7 August 2016

IAS (UPSC) Prelims GS solution-2016,civil services prelims solution.samveg ias

Dear candidate

we are providing tentative solution.
Most of the current affairs were from our test series . we will come out with details.
Direct CURRENT AFFAIRS question from our test series.WE WILL PUT THE DOCUMENT IN SUPPORT
1.un-redd plus
2.agenda21
3 district mineral fund
4 NDB
5KASTURIRANGAN REPORT
6 SOVERIGN GOLD BOND SCHEME
7.BELT AND ROAD INITIATIVE
8MUDRA YOJANA
9 ATAL PENSION YOJANA
10 GLOBAL FINANCIAL REPORT
11 BEE
12ITER
13 ISA
14 AIR QUALITY INDEX
15ASTROSAT
16 MANGLAYAN
17 PARIS AGREEMENT
18 PAYMENTS BANK
19LIFI
20INDC
21UDAY
22 UN CCD
23PM FASAL BIMA YOJANA
25NGRBA
26 STAND UP INDIA
27 KYOTO PROTOCOL
28 MISSION INDRADHANUSH
29 GREEN INDIA MISSION
30EASE OF DOING BUSSINESS
31 TPP
32INDIA AFRICA SUMMIT
33ASTRADHARINI.

SUBJECT WISE DISTRIBUTION OF GS PAPER

S no	Topic/subject	No of questions
1	Indian polity	5
2	History (modern ,ancient,medieval)	16(6,9,1)
3	geography	5
4	Environment and ecology and related CA	19
5	International organisations and their functions*	15 (almost current affairs)
6	Indian economy	22 (almost current affairs)
7	Govt policies & programmes	6 (almost current affairs)
8	Science and technology	12(almost current affairs)

5 QUESTION FROM POLITY+ 5 QUESTION FROM GEOGRAPHY+ 6 QUESTION OF MODERN HISTORY+12 QUESTION OF ENVIRONMENT AND ECOLOGY.

Q1 –B

Médecins Sans Frontières (MSF) or Doctors Without Borders, is an international humanitarian-aid non-governmental organization (NGO).

Q2-C

The Economics of Ecosystems and Biodiversity (TEEB) is a global initiative focused on “making nature’s values visible”. Its principal objective is to mainstream the values of biodiversity and ecosystem services into decision-making at all levels. It aims to achieve this goal by following a structured approach to valuation that helps decision-makers recognize the wide range of benefits provided by ecosystems and biodiversity, demonstrate their values in economic terms and, where appropriate, suggest how to capture those values in decision-making.

IMF IS NOT THE PART

http://www.teebweb.org/about/partners/

Q3 ---A

http://www.moef.nic.in/downloads/public-information/Chap-8-new.pdf

Q4 –D

Q5-A

The Greenhouse Gas Protocol (GHG Protocol) is the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions. A decade-long partnership between the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol is working with businesses, governments, and environmental groups around the world to build a new generation of credible and effective programs for tackling climate change.
It serves as the foundation for nearly every GHG standard and program in the world - from the International Standards Organization to The Climate Registry - as well as hundreds of GHG inventories prepared by individual companies.
The GHG Protocol also offers developing countries an internationally accepted management tool to help their businesses to compete in the global marketplace and their governments to make informed decisions about climate change.

http://www.ghgprotocol.org/about-ghgp

Q6- C

Q7----A

Agenda 21 is a non-binding, voluntarily implemented action plan of the United Nations with regard to sustainable development. It is a product of the Earth Summit (UN Conference on Environment and Development) held in Rio de Janeiro, Brazil, in 1992.

Q8 –C

Q9-d

Viruses are known to infect almost any kind of host that has living cells. Animals, plants, fungi, and bacteria are all subject to viral infection

Q10—B

Base erosion and profit shifting (BEPS) is a tax avoidance strategy used by multinational companies, wherein profits are shifted from jurisdictions that have high taxes (such as the United States and many Western European countries) to jurisdictions that have low (or no) taxes (so-called tax havens)

Q11-A

Andhra Pradesh is set to house India's first national investment and manufacturing zone after the state assured the Centre of availability of 10 sq km of land in one place in Prakasham district.
The imminent final approval for the NIMZ, which is expected to give a fillip to Prime Minister Narendra Modi's Make in India campaign, comes four years after the concept was mooted to boost manufacturing in the country and two years after the Department of Industrial Policy and Promotion gave an in-principle nod to Andhra Pradesh in this regard.

http://articles.economictimes.indiatimes.com/2015-09-21/news/66760948_1_andhra-pradesh-nimz-manufacturing-zone

Q12---B

Each District Mineral Foundation is established by the State Governments by notification as a trust or non-profit body in the mining operation affected districts. Objectives The objective of District Mineral Foundation is to work for the interest of the benefit of the persons and areas affected mining related operations in such manner as may be prescribed by the State Government.

