Note4Students
From UPSC perspective, the following things are important :
Prelims level: 101st Constitutional Amendment Act
Mains level: Paper 2- Fiscal federalism
Context
On May 19, in Union of India vs Mohit Minerals, the Supreme Court of India delivered a ruling which is likely to have an impact far wider than what the Centre might have imagined when it brought the case up on appeal.
Background
- At stake was the validity of a levy imposed on importers, of Integrated Goods and Services Tax (IGST) on ocean freight paid by foreign sellers to foreign shipping lines.
- The Gujarat High Court had declared the tax illegal.
- The Supreme Court affirmed the ruling and held that the levy constituted double taxation — that is, that the importer, which was already paying tax on the “composite” supply of goods, could not be asked to pay an additional tax on a perceived “service” that it may have received.
Why the ruling could transform the future of fiscal federalism in India
- Equal powers to legislate on GST: While delivering the judgement, the Supreme Court held that both Parliament and the State legislatures enjoy equal power to legislate on Goods and Services Tax (GST).
- The Court said that the Goods and Services Tax Council’s recommendations were just that: recommendations that could never be binding on a legislative body.
- Until now, governments across India have treated the GST Council’s recommendations — even where they disagreed with them — as sacrosanct, because they believed that this was indeed the law.
- According to the Court, State legislatures possess the authority to deviate from any advice rendered by the GST Council and to make their own laws by asserting, in the process, their role as equal partners in India’s federal architecture.
- Conflicting taxation regimes: Because of the ruling, the State governments will be free to exercise independent power to legislate on GST.
- It is possible that this might lead to conflicting taxation regimes, with the idea of ‘One Nation One Tax’ rendered nugatory.
- Constitutional power cannot be limited through statute: The Court’s ruling does not mean that a legislature — whether Parliament or the States’ — cannot through statutory law make the Council’s recommendations binding on executive bodies.
- But a constitutional power, in the Court’s ruling, can never be limited through statute. Such curbs must flow only from the Constitution.
- And in this case, in the Court’s analysis, no restrictions on legislative power can be gleaned on a meaningful reading of the Constitution.
Background of 101st constitutional Amendment
- Unification of tax administration: When, in July 2017, the Union government introduced the GST regime through the 101st constitutional Amendment, it did so based on an underlying belief that tax administration across India needed unification.
- To give effect to this idea, many entries in the State list of Schedule VII of the Constitution were either deleted or amended.
- A power to legislate on GST was inserted through a newly introduced Article 246A.
- No longer could State governments legislate on sale or purchase of goods barring a few exceptions, such as petroleum and liquor through the ordinary legislative route.
- GST Council: In addition, the 101st Amendment also established, through Article 279A, a GST Council.
- The Council was given the power to “make recommendations to the Union and States” on several different matters.
Implications of the judgement
- The use of the word “recommendations” suggested on the one hand that its decisions would be advisory, at best.
- But, at the same time, the fact that Article 279A directed the establishment of a mechanism to adjudicate disputes between governments on decisions taken by the Council suggested that those governments would, in fact, be bound by any advice rendered to them.
- GST would be in jeopardy: If the former reading was to be deployed, the purpose behind the introduction of a common GST would be in jeopardy.
- But the latter interpretation effectively entailed the destruction of the well-laid plans of the Constituent Assembly.
- Fiscal responsibilities that had been divided with much care and attention between the Union and the States would now stand dissolved.
Federal compact
- Although States had until now proceeded on a tacit belief that the GST Council’s recommendations were binding, such an approach, in Justice Chandrachud’s words, would run counter both to the express words of the Constitution and the philosophical values underlying the language deployed.
- Article 246A, which was introduced by the 101st Amendment provides concomitant power both to the Union and to the State governments to legislate on GST.
- It does not discriminate between the two in terms of its allocation of authority.
- That allocation, according to the Court, cannot be limited by a reading of Article 279A, which establishes a GST Council, and which treats the Council’s decisions as “recommendations”.
Conclusion
GST was conceived as a product of what some described as “pooled sovereignty”. But perhaps it is only in an administrative area, animated by contestation, where we can see synergy between different sovereign units, where our nation can take a genuine turn towards a more “cooperative federalism”.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: GST collection
Mains level: Paper 3- Increased GST collection
Context
There has been a remarkable upswing in GST collections in recent months. Collections touched a record high of Rs 1.67 lakh crore in April.
GST
What are the reasons for increased collection?
- 1] Inflation: First, the sharp rise in inflation has played a significant role.
- Notwithstanding concerns over the unevenness of the economic recovery, in nominal terms, the economy grew by 19.4 per cent in 2021-22 as per the second advance estimates.
