Daily News Mails - News of 08/05/2015

Chief Election Commissioner of India - Dr. Nasim Zaidi

Election Commission of India has one CEC along with three Election Commissioner.

Dr. Nasim Zaidi, CEC of India

Some facts of GST Bill

Extra tax of 1 percent to compensate states post-GST roll-out

• It is proposed to levy a non-vatable additional tax of not more than 1 percent on supply of goods in the course of inter-state trade or commerce.
• While this tax on supply of goods will be levied for 2 years, a period that is extendable if recommended by the GST Council, "this additional tax shall be assigned to the states from where such supplies originate.
• The Centre will compensate states for a period up to five years for any loss of revenue arising from implementing the GST.
•  He said that the compensation will be on a tapering basis, that is, full compensation for first three years, 75 percent in the fourth, and 50 percent in the fifth year.
•  Calling it the single most important tax reform since 1947, Jaitley told the house that the states will receive Rs.11,000 crore this fiscal towards partial compensation of the losses suffered by them for reduction in the Central Sales Tax (CST).
• He had earlier told parliament that the central government would clear states' compensation dues of about Rs.34,000 crore ($5.5 billion) over a three-year period.
• While the CST is levied by the Centre on inter-state movement of goods and collected by states, the issue of compensation arose because the central government cut the CST from 4 percent to 2 percent in phases after state-level VAT was introduced from April 1, 2005.
• By subsuming most indirect taxes levied by the central and state governments such as excise duty, service tax, VAT and sales tax, GST proposes to facilitate a common market across the country, leading to economies of scale(In microeconomics, economies of scale are the cost advantages that enterprises obtain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output) and reducing inflation through an efficient supply chain. 

Petroleum products, alcohol excluded from GST regime 

• As a measure of support for the states, petroleum products, alcohol for human consumption and tobacco have been kept out of the purview of GST.
• Taxes on alcohol make up a major chunks of state revenues -- for instance, in Kerala it contributes 22 percent of revenue, while in Tamil Nadu it yields about Rs.21,000 crore per year.
• Transport fuels like petrol and diesel are taxed at 20 per cent, while states earn 35 percent of their sales tax revenues from them.
• In passing the GST Bill 2014 on May 6, the Lok Sabha also approved an amendment to help further states in the transition phase, by levying an additional tax of 1 percent on inter-state trade on goods. 

Which is the best GST rate? 

• Jaitley has said 27% is too high but states have all said they can't afford to lose revenue and would be wary of anything below 25%.
• It could, as already reported in this newspaper, be in the range  of 20-23 per cent. That apart, the Centre would need some deft handling to enable states’ wish to protect revenue under the new regime.
•  Earlier, a sub-panel of  the empowered committee of state finance ministers (EC) had recommended a revenue-neutral rate at 12.77 per cent for the central GST and 13.91 per cent for state GST, nearly 27 per cent combined. This has been referred to the National Institute for Public Finance and Policy (NIPFP), as these were on the revenue estimates of 2011-12. Revenue-neutral rate (RNR) is the rate that allows Centre and states to sustain current revenues from tax collections.
•  "I straightaway concede that 27 per cent would be very high...after this 27 per cent (Revenue Neutral Rate) was born, the states and the Centre have decided to keep alcohol out,” Jaitley said in a reply to GST Bill debate in the Lok Sabha.
• “We have decided to keep petroleum out and every state finance minister is not interested in imposing higher taxes on its own people, and neither the central government. Therefore, this figure (RNR) is going to much more diluted compared to the figure (27 per cent) which has been mentioned,” he said.
• Revenue Neutral Rate (RNR) is the rate at which there will be no revenue loss to the states after GST implementation.
• Currently, the Union excise duty rate is 12 per cent on most goods. Value-added tax (VAT) is 12.5 per cent in most states. This combines to 24.5 per cent. Then, there are purchase taxes in some states and a central sales tax of two per cent on inter-state movement of goods. From this point of view, a goods tax at 27 per cent seems too high, since VAT also gives input credit and so does excise duty in most cases. Service tax will be 14 per cent from June and making it 27 per cent would again be too high. Currently, only the Centre can impose service tax.
• According to the constitution amendment Bill cleared by the Lok Sabha recently, the Centre would fully compensate states for revenue  loss due to GST for the first three years. It would then taper to 75 per cent in the fourth year and 50 per cent in the fifth.
• Besides, one per cent tax would be levied on goods to help the manufacturing states, as GST is destination-based.

 India to ratify 1974 Indira-Mujib pact

• Indian Government informed that it wanted to ratify the 1974 Indira-Mujib pact for demarcation of boundaries and for exchange of 161 adversely held enclaves with a population of about 50000 people. 
• For implementation of Indira-Mujib pact, Indian Government will have to introduce a Constitutional Amendment Bill in parliament according to Indian Constitution.