Q13—D

SWAYAM or Study Webs of Active –Learning for Young Aspiring Minds programme of Ministry of Human Resource Development, Government of India, Professors of centrally funded institutions like IITs, IIMs, central universities will offer online courses to citizens of India.^[1]
All courses would be offered free of cost under this programme however fees would be levied in case learner requires certificate.

Q14—D

Q15-B

Q16-B

17-B

18-D

19-D

20-A

21-C

22-D

23-A

24-D

Ministry of Petroleum and Natural Gas (MoPNG) has identified

six basins as potentially shale gas bearing. These are Cambay,

Assam-Arakan, Gondwana, Krishna-Godavari, Kaveri, and the

Indo-Gangetic plain

http://www.teriin.org/policybrief/docs/Shale_gas.pdf

25-B

26-C

27-B

Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN)

28-D

29-D

30-C

31-A.

121 countries from across the globe are part of the alliance and more are being asked to join it.

32-B

33-C

http://www.agriinfo.in/default.aspx?page=topic&superid=8&topicid=2243

34-C

35-D

http://wrmin.nic.in/forms/list.aspx?lid=1279

36-B

The proposed AQI will consider eight pollutants (PM₁₀, PM_2.5, NO₂, SO₂, CO, O₃, NH₃, and Pb) for which short-term (up to 24-hourly averaging period) National Ambient Air Quality Standards are prescribed.

37-D

ASTROSAT with a lift-off mass of about 1513 kg was launched into a 650 km orbit inclined at an angle of 6 deg to the equator by PSLV-C30.

Only the United States, European Space Agency, Japan and Russia have such observatories in space.

http://indianexpress.com/article/explained/astrosat-india-reaches-for-the-stars/

38-C

39-

40-D http://www.thehindu.com/news/national/other-states/maharashtra-gets-state-butterfly/article7342955.ece

41-C

The Mars Orbiter Mission (MOM), also called is a space probe orbiting Mars since 24 September 2014. It was launched on 5 November 2013 by the Indian Space Research Organisation (ISRO).^{[11][12][13][14]} It is India's first interplanetary mission^[15] and ISRO has become the fourth space agency to reach Mars, after the Soviet space program, NASA, and the European Space Agency.^[16][17] It is the first Asian nation to reach Mars orbit, and the first nation in the world to do so in its first attempt.

https://en.wikipedia.org/wiki/Mars_Orbiter_Mission

42-B

43-D

44-C

45-D

46-d

http://timesofindia.indiatimes.com/city/jaipur/Rajasthan-government-mulls-inland-port-in-Jalore/articleshow/48195329.cms

47-b

48-C

49-A

50—B

51-B

52-C

The GHI combines 4 component indicators: 1) the proportion of the undernourished as a percentage of the population; 2) the proportion of children under the age of five suffering from wasting; 3) the proportion of children under the age of five suffering from stunting; 4) the mortality rate of children under the age of ..

https://en.wikipedia.org/wiki/Global_Hunger_Index

53-C

54-d

Acceptance of demand deposits. Payments bank will initially be restricted to holding a maximum balance of Rs. 100,000 per individual customer. Issuance of ATM/debit cards. Payments banks, however, cannot issue credit cards.

https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=32615

55-C

56-B

57-D

57-C

http://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/ifc+issues+first+green+masala+bond+on+london+stock+exchange

58-C

59-C

60-B

61-A

62-D

http://economictimes.indiatimes.com/budget-faqs-what-are-revenue-capital-budgets/articleshow/18512494.cms

63-D

64-D

65-C

66-C

67-C

68-D

It measures the number of months of money available in the national bank to cover the cost of imports.

69-C

70-B

https://www.opcw.org/about-opcw/

71-C

72-D

73-A,PM CHAIRS THE MEETING

74-B

75-C

76-C

77-B

78-D

79-A

80-C

81-B

82-A

83-C

84-C

85-B

86-A

87-C

88-d

89-B

90-B

91-D ONLY 12 NATION,TRADE

92-A

93-C

94-D

95-*

96-C

97-A

98-C

99-A

100-B

6 August 2016

Govt notifies inflation target of 4%, in line with RBI

The RBI will look to contain consumer price-based inflation at 4% with a band of +/-2 percentage points till 2021