- Deflating GST collection suggests that a large part of the recent increase in collections is driven by rising prices.
- 2] Higher imports: Part of the overall increase in collections can be traced to higher imports.
- Higher buoyancy: Even if one is to exclude the revenue accruing from imports, the rise in GST collections has outstripped GDP growth, indicating higher buoyancy.
- 3] Tightening of the rules: In order to improve compliance levels, the GST Council has been tweaking the rules to tighten the system.
- Returns filed have gone up, while the number of non-filers and those who delay filing have fallen.
- Alongside, the administration has also taken steps to tackle the menace of fake invoices by placing restrictions on the quantum of input tax credit that can be used to pay of tax obligations.
- The introduction of e-invoicing has also played a role.
- Until recently, this was being implemented for firms with a turnover of more than Rs 50 crore.
- From April, this process has been extended to firms above Rs 20 crore.
- The incremental gains from bringing smaller firms into its ambit, while consequential, are unlikely to be of the same order.
- 4] Industrial activity: The higher collections in April 2022 seem to be led by increase in industrial activity. This is borne by strong growth in collections in states such as Maharashtra, Karnataka and Odisha which house lot of industries. Relatively tepid growth in more populous states such as Bihar (-2.47 per cent), West Bengal (7.80 per cent) and Jharkhand (4.86 per cent) shows that the GST collections was not propelled by revival in private consumption.
- The real challenge lies in improving compliance levels across the entire spectrum of industries where inputs/raw materials are sourced largely from the informal sector.
- 5] Changing the structure of the economy: The formalisation of firms, the growing concentration of economic power in the hands of a few, imply that for the same level of output, the tax paid will be higher.
Suggestion
- Increase tax rate: Around two-fifths of the taxable value (or turnover) falls under the 18 per cent slab as per research by some analysts.
- This implies that simply merging the 12 per cent and the 18 per cent slab as some have been suggesting would lead to a revenue loss.
- Before opting for such adjustments, the GST Council must first ascertain the potential revenue (net of cess and refunds) at varying levels of compliance, tax rates and exemptions afforded.
- Now, as per some estimates presented to the 15th Finance Commission, with existing exemptions in place, the current tax regime should ideally yield revenues equivalent to 8.23 per cent of GDP.
- In another scenario, even if existing exemptions are kept in place, and if a single rate of 14 per cent is levied, then collections should rise to 8.93 per cent.
Conclusion
Considering the current economic situation, now may not be an opportune moment to raise taxes. But there is no getting around it. Both the Centre and the states need to work towards this.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: Plight of the sex workers in India
In a significant order recognising sex work as a “profession”, the Supreme Court has directed that police should neither interfere nor take criminal action against adult and consenting sex workers.
What did the Supreme Court say?
- Sex Work is a profession whose practitioners are entitled to dignity and equal protection under law.
- Criminal law must apply equally in all cases, on the basis of ‘age’ and ‘consent’.
- It need not be gainsaid that notwithstanding the profession, every individual in this country has a right to a dignified life under Article 21 of the Constitution, the court observed.
- The order was passed after invoking special powers under Article 142 of Constitution.
A caution to the police
- It is clear that the sex worker is an adult and is participating with consent, the police must refrain from interfering or taking any criminal action.
- The Bench ordered that sex workers should not be “arrested or penalised or harassed or victimised” whenever there is a raid on any brothel.
- Since voluntary sex work is not illegal and only running the brothel is unlawful.
- Basic protection of human decency and dignity extends to sex workers and their children, the court noted.
- A child of a sex worker should not be separated from the mother merely on the ground that she is in the sex trade, the court held.
- Further, if a minor is found living in a brothel or with sex workers, it should not be presumed that the child was trafficked.
Sexual crimes against sex workers
- The court ordered the police to not discriminate against sex workers who lodge a criminal complaint of offence committed against them is of a sexual nature.
- Sex workers can also be victims of sexual assault should be provided every facility including immediate medico-legal care.
- The court said media should take “utmost care not to reveal the identities of sex workers, during arrest, raid and rescue operations.
Sex work in India
- According to the Indian Penal Code (IPC), prostitution in its broader sense is not really illegal per se.
- But there are certain activities which constitute a major part of prostitution that are punishable under certain provisions of the act, which are:
- Soliciting prostitution services in public places
- Carrying out prostitution activities in hotels
- Indulging in prostitution by arranging for a sex worker
- Arrangement of a sexual act with a customer
Various issues faced by Sex Workers
- Stigma and Marginalization: This is experienced as the major factor that prevents women in sex work from accessing their rights.
