02, July 2017

1.GST will subsume almost all cesses levied at the moment

Source: The Hindu

One of the key sticking points thwarting consensus in the Goods and Services Council over the course of its meetings in 2016 was the compensation the Centre would have to pay States for any losses they might incur due to the implementation of the new indirect tax regime.

What was the issue?

  • The GST is a destination-based tax, and as such is viewed as being to the advantage of the consuming States and to the detriment of the producing States like Maharashtra, Tamil Nadu, Gujarat, Haryana, and Karnataka.
  • These States had raised objections to the implementation of GST, forcing the Centre to agree to a formula for compensating them in the event of a loss of revenue. The 14th Finance Commission advised the Centre to provide 100% compensation to States for their revenue loss after implementation of GST for the first three years. The fourth year would bring 75% compensation, and the fifth year 50% compensation.
  • This, however, did not pacify the States who demanded full compensation for five years. The Centre agreed to this demand in December 2016, settling one of the most contentious issues delaying GST.
  • The next question, however, was how the Centre was going to finance this compensation package, which experts estimated could be as much as ₹55,000 crore.

Where are the funds?

  • The GST, once implemented, will subsume almost all the cesses levied at the moment, including Swachh Bharat Cess and Krishi Kalyan Cess. Other cesses like the education cess on imported goods and the cess on crude oil will remain under GST.
  • However, the government needs extra revenue to compensate the States, and so the GST Council decided to impose additional cesses for five years on certain goods over and above the highest tax bracket of 28%. These goods on which cess will be levied include tobacco products, coal, motor vehicles, which include all types of cars, personal aircraft, and yachts.
  • These additional cesses, however, will be removed after five years, Finance Minister Arun Jaitley has repeatedly said, adding that the States incurring losses would have to find alternative sources of revenue.

2.The lowdown on the border standoff with China

Source: The Hindu

What is it?

  • Along a mountainous disputed region of the tri-junction between India, China and Bhutan, two small units of the Indian Army and the People’s Liberation Army are in a standoff since June 16, when a Chinese group entered the Doklam area to construct a road. A Royal Bhutan Army patrol attempted to dissuade them, the Indian Army too later got involved in the scene, and the Chinese probably destroyed a few temporary bunkers of the Indian Army. On June 17, Army sources said, the two sides got into an acrimonious, physical jostling.
  • China has been vocal in its protests, accusing India of transgressing its territory, and of unnecessary rhetoric.


India and China

  • Along the Ladakh border, India sticks mostly to a boundary drawn by British civil servant W.H. Johnson in 1865, which showed Aksai Chin as part of Jammu and Kashmir.
  • China disputes this claim and in the 1950s built a road connecting Xinjiang and Tibet which ran through Aksai Chin.
  • In the northeast of India, New Delhi sticks to the McMahon Line, which was agreed to by representatives of the British empire and Tibet at a conference in Simla in 1914, where though Chinese representatives were present they didn’t agree to the final detailed maps.
  • China claims that Tibet is not a sovereign nation and thus its approval has no legal standing. Beijing claims the entire Arunachal Pradesh as part of Tibet.
  • The Middle Sector along Himachal Pradesh and Uttarakhand is almost settled, with both sides not differing much. India is keen to have a comprehensive solution to the dispute, while China has, of late, been talking about “early harvest” of solving the least controversial boundaries. There have been various suggestions, most common being India giving up its claims over Aksai Chin, while China stops claiming Arunachal as South Tibet.

Why does it matter?

  • The two countries have among the world’s biggest militaries and are nuclear armed. In many senses, they also represent the frontlines of a new global order emerging, where India seems to be moving closer to the American camp, which views China as the new global rival.
  • Whenever two economies rise quickly next to each other, wars have been inevitable. That has been the history of the modern world—Europe is a great example. Avoiding a largescale military conflict between the two sides is critical to the world, and to millions of their citizens who are still struggling in poverty.

What next?

  • There is diplomatic contact, but it has not been escalated to the political level.
  • The immediate standoff could be avoided at the diplomatic level, or through the intervention at the level of the Foreign Minister or the National Security Adviser, as has happened in the past. However, the standoff is a warning to both sides that unless they step up their engagement to move quickly towards a time-bound resolution of boundary disputes, the two could be inching towards a confrontation.

3.US travel ban on six Muslim countries takes effect

Source: The Hindu

Washington President Donald Trump’s temporary ban on refugees and travelers from six mainly Muslim countries came into effect late Thursday, after the Supreme Court allowed it following a five month battle with rights groups.

Significance of this move:

  • The Trump administration says the ban is necessary to block terrorists from entering the country, but immigrant advocates charge that it illegally singles out Muslims.
  • The 90-day ban on visitors from Iran, Libya, Somalia, Sudan, Syria and Yemen will allow exceptions for people with “close family relationships” in the United States, which the government has defined narrowly, excluding grandparents and grandchildren, aunts and uncles and others.

02-07  Source: The Hindu

4. What is GST and how will it affect you?

Source: The Hindu

Sixteen years in the making, India rolls out the Goods and Services Tax (GST) from July 1, 2017

What is GST?

  • The GST is meant to be a unified indirect tax across the country on products and services. Pre-GST: Tax is levied at each stage separately by the Union government and the States at varying rates, on the full value of the goods. But under the GST system, tax will be levied only on the value added at each stage. It is a single tax (collected at multiple points) with a full set-off for taxes paid earlier in the value chain.
  • Thus, the final consumer will bear only the GST charged by the last dealer in the supply chain with set-off benefits at all the previous stages.