The government on Friday formally backed the inflation strategy of the Reserve Bank of India (RBI) by notifying a retail inflation target of 4% as an anchor for monetary policy. This is consistent with the agreement reached between the central bank and the government last year.
Not only does the move place the government and RBI on the same page, it also sends out a strong signal of stability with respect to the country’s macroeconomic policies—something that had come into question in recent years.
By adhering to specified fiscal deficit targets in the latest Union budget, the government had already conveyed its intent to conform to fiscal reform. Together with its latest move, it has taken a big step towards restoring the credibility of macroeconomic policy, particularly in the eyes of foreign investors and rating agencies.
It also brings the country one step closer to resetting the monetary policy framework. The process will be complete when the government appoints the members of the monetary policy committee, which will define monetary policy in future.
According to a notification tabled in the Lok Sabha by the National Democratic Alliance (NDA), RBI will look to contain Consumer Price Index (CPI)- based inflation at 4% with an upper and lower tolerance limit of two percentage points till 2021.
With this official notification, India joins advanced and emerging market economies of the world to have an inflation targeting mandate for the central bank. The US Federal Reserve, European Central Bank and Bank of England all have inflation targets, as do the central banks of Thailand, Indonesia and the Philippines.
The inflation target will be revisited once every five years, said the government, terming it an important reform.
“Fixation of an inflation target while giving due emphasis to the objective of growth and challenges of an increasingly complex economy, is an important monetary policy reform with necessary statutory back-up,” the government said in a statement on Friday.
Outgoing RBI governor Raghuram Rajan has been the chief advocate of such a move, arguing that India needs to rein in inflation to achieve sustainable growth in the long run.
The notification, laid down by minister of state for finance Arjun Ram Meghwal, also ends speculation that the government may revisit the target to boost growth.
Equity and bond markets had rallied recently on hopes that the government may choose a more accommodative inflation target of 5% with a lower and upper tolerance threshold of 1%, which would suggest that policymakers are comfortable with 5% inflation in the medium term.
On Thursday, the benchmark 10-year government bond yield fell three basis points to 7.168%. Bond yields are close to a three-year low as investors chase higher returns in emerging market assets. A basis point is 0.01%.
Economists said that although the move was surprising, the government’s target reinforces the focus of both fiscal and monetary policy in lowering inflation over the medium term.
“A 4% target is a bit of a surprise because my impression was they would set a target of 6% and they would leave the flexibility of tolerance level to the RBI,” said A. Prasanna, chief economist at ICICI Securities Primary Dealership Ltd.
The tolerance range of two percentage points will enable policymakers to reckon with short-term trade-offs between inflation and growth while at the same time ensuring the inflation target is achieved in the long run, said the government.
“The range also accommodates data limitations, projection errors, short-run supply gaps and instability in agriculture production, an important factor for CPI inflation as food articles have a major weight in the CPI indices,” said the statement.
“It also allows to accommodate unanticipated short-term shocks even while nudging public inflation expectations on the centre of the range, to which the monetary policy will return the economy over the medium term, leading to transparency and predictability,” it added.
Indeed, given the risks from global crude oil prices and the upward pressure the seventh pay commission and the goods and services tax will put on prices, inflation could well firm up in the near term.
Retail inflation rose to 5.7% in June, above the central bank’s March 2017 target of 5%. In its June monetary policy statement, RBI highlighted upside risks to its March target.
“Now that the government has formalized that 4% plus or minus 2% (target), it should give RBI complete operational freedom to reach that target,” said Soumya Kanti Ghosh, chief economist at State Bank of India, the country’s largest lender.
The inflation target mandate now requires the central bank to give reasons to the government if average inflation goes over 6% or below 2% for three straight quarters. The statement also added that this report from RBI shall state remedial measures the central bank proposes to take and a likely time frame for bringing inflation back to the target level after these measures are implemented.
The final step in institutionalizing a new monetary policy framework would be setting up of the monetary policy committee.
In June, the government had notified that a six-member monetary policy committee will decide on key policy rates, but it is still in the process of finalizing the members.
The panel will have three members from the central bank, including the governor, who will be the chairperson, deputy governor of RBI and one officer of RBI. The other three members will be appointed by the centre, based on the recommendations of a panel headed by the cabinet secretary, and will be experts in the fields of economics, banking, finance or monetary policy. The RBI governor will get a casting vote in case of a tie.

Frequently Asked Questions (FAQs) on Goods and Services Tax (GST)

Following are the answers to the various frequently asked questions relating to GST:

Question 1.What is GST? How does it work?

Answer: GST is one indirect tax for the whole nation, which will make India one unified common market.

GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

Question 2. What are the benefits of GST?

Answer:The benefits of GST can be summarized as under:

· For business and industry

o Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.

o Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.

o Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

o Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.

o Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.

· For Central and State Governments

o Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.

o Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.

o Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.

· For the consumer

o Single and transparent tax proportionate to the value of goods and services: Due to multiple indirect taxes being levied by the Centre and State, with incomplete or no input tax credits available at progressive stages of value addition, the cost of most goods and services in the country today are laden with many hidden taxes. Under GST, there would be only one tax from the manufacturer to the consumer, leading to transparency of taxes paid to the final consumer.

o Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most commodities will come down, which will benefit consumers.

Question 3. Which taxes at the Centre and State level are being subsumed into GST?

Answer:

At the Central level, the following taxes are being subsumed:

a. Central Excise Duty,

b. Additional Excise Duty,

c. Service Tax,

d. Additional Customs Duty commonly known as Countervailing Duty, and

e. Special Additional Duty of Customs.

