Mission Mains 2021 - GS Paper 2 & 3
This is for those of you who are planning to write Mains 2020 ( subject to prelims happening ) and we clearing it. Nevertheless, in this time of lull, I am iniviting all people to come up with Mains related study material and Daily Q & A. I will be regular with the newspaper, my self and try to post questions. Anyone else interested, please contribute!
Let us have separate thread for GS Paper 4 & Essay as GS 2 and 3 are largely from current, and we can pool lot of questions.
If @root can help to pin it up, then we can begin with a small group.
Will help in daily accountability.
Adding to this discussion ( assuming people will write answer )
1 The division of taxation powers in India undermines both “cooperative” and “federalism” . Critically examine.
Those if you reading Hindu or IE must be able to answer it! Just suggest points!
I am no knight. Do not call me Sir|Philosophy behind ForumIAS
sonder,Casablanca@Neyawn nor??
corrected. I was framing it differently. Then made a change
I am no knight. Do not call me Sir|Philosophy behind ForumIAS
Adding to this discussion ( assuming people will write answer )
1 The division of taxation powers in India undermines both “cooperative” and “federalism” . Critically examine.
Those if you reading Hindu or IE must be able to answer it! Just suggest points!
Why it isn’t co-operative
A. Lack of consultation with all States on deciding taxation matters. Eg imposition of wealth tax
B. No alternative to appeal against recommendations of Finance Commission
Why it is against federal principle
A. GST took away autonomy of States to impose tax. Eg Sales tax
B. Creates dependency of State to the Centre. Eg Dues and compensation pending under GST yet not given to States
C. Lack of effective devolution of tax share and autonomy to raise revenue via tax , to local bodies, as noted by 2nd ARC
Counter view- Article 269A presence of GST council for co-operation to decide all matters via vote
- Inter state council discussed Puncchi Commission recommendation, including those on taxation
- Untied 42% devolution of tax share to States post 14th Finance Commission
Way forward
A. Timely release of GST dues and compensation by the Centre
B. Increasing autonomy of State to levy tax. Eg Sin tax by Kerala
C. Empowering State Finance Commission to ensure fiscal federalism between state and local body
@goldberry I’m supportive of this initiative, ready to contribute.
Haven’t done answer writing practice since very long time plus still have to revise polity again but yet I tried to answer this question with whatever I knew as I was asked to do so. Apologies for bad handwriting. Whoever is going to review the answer, please score it out of 15 marks. Thanks!
Correction:-
way forward
3rd point- Stop ignoring certain demands of states, start accepting them and letting them put their woes and concerns on discussion tables such as the GST council.
Casablanca,goldberryUnder Article 269A, GST Council (and not FC) has the powers to recommend on sharing of taxes from inter-tax trade.But Article 270 provides that taxes levied under GST laws will be shared in the matter prescribed by provisions under this Article ie, FC (and not GST Council). Its recommendations are placed before Parliament and States have no role in the debate.Also, there is no provision for an aggrieved state to challenge the FC report.Federation face 2 imbalances:1. Vertical imbalance: more tax revenue to Central govt, while more responsibilities to state govts.2. Horizontal imbalance: differential growth rates among States and their developmental status in terms of social or infrastructure capital.Suggestions:1. NITI Aayog should promote accelerated growth in States that are lagging and overcome their historically conditioned infrastructure deficit, thus reducing the developmental imbalance.2. It should also create an independent evaluation office which will monitor and evaluate the efficacy of the utilisation of grants.3. Ushering in Decentralisation. Seriousness to be accorded to the 73rd and 74th constitutional amendments. For this, should create a seperate tier 3 consolidated fund.4. Flawless or Model GST. It needs further simplification and extended coverage. GST council should create its own Secretariat with independent experts and staffs to undertake reforms in an informed and transparent manner.
Two things in particular I like about your answer
1. The conceptual clarity displayed in your introduction (269A v/s 270)
2. Keyword used- vertical and horizontal imbalance
Deepak802,goldberryWould like to add few points why cooperative federalism is not being followed in taxation
- States have little rights left to raise money by taxation with GST kicking in
- dependency on GST revenue devolved from center which takes time
- the minimum tax revenue guarantee that center made to states for 5 years after GST was accpeted by states - the center has fallen back on that promise
- states raising funds is also challenge because :-
- Center's approval needed to raise borrowing limit
- center needs to stand as guarantor, thus dependence on center
- high rate of interest for loans by states because no clear revenue projection of states (union has incoe tax, coporrate tax etc )
- Thus dependent on Center to borrow from market and handover to states.
