UPSC 2017: Comprehensive News Analysis - July 01

In news:

• Prime Minister Narendra Modi termed the new Goods and Services Tax (GST) regime, to be implemented from Saturday, as a ‘Good and Simple Tax’ and said its introduction was not just a tax or economic reform, but a social reform that would nudge people on the path to honesty and benefit the poor the most.
• ‘More transparent’:
• GST will do away with 500 different taxes levied across the country’s 29 States and seven Union Territories
• It would end the spectre of tax terrorism and Inspector Raj that India’s businesses have had to endure for long.
• The GST Council chaired by Finance Minister Arun Jaitley slashed the tax rate on fertilizers from 12% to 5% and tractor parts from 28% to 18%, in a bid to make the new tax regime more farmer-friendly.

In News:

• Keeping petroleum products such as petrol, diesel, natural gas out of the ambit of the Goods and Service Tax (GST) is expected to result in higher cost of production
• This will be for upstream companies such as oil and gas exploration firms as well as for downstream refining companies
• For the end-consumer, this exclusion from GST, however, is unlikely to result in any significant increase in prices

Inclusion/Exclusion:

• The output of upstream and downstream companies have been kept out of the GST
• The inputs that go into their making is subject to levy of GST
• For instance, an oil or gas refiner that imports inputs such as gases, platforms, parts of platform, cranes, chemicals etc will have to pay 5 per cent tax under the GST regime
• All these are tax-free in the current regime

Increase in prices + No input tax credit:

• No passing on to customers: Even though the cost of production increases, these can’t be totally passed on to customers such as domestic refineries or exports since the prices of these products are linked to international benchmarks
• Possible migration: Any increase in prices due to higher taxes locally will encourage buyers to scout for international contracts offering similar products at cheaper prices
• For refineries, nearly 70 per cent of their refined products are petrol, diesel, natural gas, aviation turbine fuel (ATF), which are out of the GST net
• Currently, the refineries take input tax credit on almost 80 per cent of the taxes paid
• Now the refineries cannot take credit for inputs that go in for production of petrol, diesel and ATF

Context

Under the GST regime, the Centre and states/Union Territories shall simultaneously levy indirect taxes on a common tax base

Taxes within GST

• Within the umbrella of GST, the GST levied by the Centre on intra-state supply of goods and/or services will be called Central GST (CGST) and levied by states/UTs, State GST (SGST/UTGST)
• Integrated GST (IGST) will be levied and administered by the Centre on the inter-state supply of goods and services

Why the state tax?

• CGST and SGST/UTGST were decided keeping in mind the federal structure of the country
• Here both the Centre and the states have the powers to levy and collect taxes through appropriate legislation
• The CGST and SGST will be levied simultaneously on every transaction of supply of goods and services except exempted goods and services
• They will not be implemented on goods which are outside the purview of GST, and transactions which are below the prescribed thresholds

Some understanding of GST implementation

• SGST and CGST will be levied on the same price or value
• This will be unlike state VAT, which is levied on the value of the goods inclusive of CENVAT
• The location of the supplier and recipient within the country is immaterial for the purpose of CGST
• SGST will be chargeable only when the supplier and recipient are both located within a state
• IGST shall be levied and collected by the Government of India, and such tax shall be apportioned between the Centre and the states

How Will GST Work?

• Under the GST regime, tax liability arises when the taxable person crosses the turnover threshold of Rs 20 lakh
• For Northeastern and ‘Special Category’ states, it is Rs 10 lakh
• Cross-utilisation of input credit of one component of tax against the other is allowed except utilisation of credit of CGST for SGST and vice versa

Context

The GST Rate Schedule for goods has put ‘solar power generating systems’ and ‘photovoltaic cells whether or not assembled into modules or made into panels’ into different tax brackets

Tax on solar power

• GST rate schedule suggested that all solar power generating systems will be taxed at 5%
• This will be similar to the tax on wind systems
• This would put solar and wind in the same tax bracket as coal
• Coal was previously taxed at 11.69%
• Nuclear fuel too will be taxed at 5%

The state of confusion

• Another chapter of the GST rate schedule noted that semi-conductor devices including PV cells, which may or may not be assembled into modules or panels, would be taxed at 18%
• The council has put solar panels in the 5% category
• The issue of tax on the remanining components of solar systems remains unresolved even on the eve of the rollout of the new fiscal regime

What will be the impact?