At the State level, the following taxes are being subsumed:

a. Subsuming of State Value Added Tax/Sales Tax,

b. Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),

c. Octroi and Entry tax,

d. Purchase Tax,

e. Luxury tax, and

f. Taxes on lottery, betting and gambling.

Question 4. What are the major chronological events that have led to the introduction of GST?

Answer: GST is being introduced in the country after a 13 year long journey since it was first discussed in the report of the Kelkar Task Force on indirect taxes. A brief chronology outlining the major milestones on the proposal for introduction of GST in India is as follows:

a. In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.

b. A proposal to introduce a National level Goods and Services Tax (GST) by April 1, 2010 was first mooted in the Budget Speech for the financial year 2006-07.

c. Since the proposal involved reform/ restructuring of not only indirect taxes levied by the Centre but also the States, the responsibility of preparing a Design and Road Map for the implementation of GST was assigned to the Empowered Committee of State Finance Ministers (EC).

d. Based on inputs from Govt of India and States, the EC released its First Discussion Paper on Goods and Services Tax in India in November, 2009.

e. In order to take the GST related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted in September, 2009.

f. In order to amend the Constitution to enable introduction of GST, the Constitution (115th Amendment) Bill was introduced in the Lok Sabha in March 2011. As per the prescribed procedure, the Bill was referred to the Standing Committee on Finance of the Parliament for examination and report.

g. Meanwhile, in pursuance of the decision taken in a meeting between the Union Finance Minister and the Empowered Committee of State Finance Ministers on 8th November, 2012, a ‘Committee on GST Design’, consisting of the officials of the Government of India, State Governments and the Empowered Committee was constituted.

h. This Committee did a detailed discussion on GST design including the Constitution (115th) Amendment Bill and submitted its report in January, 2013. Based on this Report, the EC recommended certain changes in the Constitution Amendment Bill in their meeting at Bhubaneswar in January 2013.

i. The Empowered Committee in the Bhubaneswar meeting also decided to constitute three committees of officers to discuss and report on various aspects of GST as follows:-

(a) Committee on Place of Supply Rules and Revenue Neutral Rates;

(b) Committee on dual control, threshold and exemptions;

j. The Parliamentary Standing Committee submitted its Report in August, 2013 to the Lok Sabha. The recommendations of the Empowered Committee and the recommendations of the Parliamentary Standing Committee were examined in the Ministry in consultation with the Legislative Department. Most of the recommendations made by the Empowered Committee and the Parliamentary Standing Committee were accepted and the draft Amendment Bill was suitably revised.

k. The final draft Constitutional Amendment Bill incorporating the above stated changes were sent to the Empowered Committee for consideration in September 2013.

l. The EC once again made certain recommendations on the Bill after its meeting in Shillong in November 2013. Certain recommendations of the Empowered Committee were incorporated in the draft Constitution (115th Amendment) Bill. The revised draft was sent for consideration of the Empowered Committee in March, 2014.

m. The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST introduced in the Lok Sabha in March 2011 lapsed with the dissolution of the 15th Lok Sabha.

n. In June 2014, the draft Constitution Amendment Bill was sent to the Empowered Committee after approval of the new Government.

o. Based on a broad consensus reached with the Empowered Committee on the contours of the Bill, the Cabinet on 17.12.2014 approved the proposal for introduction of a Bill in the Parliament for amending the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country. The Bill was introduced in the Lok Sabha on 19.12.2014, and was passed by the Lok Sabha on 06.05.2015. It was then referred to the Select Committee of Rajya Sabha, which submitted its report on 22.07.2015.

Question 5.How would GST be administered in India?

Answer:Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.

Question 6.How would a particular transaction of goods and services be taxed simultaneously under Central GST (CGST) and State GST (SGST)?

Answer :The Central GST and the State GST would be levied simultaneously on every transaction of supply of goods and services except on exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. Further, both would be levied on the same price or value unlike State VAT which is levied on the value of the goods inclusive of Central Excise.

A diagrammatic representation of the working of the Dual GST model within a State is shown in Figure 1 below.

Figure 1: GST within State

Question 7.Will cross utilization of credits between goods and services be allowed under GST regime?

Answer :Cross utilization of credit of CGST between goods and services would be allowed. Similarly, the facility of cross utilization of credit will be available in case of SGST. However, the cross utilization of CGST and SGST would not be allowed except in the case of inter-State supply of goods and services under the IGST model which is explained in answer to the next question.

Question 8.How will be Inter-State Transactions of Goods and Services be taxed under GST in terms of IGST method?

Answer:In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST.Since GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.

A diagrammatic representation of the working of the IGST model for inter-State transactions is shown in Figure 2 below.

Figure 2

Question 9.How will IT be used for the implementation of GST?

Answer:For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments.