- Denial of basic amenities: Due to this discrimination, women in sex work have been denied safety, proper healthcare, education and, most importantly, the right to practice the business of making money from sex.
- Risks of violence: People in sex work are not only at a higher risk for violence, but they are also less likely to get protection from the police—often the very perpetrators of this violence.
- Backwardness: Illiteracy, ignorance and fear of the medical establishment make it difficult for women to access healthcare.
- Health hazards: Current discourse on HIV/AIDS has served to further stigmatize sex workers by labeling them as “vectors” and “carriers” of the disease.
Protection against forceful sex work
- The Immoral Traffic (Prevention) Act, 1986 is an amendment of the original act.
- As per this act, prostitutes are to be arrested if they are found soliciting their services or seducing others.
- Furthermore, call girls are prohibited from making their phone numbers public.
- They can be punished for up to 6 months along with penalties if found doing so.
Constitutional protection
Article 23 of the Indian Constitution, amended in 2014, includes the following provisions:
- Prohibition of human trafficking and forced labour.
- Traffic in human beings and bears and other similar forms of forced labour are prohibited and any contravention of this provision shall be an offence punishable in accordance with the law.
- Nothing in this article precludes the State from imposing compulsory service for public purposes, and the State shall not discriminate solely on the basis of religion, race, caste, or class, or any combination thereof, in imposing such service.
So, where does India stand?
- Prostitution is not illegal in our country, but soliciting and public prostitution are.
- Owning a brothel is also illegal, but because places like GB Road are already in place, these laws are rarely enforced.
What will change in India if the Centre accepts the court’s direction?
- Sex workers will be accorded equal legal protection.
- If a sex worker reports a criminal/sexual or other type of offence, the police will take it seriously and act in accordance with the law.
- If a brothel is raided, the sex workers involved will not be arrested, penalised, harassed, or victimised.
- Any sex worker who is a victim of sexual assault will be given all of the same services as a survivor of sexual assault, including immediate medical attention.
- Police will be required to treat all sex workers with dignity and not verbally or physically abuse them, subject them to violence, or coerce them into any sexual activity.
Where do other countries stand?
Some countries choose to outright ban the practice, while others have attempted to regulate prostitution and provide health and social benefits to sex workers.
Here are a few examples of countries where prostitution is legal:
- New Zealand: Prostitution has been legal since 2003. There are even licenced brothels operating under public health and employment laws, and they get all the social benefits.
- France: Prostitution is legal in France, though soliciting in public is still not allowed.
- Germany: Prostitution is legalised and there are proper state-run brothels. The workers are provided with health insurance, have to pay taxes, and they even receive social benefits like pensions.
- Greece: The sex workers get equal rights and have to go for health checkups as well.
- Canada: Prostitution in Canada is legal with strict regulations.
Conclusion
- While sex worker collectives have shown tremendous progress in asserting the rights of sex workers across India, they face an uphill battle as the country continues to foster a globalized economy.
- In the globalized world, sex work will become more institutionalized, functioning through escort services, and will no longer need traditional street brothels.
- Legislators needs to ensure all rights to the sex workers at par with citizens.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: RTI Act
Mains level: Exemptions to the RTI
Veterans of the Indian Armed Forces have urged PM against exempting defense services from purview of RTI (Right to Information) Act, 2005.
Why in news?
- Last year, late CDS Rawat had urged the government making a pitch for defence services to be exempted from the RTI Act.
- He had stated that none of the Central Armed Police Forces (CAPF) are under its purview and defence services, being even more sensitive, should be fully exempted too.
What is RTI?
- RTI is an act of the parliament which sets out the rules and procedures regarding citizens’ right to information.
- It replaced the former Freedom of Information Act, 2002.
- Under the provisions of RTI Act, any citizen of India may request information from a “public authority” (a body of Government or “instrumentality of State”) which is required to reply expeditiously or within 30.
- In case of the matter involving a petitioner’s life and liberty, the information has to be provided within 48 hours.
- The Act also requires every public authority to computerize their records for wide dissemination and to proactively publish certain categories of information so that the citizens need minimum recourse to request for information formally.
Constitutional status of RTI
- Since RTI, is implicit in the Right to Freedom of Speech and Expression under Article 19 of the Indian Constitution, it is an implied FR.
- These are backed by the right to constitutional remedies that is, the right to approach the supreme court and high court under Article 32 and 226 respectively in case of infringement of any of FRs.
Benefits of RTI
- Greater accessibility of information: A person can seek information from any public authority in the form of copies, floppy disks, sample material etc under RTI.
- Efficient governance: RTI Act helps us in knowing the efficiency of the government’s functioning.