• In the first scenario, utility scale solar (panels and parts), along with other renewable energy sources of electricity as well as coal, is taxed at 5%
• Analysis suggests that GST would result in a minor rise of 1.6% in solar tariffs
• In a thriving solar market, this is unlikely to create any setback for the sector
• While 5% doesn’t seem a mammoth figure, the rise in price of solar power is not insignificant when seen in conjunction with the decline in taxes on coal
• 60% decline in taxation on coal is likely to make thermal power cheaper by as much as Rs 0.15
• This would set back some of the rapid advances made in recent times to close the price gap between the prices of solar power and thermal power
• The cumulative result, with a lower tax bracket for coal and higher (effective) tax implication for solar, would do little to incentivise already apprehensive utilities to purchase more solar power

What about the cess?

• The change in the tax regime would be accompanied by a change in use for the coal cess
• The cess is currently contributing to the National Environment Fund (NEF), with a mandate to finance and promote clean energy initiatives
• It is a carbon tax that will now be redirected

Use of cess:

• Collections from the cess on coal are now expected to be used to compensate states for the loss of revenue due to the GST regime
• Between 2010 and 2017, this cess has been used to make budgetary allocations to the ministries of New and Renewable Energy; Environment, Forests, and Climate Change; Water Resources, etc.

In news:

• The NASA has successfully launched Terrier-Improved Malemute sounding rocket that created colourful artificial clouds visible in the skies of the US.
• The rocket was launched from its Wallops Flight Facility in Virginia.
• Salient Facts:
• The rocket during the 8-minute flight had released 10 canisters about the size of a soft drink into space.
• The canisters deployed blue-green and red vapour that formed artificial clouds visible in the skies of the United States from New York to North Carolina.
• The artificial clouds are formed through the interaction of barium, strontium and cupric-oxide.
• The vapour tracers will help in understanding the movement of the particles in the ionosphere.
• It will help to learn more about the movement of the air currents at that altitude.

Basic Information:

• Ionosphere: The ionosphere is called so because it is ionised by solar radiation. It plays an important part in atmospheric electricity and forms the inner edge of the magnetosphere. Ionosphere stretches from 50 to 1,000 km and typically overlaps both the exosphere and the thermosphere. It has practical importance because it influences, for example, radio propagation on the Earth. It is also responsible for auroras.

In news:

• The Department of Science and Technology (DST) is looking to send robotic vehicles into the sea near Dwaraka, Gujarat, and Puhar, Tamil Nadu, to look for submerged structures that may point to evidence on the ancient cities.
• The programme, still a preliminary proposal, is expected to involve organisations such as the National Institute of Ocean Technology, Chennai, and the National Institute of Oceanography (NIO), Goa.
• NIO,Chennai has indigenously built vehicles capable of plumbing 5,000 metres underwater and the NIO has previous experience in marine archaeology.
• New technology to be tested: Along with historical interest, this is also to test several technologies such as sophisticated imaging technology, being able to map the ocean floor with sonar and being able to date old stones and recoverable implements using the latest techniques.

Previous excavations findings:

• Nearly a decade ago, the Underwater Archaeology Wing of the Archaeological Survey of India (ASI) found copper coins and segments of granite structures.
• Mentioned in the Mahabharata as ‘Dvaraka’ or ‘Dvaravati,’ it is also linked to the god Krishna.
• Dwaraka, a port city, finds mention in ancient Greek texts from the 1st millennium and, according to legend, was a rich city that sank into the sea.
• Last year, divers, geologists and archaeologists with the NIO, working off the coast of Tamil Nadu, reportedly found stone remains suggestive of an ancient port and temples, which were reportedly buried about 30 feet into the sea.
• Tamil and Buddhist literature have references to Poompuhar, or Puhar, as being the port capital of the Chola dynasty.

Evidence of the course of the Saraswati:

• An expert committee of geologists, archaeologists and hydrologists said it had found evidence of the course of the Saraswati, a river mentioned in the Rig Veda and in Hindu mythology.
• S study commissioned by the Water Resources Ministry and led by Professor K.S. Valdiya of the Jawaharlal Nehru Centre for Advanced Scientific Research.
• Report concluded that evidence from palaeochannels — remnants of defunct rivers — suggested that the Sarsuti-Markanda rivulets in Haryana were the water courses of the “eastern branch of a Himalayan river” and the Ghaggar-Patiali channels were the western branches.

D. GS4 Related

E. Concepts-in-News: Related Concepts to Revise/Learn

F. Bills/Acts/Schemes/Orgs in News

Question 1: The tenure of every Panchayat shall be for five years from the date of

Question 2: In SONAR, which particular wave is used?

Question 3: The Patola Weave was traditionally done in

Question 4: Collission-Coalscence process of precipitation is applicable to

Question 5: Which of the following constitute Capital Account?

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