GSTN is working on developing a state-of-the-art comprehensive IT infrastructure including the common GST portal providing frontend services of registration, returns and payments to all taxpayers, as well as the backend IT modules for certain States that include processing of returns, registrations, audits, assessments, appeals, etc. All States, accounting authorities, RBI and banks, are also preparing their IT infrastructure for the administration of GST.

There would no manual filing of returns. All taxes can also be paid online. All mis-matched returns would be auto-generated, and there would be no need for manual interventions. Most returns would be self-assessed.

Question 10.How will imports be taxed under GST?

Answer :The Additional Duty of Excise or CVD and the Special Additional Duty or SAD presently being levied on imports will be subsumed under GST. As per explanation to clause (1) of article 269A of the Constitution, IGST will be levied on all imports into the territory of India. Unlike in the present regime, the States where imported goods are consumed will now gain their share from this IGST paid on imported goods.

Question 11.What are the major features of the Constitution (122^nd Amendment) Bill, 2014?

Answer :The salient features of the Bill are as follows:

g. Conferring simultaneous power upon Parliament and the State Legislatures to make laws governing goods and services tax;

h. Subsuming of various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, and Special Additional Duty of Customs;

i. Subsuming of State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, and Taxes on lottery, betting and gambling;

j. Dispensing with the concept of ‘declared goods of special importance’ under the Constitution;

k. Levy of Integrated Goods and Services Tax on inter-State transactions of goods and services;

l. GST to be levied on all goods and services, except alcoholic liquor for human consumption. Petroleum and petroleum products shall be subject to the levy of GST on a later date notified on the recommendation of the Goods and Services Tax Council;

m. Compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years;

n. Creation of Goods and Services Tax Council to examine issues relating to goods and services tax and make recommendations to the Union and the States on parameters like rates, taxes, cesses and surcharges to be subsumed, exemption list and threshold limits, Model GST laws, etc. The Council shall function under the Chairmanship of the Union Finance Minister and will have all the State Governments as Members.

Question 12.What are the major features of the proposed registration procedures under GST?

Answer:The major features of the proposed registration procedures under GST are as follows:

i. Existing dealers: Existing VAT/Central excise/Service Tax payers will not have to apply afresh for registration under GST.

ii. New dealers: Single application to be filed online for registration under GST.

iii. The registration number will be PAN based and will serve the purpose for Centre and State.

iv. Unified application to both tax authorities.

v. Each dealer to be given unique ID GSTIN.

vi. Deemed approval within three days.

vii. Post registration verification in risk based cases only.

Question 13.What are the major features of the proposed returns filing procedures under GST?

Answer:The major features of the proposed returns filing procedures under GST are as follows:

a. Common return would serve the purpose of both Centre and State Government.

b. There are eight forms provided for in the GST business processes for filing for returns. Most of the average tax payers would be using only four forms for filing their returns. These are return for supplies, return for purchases, monthly returns and annual return.

c. Small taxpayers: Small taxpayers who have opted composition scheme shall have to file return on quarterly basis.

d. Filing of returns shall be completely online. All taxes can also be paid online.

Question 14.What are the major features of the proposed payment procedures under GST?

Answer:The major features of the proposed payments procedures under GST are as follows:

i. Electronic payment process- no generation of paper at any stage

ii. Single point interface for challan generation- GSTN

iii. Ease of payment – payment can be made through online banking, Credit Card/Debit Card, NEFT/RTGS and through cheque/cash at the bank

iv. Common challan form with auto-population features

v. Use of single challan and single payment instrument

vi. Common set of authorized banks

vii. Common Accounting Codes

5 August 2016

The age of GST dawns

As the most important indirect tax reform since 1947, it will create a single market and push competitiveness. It represents a historic political consensus, but there are potential implementation problems.

The introduction of a unified goods and services tax (GST) across the nation is the most important indirect tax reform since Independence. It has taken almost 16 years from the date of inception of the idea, formation of a task force, to passage in Parliament. It represents a Herculean, nationwide, multi-party consensus-building exercise which is finally bearing fruit.

The upside of GST

It has huge implications. First, it addresses a serious impediment to our competitiveness. Without the GST, there are multiple points of taxation, and multiple jurisdictions. We also have an imperfect system of offsetting credits on taxes paid on inputs, leading to higher costs. Further there is cascading of taxes — that is, tax on tax. Interstate commerce has been hampered due to the dead-weight burden on Central sales tax and entry taxes, which have no offsets. All this will go once the GST is in place. It will enhance the ease of doing business, and make our producers more competitive against imports.

Second, the adoption of the GST is an iconic example of what Prime Minister Narendra Modi has called “cooperative federalism”. It represents a national consensus, an outcome of a grand bargain struck together by 29 States and seven Union Territories with the Central government. The States agreed to give up their right to impose sales tax on goods (VAT), and the Centre gave up its right to impose excise and services tax. In exchange they will each get a share of the unified GST collected nationally. The anticipated additional gains in efficiency, competitiveness and overall tax collections are what drove this bargain.