- Some critiques argue that "cooperation" in "federalism" works when same party is in state and center. But a single monolithic taxation structure like GST is not viable in a economicallly and politically divergent set up - where states have popular mandate, and have little money to meet those promises.
mickeyviru,goldberryThe division of taxes in india is mainly done by two constitutional bodies- FC and GST council. Though both try to ensure fiscal federalism, but only GST council is able to represent states in its composition.
Features which undermine the "cooperative and "federalism" are -
1. The FC composition
2. FC recommendations cannot be challenged by the aggrieved state.
3. Article 293
4. In the pre GST era- states could raise additional funds by means like - increasing the sales tax etc. but currently not allowed and thus center dependency.
5. Under GST regime - center supposed to be releasing the funds to state periodically, but this is being delayed.
6. Taxes levied under the GST laws to be shared as per prescribed by the Article 270(2)- subject matter of FC.
7. Parameters for the division of the taxes between states - decided by FC - states views undermined. E..g. the southern states plight over change of base year for population
However, GST council in certain ways, tries to ensure the Cooperative federalism -
1. By ensuring states participation by vote in the decision making.
2. To make recommendations on inter state trade - coming under the GST council ambit.
3. If centre refuses to make allocations as per the recommendations of GST council - the states can approach the supreme court.
Way forward -
1. GST council can develop a pro active, independent body to ensure timely release of funds from centre to states.
2. A robust dispute redressal mechanism can be set up by GST council.
3. More efficient vertical as well as horizontal devolution of funds can be ensured.
4. States to be allowed to raise funds from international source under special circumstances.
5. States efforts like maintenance of forests, population control measures etc. to be incentivised and their historical aspects to be taken care of while allocating funds.
The current COVID 19 situation requires a decentralised approach. The center is such extraordinary times must take steps to ensure that states can raise the funds locally and thus the states wont have to rely on non-essential commodities like liquor to tackle a health crisis.
The division of taxes in india is mainly done by two constitutional bodies- FC and GST council. Though both try to ensure fiscal federalism, but only GST council is able to represent states in its composition.
Features which undermine the "cooperative and "federalism" are -
1. The FC composition
2. FC recommendations cannot be challenged by the aggrieved state.
3. Article 293
4. In the pre GST era- states could raise additional funds by means like - increasing the sales tax etc. but currently not allowed and thus center dependency.
5. Under GST regime - center supposed to be releasing the funds to state periodically, but this is being delayed.
6. Taxes levied under the GST laws to be shared as per prescribed by the Article 270(2)- subject matter of FC.
7. Parameters for the division of the taxes between states - decided by FC - states views undermined. E..g. the southern states plight over change of base year for population
However, GST council in certain ways, tries to ensure the Cooperative federalism -
1. By ensuring states participation by vote in the decision making.
2. To make recommendations on inter state trade - coming under the GST council ambit.
3. If centre refuses to make allocations as per the recommendations of GST council - the states can approach the supreme court.
Way forward -
1. GST council can develop a pro active, independent body to ensure timely release of funds from centre to states.
2. A robust dispute redressal mechanism can be set up by GST council.
3. More efficient vertical as well as horizontal devolution of funds can be ensured.
4. States to be allowed to raise funds from international source under special circumstances.
5. States efforts like maintenance of forests, population control measures etc. to be incentivised and their historical aspects to be taken care of while allocating funds.
The current COVID 19 situation requires a decentralised approach. The center is such extraordinary times must take steps to ensure that states can raise the funds locally and thus the states wont have to rely on non-essential commodities like liquor to tackle a health crisis.
These are very good points. What is your source?
The division of taxes in india is mainly done by two constitutional bodies- FC and GST council. Though both try to ensure fiscal federalism, but only GST council is able to represent states in its composition.
Features which undermine the "cooperative and "federalism" are -
1. The FC composition
2. FC recommendations cannot be challenged by the aggrieved state.
3. Article 293
4. In the pre GST era- states could raise additional funds by means like - increasing the sales tax etc. but currently not allowed and thus center dependency.