- Citizen’s participation: Information under RTI can be sought easily by requesting the public officer and assistant public officer in any public authority.
- Government obligation: Obtaining information from any public authority is obligatory for them.
- Maintenance of public record: Under RTI Act, it is the duty of public authorities to maintain records for easy access and to publish within 120 days the name of the particular officers who should give the information and in regard to the framing of the rules, regulations etc.
- Empowerment of Citizens: Every citizen has been empowered to be informed about anything that affects their life directly or indirectly.
Why do Veterans want RTI?
- The RTI has remained a powerful tool with the veterans and serving community to obtain information and documents concerning their service and pensioner issues.
- RTI Act has ensured maximum transparency in official establishments dealing with such cases.
- Even innocuous documents such as medical board proceedings concerning disabled soldiers and old service records of veterans are only made available through the RTI Act.
- Requesting that defence services are not be placed in Schedule 2 of the RTI Act, 2005, the lobby said that adequate protection is already available in Sections 8 and 9 of the Act.
- Armed forces can hold back information related to operational and security-related issues.
Necessity for RTI in armed forces
- Any such move will be a blow to transparency and will lead to an exponential increase in litigation and grievances.
- And any irregularities in defence procurements would also go under the carpet, besides massive discrepancies in promotions.
- Already they are so opaque and have faced so many strictures by the courts.
- Denying such a right of a powerful public-oriented tool to military personnel, veterans, military widows and their families would place them at a sharp disadvantage compared to citizens.
- This would also result in litigation blast with affected persons approaching judicial forums for minor issues.
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From UPSC perspective, the following things are important :
Prelims level: Green Hydrogen
Mains level: National Hydrogen Mission
India aspires to emerge as the leader of green hydrogen by taking advantage of the current energy crisis across the globe.
Why in news?
- Oil India Limited (OIL) has commissioned India’s first 99.99% pure green hydrogen plant in eastern Assam’s Jorhat.
- Powered by a 500 KW solar plant, the green hydrogen unit has an installed capacity to produce 10 kg of hydrogen per day and scale it up to 30 kg per day.
What is Hydrogen?
- Hydrogen is the lightest, simplest and most abundant member of the family of chemical elements in the universe.
- It is colourless, odourless, tasteless, non-toxic and highly combustible gaseous substance.
What is Green hydrogen?
- Green hydrogen is the one produced with no harmful greenhouse gas emissions.
- It is made by using clean electricity from surplus renewable energy sources, such as solar or wind power, to electrolyse water.
- Electrolysers use an electrochemical reaction to split water into its components of hydrogen and oxygen, emitting zero-carbon dioxide in the process.
- Green hydrogen currently makes up a small percentage of the overall hydrogen, because production is expensive.
Why is India pursuing green hydrogen?
- Under the Paris Agreement of 2015, India is committed to reducing its greenhouse gas emissions by 33-35% from the 2005 levels.
- It is a legally binding international treaty on climate change with the goal of limiting global warming to below 2°C compared to pre-industrial levels.
- At the 2021 CoP in Glasgow, India reiterated its commitment to move from a fossil and import-dependent economy to a net-zero economy by 2070.
- India’s average annual energy import bill is more than $100 billion .
- The increased consumption of fossil fuel has made the country a high CO2 emitter which accounts for nearly 7% of the global CO2 burden.
Various policy moves
- In order to become energy independent by 2047, the government stressed the need to introduce green hydrogen as an alternative fuel that can make India the global hub and a major exporter of hydrogen.
- The National Hydrogen Mission was launched on August 15, 2021, with a view to cutting down carbon emissions and increasing the use of renewable sources of energy.
How much green hydrogen is India producing?
- India has just begun to generate green hydrogen with the objective of raising non-fossil energy capacity to 500 gigawatts by 2030.
- It was on April 20, 2022 that the public sector OIL, which is headquartered in eastern Assam’s Duliajan, set up India’s first 99.99% pure green hydrogen pilot plant.
- Research and development efforts are ongoing for a reduction in the cost of production, storage and the transportation of hydrogen.
What are the advantages of hydrogen as a fuel?
- Hydrogen can be used to produce electricity using fuel cells.
- Hydrogen, thus, can act as an energy storage device and contribute to grid stability.
- The oxygen, produced as a by-product (8 kg of oxygen is produced per 1 kg of hydrogen), can also be monetised by using it for industrial and medical applications or for enriching the environment.
Limitations to Hydrogen
- Despite being the most abundant element in the Universe, hydrogen does not exist on its own so needs to be extracted from water via electrolysis or separated from carbon fossil fuels.