Third, once the GST is in place, it means a unified, un-fragmented national market for goods and services, accessible to the smallest entrepreneur. Companies need not maintain stock depots to avoid paying interstate taxes. This will free up some capital. All this will add to demand, and also efficiency. The National Council for Applied Economic Research and others have estimated that national GDP growth can go up by one percentage point on a sustained basis.

Fourth, because the structure of claiming input tax credit is linked to having proof of taxes paid at an earlier stage in the value chain, this creates interlocking incentives for compliance between vendor and customer. No more questions from a vendor: “Would you like that with receipt or without receipt?” Because of this inherent incentive, the total taxes paid, and hence collected, may go up significantly. This provides buoyancy to the GST. In fact, a significant part of the black economy will enter the tax-paid economy.

The potential downside

All of this constitutes the upside of adopting the GST. Its roll-out represents a rare and historic political consensus. But that should not blind us to its potential downside, or the devil lurking in the details of its implementation. Here are some issues to consider.

First is the question of the uniform GST rate. What should it be? An early report of the Finance Ministry from 2003 mentioned a rate of 12 per cent. Over the years this rate drifted higher, and the focal number being discussed now is 18 per cent. What determines this number?

The empowered committee of finance ministers uses a concept called “Revenue Neutral Rate” or RNR. The RNR is that uniform rate which when applied will leave all States with the same revenue as before. So no State should lose out by signing up to the GST. But this approach is faulty, since unless we try it for a year (or more) we won’t be able to gauge the buoyancy of the GST. In trying to assuage the fears of States, the calculation of the RNR has been loaded by every possible existing tax (like entry tax, octroi, etc.). This has caused the RNR to steadily escalate upward. At one point, the National Institute of Public Finance and Policy mentioned 26 per cent. The higher the RNR (and hence GST rate), the more is its inflationary impact. This is a sure way of killing the golden egg-laying goose. A better approach is to keep the GST rate low initially, and promise to fully reimburse losing States by the end of the year. Everyone may be in for a pleasant surprise by GST buoyancy. But this tax buoyancy will stop working beyond a certain threshold (like say 18 or 20 per cent). The focus on the RNR is self-defeating.

Taxation and litigation

The second issue is that the GST is an indirect tax. By their very nature, indirect taxes are regressive because they affect the poor more than the rich. India’s ratio of indirect to direct tax collection is 65:35, which is exactly the opposite of the norm in most developed countries. India’s ratio of direct tax to GDP is one of the lowest in the world, and it badly needs to expand the direct tax net. Only 4 per cent of India pays income tax, but practically all Indians pay indirect taxes in one form or the other. Direct tax rates have been falling, and indirect tax rates rising. For instance, service tax (an indirect tax) used to be 5 per cent in the 1990s and is now more than 15 per cent. The Swachh Bharat cess, or frequent increase in excise duty on petrol and diesel are all recent examples of regressive indirect tax. Unless a rate cap is adopted, the GST rate could easily drift higher, further hurting India’s income inequality. To meet their fiscal needs, it is always tempting for governments to tweak indirect taxes higher, since the work of expanding the direct tax net is so much harder. This temptation must be curbed with a rate cap.

The third issue is of tax litigation. Approximately Rs.1.5 lakh crore is stuck in litigation related to Central excise and service taxes. On the other hand the State-level VAT is administered in a way that empowers tax officials to dispose of cases quickly. Disputes involving Central taxes go though an appeal and tribunal process, and can drag on for years. But empowered staff under the Sales Tax Commissioner can dispose of valid grievances of State-level VAT payers much faster. This difference is called the “review” versus “revise” approach to tax disputes. It is important that the GST approach leans towards the more efficient State-level model.

State of the States

The fourth issue in implementing the GST is the governance within the GST Council. It is a de facto council of States, along with representatives from the Union Finance Ministry. It seems that one State will get one vote, irrespective of its size. This seems unfair. An economically larger State, contributing a bigger chunk of the GST pie, should have a greater say. Similarly, the special needs of smaller States should also be heeded. For instance, the Northeast States had to be assuaged already with a lower threshold for GST exemption, because if a higher (uniform) threshold were adopted nationally, then nearly all businesses of the Northeast would become tax-exempt.