Indira-Mujib Pact 1974

• In 1974, India and Bangladesh entered into an agreement on borders. Popularly known as Indira-Mujib Pact, the two signatories of the pact were the Indian Prime Minister Indira Gandhi and the Bangladesh Prime Minister Mujib-ur-Rehman. 
• This agreement sought to cover the demarcation of the land boundary between the two countries and other related issues. 

Pending Issues

• There is a 6.1 kilometre long stretch on the border between the two countries which is still not demarcated. It is spread in three sectors;  Daikhata – 56 in West Bengal, Muhuri river – Belonia in Tripura and Lathitila-Dumabari in Assam.
• There are about 111 such enclaves that belong to India but remain to this day in Bangladesh territory. They measure an area of approx. 17,161 acres. 
• Similarly there are 51 enclaves in India measuring approximately 7,110 acres that belong to Bangladesh.  
• All the enclaves belonging to Bangladesh are located in the Coochbehar district of West Bengal whereas all the Indian enclaves in Bangladesh fall in four districts – Panchagarh, Lalmonirhat, Kurigram and Nilphamari.

Border breakthrough: Ratification of LBA paves the way for enhanced India-Bangladesh ties and regional growth

• It’s been four decades in the making. In a historic move, Lok Sabha’s unanimously passed the 100th Constitution Amendment that ratifies the 1974 India-Bangladesh Land Boundary Agreement (LBA). All that’s left now is for the four affected states – Bengal, Assam, Tripura, Meghalaya – to endorse it in their assemblies to give both countries a fully demarcated border. But given the nature of unanimity in the Lok Sabha, this should be a formality.
• India, in general, isn’t very successful in resolving boundary disputes with neighbours. The LBA ratification is a major breakthrough because it suggests this narrative can change. It’s also welcome that LBA has been ratified in the original form as envisaged by New Delhi and Dhaka in their 2011 agreement. There were concerns that government was seeking to exclude the Assam portion of the accord in view of protests by BJP’s state unit. What’s even more heartening is the bipartisan spirit in which the Constitution amendment bill was passed. External affairs minister Sushma Swaraj laid the foundation for its successful passage by crediting former PM Manmohan Singh for championing LBA during UPA’s tenure. This was a simple recognition of the truth, enough to bring the Rajya Sabha where BJP is in a minority around.
• That government and opposition chose to set aside their differences and facilitate this landmark legislation provides a template for cooperation on other important legislative business, such as the Goods and Services Tax. Needless to say, operationalising LBA will give a tremendous boost to India-Bangladesh relations. With ratification of the agreement, the goodwill generated should propel both sides to settle other outstanding issues such as Teesta river water sharing and transit rights.
• Besides, full demarcation of the boundary should facilitate better border management with Bangladesh. By erasing cartographic anomalies security at the India-Bangladesh border should increase substantially. Plus, by resolving the border dispute New Delhi and Dhaka can speed up the development of border infrastructure that is bound to boost the sub-regional economy. This will directly benefit India’s northeast which has hitherto suffered from lack of connectivity and market access. Now that New Delhi has displayed its seriousness about dealing with border issues and PM Narendra Modi heads to Beijing, resolving the India-China boundary on the basis of similar pragmatic principles should be the big prize.

Adult laws will cover 16-18 year olds

• The Lok Sabha on May 7 passed a bill that provides for trying juveniles aged between 16 and 18 years for heinous crimes under laws for adults, with the government insisting that it had tried to strike a “fine balance” to ensure that no injustice was done to the innocent.
• The Juvenile Justice (Care and Protection of Children) Bill was passed after the government agreed to delete a controversial clause which said that if a minor commits a crime at an age between 16 and 18, but is caught when he has turned 21, should be tried under the Indian Penal Code and not juvenile laws. At least 42 official amendments were moved by the government to the bill, which were adopted, but all amendments moved by Opposition members like Shashi Tharoor (Congress) and N.K. Premchandran (RSP) were negated.
• Opposition members opposed the proposal to raise the age bar, expressing apprehensions over misuse and violation of rights of children by the new law, which is being enacted against the backdrop of the involvement of a 16-year-old in the 2012 Nirbhaya gang rape case.
• However, Minister for Women and Child Develoment Maneka Gandhi said she had tried to be “pro-child” and had made efforts to strike a “fine balance” between justice to the victims and rights of the children.
• Rejecting the allegation that she only loved animals, Gandhi said the new law was intended to be a “deterrent” to ensure that juveniles refrain from crimes and avoid spoiling their lives.
• Justifying the need for the law, she said that according to the National Crime Records Bureau, around 28,000 juveniles had committed various crimes in 2013. Of them, 3,887 had allegedly committed heinous crimes. She cited a recent Supreme Court order wherein the court favoured a relook at the law in view of the growing number of juveniles involved in heinous crimes.