GST has been predominantly conceptualised around a ‘One Nation, One Tax’ philosophy and will:

  • Help eliminate the previous cascading tax structure
  • Ease compliances
  • Create uniform tax rates and structure, and
  • Help in reducing additional tax burdens on consumers.

What is State GST and Central GST?

  • For transactions within a State, there will be two components of GST – Central GST (CGST) and State GST (SGST) – levied on the value of goods and services. Both the Centre and the States will simultaneously levy GST across the value chain.
  • In the case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST). The IGST would be roughly equal to CGST plus SGST.

Why was GST established?

The GST was established to subsume various indirect taxes levied at different levels, with the idea of reducing red-tape, plugging leakages and paving the way for a transparent indirect tax regime.

How will GST affect the common man?

  • The impact of the GST on the prices of goods and services will largely depend on the item in question.
  • It will also depend upon the respective State governments and their intervention with respect to controlling prices of essential commodities. Milk, for example, which is likely to see a spike in prices after GST is implemented, can still be sold at cheaper rates, if the State government offers a subsidy on it.

How will GST help in getting rid of tax evasion?

  • A comprehensive IT system, GSTN, will allot universal GST numbers (similar to PAN) to all manufacturers, traders, stockists, wholesalers and retailers. This will simplify the administration of indirect taxes and plug leakages. The government also plans to incentivise tax compliance by traders.
  • Whether the GST will be beneficial to the poor or not only time can tell. Prices of vegetables and fruits are likely to rise under the GST regime and services such as eating at restaurants will get more expensive. What will likely get cheaper are items such as clothes, as cascading taxes at various stages of manufacturing would no longer apply to them.

Is GST going to benefit people below the poverty line?

  • With respect to those living below the poverty line, there might not be a direct impact of the GST on them as such since basic necessities like food are unlikely to attract the GST but increased collections of the GST with a larger tax base should provide an impetus to the government to allocate more money for social and poverty alleviation programmes.
  • Thus, the GST should benefit all sections of the society. Additionally, the GST, being a nationwide tax, could lead to possibly higher inflation in the first few years of its introduction but would gradually increase the overall GDP.

How will GST affect tax deductions of a salaried person?

The GST is an indirect tax collected from customers who buy manufactured goods or services. So whether you are earning a salary or not, as long as you buy something, you’ll be paying tax.

Which are the items that could become costlier and which are those that could become cheaper?

  • Broadly, services are expected to become costlier under the GST regime, as the expected GST rate would be higher than the existing service tax rate of 15%.
  • Clearly, the GST is expected to bring down prices of indigenously manufactured goods on account of current effective indirect taxes (central excise @ 12.5%, State VAT @ 5%-15% etc.) being higher as compared to recommended lower GST rate @ 5% and standard GST rates @ 12% and 18%. Thus, price of certain category of goods may come down depending on the effective rate of indirect taxes being paid at present and the tax brackets under which goods are classified under the GST.

5.Antarctica’s ice-free islands set to grow

Source: The Hindu

If greenhouse gas emissions aren’t reduced, ice-free areas are expected to surge by as much as 17,000 square kilometres.

  • Scattered within the vast frozen expanse of Antarctica are isolated ice-free nooks — nunataks (exposed mountain tops), scree slopes, cliffs, valleys and coastal oases — which cover less than 1% of the area, but support almost all of the continent’s biodiversity.
  • But by the turn of the century these ice-free islands could grow by over 17,000 sq.km (a 25% increase) due to climate change, according to a paper published in Nature.

Key facts:

  • Climate change will cause ice-free areas on Antarctica to increase by up to a quarter by 2100, threatening the diversity of the unique terrestrial plant and animal life that exists there, according to projections from the first study examining the question in detail.
  • If emissions of greenhouse gasses are not reduced, projected warming and changes in snowfall will cause ice-free areas – which currently make up about 1% of Antarctica and are home to all of the continent’s terrestrial plants and animals – to increase by as much as 17,000 square kilometres.
  • Since many of the ice-free areas on Antarctica are isolated from one another, they have acted like islands in the ocean, with the life existing in each one forming distinct groups. As those areas expand in the future, they will become closer to one another, with many coalescing, allowing the distinct groups to mix and potentially homogenise.
  • If emissions begin to reduce from 2040, the expansion of the patches will be limited and as many as 4,000 distinct patches could remain.
  • About 85% of the new ice-free areas will emerge in the Antarctic peninsula, which extends out into the Southern Ocean towards Chile. The Antarctic peninsula has experienced the most rapid warming in the southern hemisphere already and is predicted to see five metres of ice melt by 2100.
  • As a result, the Antarctic peninsula will emerge as the region of Antarctica with the most ice-free area, overtaking the Transantarctic Mountains.

Invasive species

  • As ice-free islands expand and coalesce, biodiversity could homogenise, less competitive species could go extinct and ecosystems destabilise from the spread of invasive species, which already pose a threat to native species, says the paper.
  • Much life thrives in Antarctica’s ice-free pockets: small invertebrates (nematodes, springtails, and tardigrades) vascular plants, lichen, fungi, mosses and algae. They also serve as breeding ground for sea birds (including the Adelie penguins) and elephant seals.

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