Finally, the issue of States’ autonomy. India will be a unique large democracy that adopts a nationwide GST, with virtually no taxing powers to the States. In the United States, the States have power to impose sales and income taxes. Within the European Union (EU), each member country retains fiscal autonomy, and also the freedom to breach the fiscal deficit of 3 per cent of GDP. Indeed virtually all members of the EU have breached that limit. In India, what if a State wants to undertake a special spending programme to respond to a State-specific situation, such as a disaster? In 1982, the Chief Minister of Tamil Nadu upgraded a midday meal scheme which his opponents criticised as being an empty promise and fiscally reckless. In response he raised taxes on goods (not possible in a GST regime), and made the programme so successful that it is praised to this day, not just in India but also around the world. It achieved the double objective of better nutrition for children and better school attendance. Similarly in the drought crisis year of 1972, the Maharashtra government imposed a profession tax on city dwellers (not possible under the GST) to fund an innovative programme called the rural “Employment Guarantee Scheme (EGS)”, which three decades later was acknowledged nationally as the inspiration behind the National Rural Employment Guarantee Act. The GST regime should remain sympathetic to this issue of States’ fiscal autonomy. We have not even mentioned here what happens to the third tier, i.e. local bodies.

The GST is obviously not a panacea for all ills of India’s economy. It is nevertheless a revolutionary and long-pending reform. It promises economic growth and jobs, better efficiency and ease of doing business, and higher tax collection. We hope that its imperfections and potential pitfalls will be sorted out as we roll it out.

Indian GSLV will truly ‘arrive’ this month

When launched, it will mark the culmination of more than two decades of hard work.

Enters the all-Indian GSLV, finally, later this month. The GSLV-F05 flight coming up on August 28 or 29 will be its first regular, full-service or 'operational' one.

When launched, it will be the culmination of more than two decades of hard work — punctuated with jinxes and tribulation — for developing an indigenous medium-lift satellite launcher.

GSLV-F05 will be the fourth flight powered by the Indian cryogenic stage and its preceding two in the last two years have been successful. F05 will carry the roughly 2,000-kg weather satellite, INSAT-3DR, follow-on to INSAT-3D which entered space in 2013.

The first six GSLVs starting with D1 of 2000 used the Russian cryogenic engines in the third and last stage and were called GSLV-MarkI. The first GSLV propelled by an Indian cryogenic engine and distinguished as MarkII, was tested about ten years later, in April 2010, but flight D3 failed.

“The flight of GSLV-F05 will be truly significant milestone in our launch vehicle programme. It signals India’s feat of developing its own cryogenic technology for its launchers. The technology is so complex and our success signifies the confidence of handling this tough challenge,” said a senior official in the Indian Space Research Organisation.

GSLV-Mk2 however can put only satellites weighing up to 2,200 kg into geostationary space. At least four more of them are in the making now. ISRO, meanwhile, has moved towards 3,000-kg class communication spacecraft with an eye on making 4,000-kg satellites.

Foreign launches

These heavier ones need to be put into space on a foreign launcher such as the European Ariane. GSAT-18, due in October and next year’s GSAT-17 are confirmed while the heavy 4-tonne GSAT-11 will also need a foreign launch.

Another official said the plan is to do two GSLV launches a year from next year, apart from doubling the PSLV rate to ten or a dozen a year.

He agreed that “Ultimately, GSLV-MarkIII [that is under development to do handle 4,000-kg spacecraft] is more important to us than Mark-II.”

It will mean that all ISRO satellites can be launched from within the country.

Test flight in December

The first test flight of Mark-III, also knows as LVM3, is slated for December and it will take a few more flights and years to become regular.

As the GSLV numbers go up, the official said it increases the onus on suppliers in public and private industry, especially for cryogenic engines, tanks and rocket stages. Indicatively, the smaller PSLV gets about 80 per cent of its supplies from industry

Rajya Sabha has finally adopted a goods and services tax

Eleven years after it was first mooted in Parliament, the Rajya Sabha has finally adopted a goods and services tax. After the mere formality of its passage in the Lok Sabha for an approval of the amendments made, it will have to be considered and approved by a majority of State Assemblies before it can be sent to the President for assent. For now, Parliament’s stamp is historic as the proposed tax will alter the powers of taxation that States enjoyed under the Constitution and usher in a uniform consumption-based tax structure across the land for almost all goods and services. Only potable alcohol is proposed to be excluded from the GST’s ambit, according to Finance Minister Arun Jaitley, with petroleum products set to be pegged at a zero per cent rate till such time as the proposed GST Council reaches an agreement with the States and the Centre on an acceptable framework for taxation. That the two main players — the Bharatiya Janata Party and the Congress — were able to narrow their differences restores a degree of faith in the capacity of the political class to put the nation above petty self-serving interests. While it is a pity that consensus took so long to forge, both parties deserve a measure of credit for seeing the legislation through. The BJP for being accommodative in the face of reservations about specific provisions, which was accompanied by a much-needed change in tack in dealing with the Opposition. And the Congress, which became increasingly isolated on the issue and risked appearing cussedly obstructionist, for overcoming its desire to pay the BJP back in its own coin.