- Hydrogen fuel cells need huge investment to be developed to the point where they become a genuinely viable energy source.
- This will also require the political will to invest the time and money into development in order to improve and mature the technology.
- Precious metals such as platinum and iridium are typically required as catalysts in fuel cells meaning unfeasibly high cost.
- There are also barriers around regulatory issues concerning the framework that defines commercial deployment models.
- Storage and transportation of hydrogen is more complex than that required for fossil fuels due to its high inflammability.
Back2Basics: Colours spectrum of Hydrogen
(1) Green hydrogen
(2) Blue hydrogen
- It is produced mainly from natural gas, using a process called steam reforming, which brings together natural gas and heated water in the form of steam.
- The output is hydrogen – but also carbon dioxide as a by-product.
- That means carbon capture and storage (CCS) is essential to trap and store this carbon.
- Blue hydrogen is sometimes described as ‘low-carbon hydrogen’ as the steam reforming process doesn’t actually avoid the creation of greenhouse gases.
(3) Grey hydrogen
- Currently, this is the most common form of hydrogen production.
- Grey hydrogen is created from natural gas, or methane, using steam methane reformation but without capturing the greenhouse gases made in the process.
(4) Black and brown hydrogen
- Any hydrogen made from fossil fuels through the process of ‘gasification’ is sometimes called black or brown hydrogen interchangeably.
- They are the most environmentally damaging.
(5) Pink hydrogen
- Pink hydrogen is generated through electrolysis powered by nuclear energy.
- Nuclear-produced hydrogen can also be referred to as purple hydrogen or red hydrogen.
- In addition, the very high temperatures from nuclear reactors could be used in other hydrogen productions by producing steam for more efficient electrolysis or fossil gas-based steam methane reforming.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: Semiconductor industry
CEOs of AMD, Nvidia and Intel have said at different forums last year that the chip situation will remain tight for the rest of 2022.
Genesis of shortage
- After reaching its peak in 2011, the laptop market growth slowed down with the rise of alternatives such as smartphones and tablets.
- Then, the pandemic hit.
- People switched to work from home, children connected to schools through laptops, and get-togethers happened over video calls.
- This shift led to a surge in demand for laptops and tablets.
- The stay-at-home rules also made several people pick up console-based learning and gaming.
- Each of these devices were in high demand and are run on thumbnail-sized semiconductors, performing various functions on a single device.
Also read:
[Sansad TV] Perspective: Semiconductor Industry & India
What led to the production anomaly?
- Manufacturers produce them as 200mm or 300mm wafers. These are further split into lots of tiny chips.
- While the larger wafers are expensive and mostly used for advanced equipment, the devices that were in high demand needed smaller diameter wafers.
- But the manufacturing equipment needed to make them were in short supply even before the pandemic began.
- Industry is moving in the direction of 5G and advanced communication, which requires expensive wafers.
- High consumer demand for low-end products, coupled with large orders from tech firms chocked chip makers whose factories were also closed during lockdowns.
- As the industry gradually tried to pull itself out of the supply crunch, and logistical complexities have exacerbated the problem.
Impact of Ukrainian War
- Separately, Russia’s invasion of Ukraine has strained exports of essential commodities used to make chip sets.
- Moscow supplies rare materials like palladium, and Kyiv sells rare gases to make semiconductor fab lasers.
- This combination is required to build chipsets that power a range of devices, from automobiles to smartphones.
Global supply chain
- About a decade and half back, semiconductors barely drew attention from large companies that have now come to rely on the thumbnail-sized semiconductor piece.
- During this period, firms developed a system to make chip sets.
- The system was made by interconnecting several parts of the world to make a single device.
- It is what we now call as the global supply chain.
How intricate is this network?
- Semiconductor manufacturing involves roughly 25 countries in the direct supply chain, and 23 countries in allied functions, according to a joint study by Global Semiconductor Alliance and Accenture.
- The report estimates a semiconductor-based product could cross international borders about 70 times before finally making it to the end customer.
- Wafer fabrication is the most globally dispersed, with 39 countries directly involved in the supply chain and 34 involved in allied activity.
- They provide services like photolithography, etching and cleaning.
- Designing happens across 12 countries; product testing and manufacturing each are done across 25 countries.
COVID is the only raison d’être
- Supply chain dynamics back fired due to the pandemic, and the recent geopolitical events.
- When the pandemic began, carmakers stopped requesting chips from suppliers due to low demand for new vehicles.
- And now, as they ramp up production to meet consumer demand, chip makers are down on supply because they have cut deals with other industries.
- As the geopolitical events in Central Europe and production shutdowns in China continue to add pressure to the already complicated semiconductor supply chain.
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