in collections as compared to original forecast, high volatility in collections, accumulation of large integrated GST credit, glitches in invoice and input tax matching, and delay in refunds.
  • The Commission also observed that the continuing dependence of states on compensation from the central government for making up for the shortfall in revenue is a concern.
  • While at the same time it suggested that the structural implications of GST for low consumption states need to be considered.

Conclusion:

While the GST’s journey has given its stakeholders some causes to celebrate, it has also given moments of worry. But then, no transformation of the scale and complexity can be achieved without its share of hiccups and challenges. The process of evolution will take a few years more for the mammoth structural change to stabilize. The four-year journey of GST has been a roller-coaster ride for all stakeholders with equitable share of hits, misses and expectations. A work-in-progress in its transformational journey, GST suffers from several shortcomings which need to be resolved quickly, but its journey to ‘Good & Simple Tax’ is still quite long.


  • Join our Official Telegram Channel HERE for Motivation and Fast Updates
  • Subscribe to our YouTube Channel HERE to watch Motivational and New analysis videos

Leave a Comment