The GST will usher in a nationwide common market and subsume a multiplicity of Central and State taxes; but this is still some time and several smaller challenges away. Indeed, the Centre, the States, the yet-to-be-created GST Council and the vendor tasked with creating the IT backbone for the administration of the new tax regime have a clear challenge if they are to meet the April 1, 2017 deadline. Among the tasks ahead is the drafting of the specific Central and State GST laws that will again need to be passed in Parliament and State legislatures. Vital decisions, such as the setting of a proposed revenue-neutral standard rate, remain; these can have far-reaching cost and price implications for producers and consumers. These would also have revenue ramifications for governments. And while the Centre may be tempted to opt to speed up matters by moving the GST legislations as Money Bills to bypass any debate over specific provisions in the Rajya Sabha, it would be well-advised to avoid that path to see that the spirit of hard-won consensus is not frittered away in another round of political one-upmanship.

GST bill passed: Here are the winners and losers The goods and services tax will undoubtedly give India a facelift on the taxation front

GST bill passed: Here are the winners and losers

The goods and services tax will undoubtedly give India a facelift on the taxation front

he goods and services tax (GST) will undoubtedly give India a facelift on the taxation front. Of course, the suspense over the rate at which GST will be levied remains.

While it is difficult to quantify the impact on various sectors until the government announces the final GST rate, analysts and economists are assuming a standard rate of 17-18%.
If that happens, then companies in the manufacturing sector are expected to benefit, while those in the services sector stand to lose.
Also read: GST: The road ahead for industry
Of course, even though the bill has been passed in the current session, it will be another couple of years until GST is fully rolled out. As such, it’s premature to conclude how this reform will impact stock prices in the near term.
In any case, there are various other factors that impact stock prices, and while GST is an important reform, analysts are more keen about indicators of the economic recovery.
The winners
1) Automobiles: The auto sector is likely to emerge as a winner from GST implementation, provided the rate is below the total tax incidence for the sector (>27%). GST is expected to lead to lower prices for the end user and thus boost demand. Companies to benefit include Maruti Suzuki India Ltd and Mahindra and Mahindra Ltd. Both stocks have outperformed the market so far this fiscal year. Analysts believe some impact of GST could well be priced in at current levels.
2) Multiplexes: Multiplex companies pay around 25% of the average revenue per user (average ticket price + food and beverage spends, or F&B per head) as taxes, according to Kotak Institutional Equities. This is in three broad areas—(a) entertainment tax on net ticket sales, (b) Value-added tax (VAT) on F&B, and (c) service tax on input costs for which there is no set-off available. No wonder, GST is expected to reduce the tax burden and improve the Ebitda (earnings before interest, taxes, depreciation and amortization) margin. Stocks of PVR Ltd and Inox Leisure Ltd have increased 50% and 30%, respectively, so far in FY17, suggesting the shares are factoring in most of the positives. Of course, there are other factors that are driving these shares.
3) FMCG: If the GST rate is less than or equal to 18%, then it should be positive for most consumer goods companies, point out analysts at Citigroup. Of course, much depends on which exemptions are retained and which of the current excise benefits are “grandfathered”. In addition, there will be gains from warehouse rationalization and a better competitive position vis-à-vis unorganized firms. But gains aren’t expected to be massive and will occur gradually; as such, stocks may not react dramatically just because the GST bill is passed.
If cigarettes attract a higher tax incidence under the GST regime, then it will have an adverse impact on companies such as ITC Ltd.
4) Logistics: Supply chain management is expected to get a boost and transit time will reduce. Further, interstate trade barriers would reduce and eventually result in better interstate commerce. Consolidation of warehousing facilities is expected. Stocks that may benefit include Container Corp. of India Ltd and Transport Corp. of India Ltd. Citi’s analysts point out that the better operating environment could lead Gateway Distriparks Ltd to enter the domestic business.
5) Cement: The anticipated 18% GST rate is far lower than what cement companies are paying currently, and analysts expect cement makers to pass on the benefits to consumers as demand continues to remain weak. Whether this alone will help revive demand is another matter altogether.
6) Retail: The opportunity to set off input tax credit on rent is expected to aid margin expansion. But retail companies are facing other problems. Shoppers Stop Ltd’s stock has underperformed the benchmark Sensex this year, as underlying demand remains weak and like-to-like sales growth has been lacklustre.
Also read: GST reforms: Are companies prepared?
The losers
As mentioned earlier, services-related sectors are expected to be negatively impacted, as they may have to shell out higher taxes than what they are currently paying. Service tax rate is currently at about 15%.
1) Telecom: The moderate rise in tax outgo could hit demand and revenues. But there would be a simultaneous set-off of taxes (Cenvat, or central VAT) paid on certain capex inputs. So, the impact would be marginal. But telcos have bigger problems. Data volumes are slowing and the Reliance Jio Infocomm Ltd launch can worsen matters.
2) Consumer staples and discretionary: Many consumer staples currently have low indirect tax. Hence, GST will be negative for companies in food processing, bakery, edible oil, dairy segments and personal care items. Quick service restaurants too will be adversely impacted. Kotak Institutional Equities sees some impact on Britannia Industries Ltd and ITC.