5. Under GST regime - center supposed to be releasing the funds to state periodically, but this is being delayed.
6. Taxes levied under the GST laws to be shared as per prescribed by the Article 270(2)- subject matter of FC.
7. Parameters for the division of the taxes between states - decided by FC - states views undermined. E..g. the southern states plight over change of base year for population
However, GST council in certain ways, tries to ensure the Cooperative federalism -
1. By ensuring states participation by vote in the decision making.
2. To make recommendations on inter state trade - coming under the GST council ambit.
3. If centre refuses to make allocations as per the recommendations of GST council - the states can approach the supreme court.
Way forward -
1. GST council can develop a pro active, independent body to ensure timely release of funds from centre to states.
2. A robust dispute redressal mechanism can be set up by GST council.
3. More efficient vertical as well as horizontal devolution of funds can be ensured.
4. States to be allowed to raise funds from international source under special circumstances.
5. States efforts like maintenance of forests, population control measures etc. to be incentivised and their historical aspects to be taken care of while allocating funds.
The current COVID 19 situation requires a decentralised approach. The center is such extraordinary times must take steps to ensure that states can raise the funds locally and thus the states wont have to rely on non-essential commodities like liquor to tackle a health crisis.
These are very good points. What is your source?
@goldberry Thanks.
The following Hindu articles + some basic info. were the source-
https://www.thehindu.com/opinion/lead/states-cannot-be-left-to-the-centres-mercy/article31585516.ece
https://www.thehindu.com/opinion/op-ed/a-reality-check-on-cooperative-federalism/article25487968.ece
#2 Write a critical note on challenges to Self-reliance in the context of India's economy.
In an attempt to work on the famous saying of Winston Churchill "never let a good crisis go to waste", India has embarked upon a bold program of Self-reliance in the midst of Covid-19. The program is named 'Atma Nirbhar Bharat Abhiyaan'.
Components of Self-reliance -
Economy, Infrastructure, Systems, Demography, Demand
Challenges in achieving Self-reliance -
1. Economic challenges - land acquisition, complex and rigid labor laws, low investment in R&D, lack of innovation and push towards entrepreneurship
2. Infra challenges - lack of forward and backward linkages for the industry, investment, technology
3. Systemic challenges - tax structure, financial system, supply chains, technology access and use, governance-related red-tapism and complex law structure, financial literacy
4. Demographic challenges - low employability, lack of skills, quickly rushing through the golden period of demographic dividend
5. Demand related challenges - As per Household Consumer Expenditure in India Survey conducted by NSO -consumer spending has declined for the first time in four decades in 2017-18
A clear path to work on aspects related to land, labor, liquidity, and laws will prove to be a big boost to attract investment and serve as a strong foundation of our Make In India program. Promoting local will help revive the demand that will eventually help achieve a Self-reliant India.
Deepak802,Some points which haven't been mentioned above that I'd like to share
1. Division of taxation subjects is enshrined in constitution. And amendments to it can only be initiated by parliament, with states role limited only to ratification.
2. Finance commission is appointed by sole discretion of centre through the President, along with its terms of reference. States thus remain a beneficiary rather than active participants in sphere of financial federalism. Recent example of where the tenure of 14th Finance Commission was extended and it's recommendations for Fy20 along with FY21-26 can be seen as an act of unilaterlalism by centre.
3.While GST has emerged as a parallel mechanism for devolution of some indirect taxes, Finance commission's ability to balance requisite financial resources for state suffers due to lack of synergy between the two constitutional bodies.
4. The effective Veto of Centre due to 1/3rd of weighted votes in GST council tilts the balance in favour of centre.
5.the borrowing limits on states along with restrictions over Fiscal deficit has hindered the ability of states to develop according to their needs, with capital expenditure component suffering in order to meet these restrictions.
6. The provisions for Compensation to states within GST structure for 5 years have not been given any constitutional legitimacy, and in absence of dispute resolution structure as mandated, the states remain vaguely placed to seek their rightful compensation.
Counter view
1. Despite the provision of decision making in GST council through voting, most of the decisions till now have been taken by consensus.
2. President is the representative of entire nation and as such, Finance commission being constituted through him gives it federal sanctity.
3. Although states cannot initiate amendments to taxation provisions of constitution, the representatives of respective states in Parliament are entitled to do so, and can even achieve success by securing wider cooperation across party lines.
4. States have been given limited fiscal space to ensure that regional interests don't end creating disturbances in national economic framework.
Suggestions
1. Earlier the planning commission had considerable overlap with Finance Commission in terms of membership. Similar arrangement should be pursued for GST Council as well allowing opportunity of representation to states as well
2.Finance Commission should be made a permanent body so that it can factor in variations in GST collection and make annual provisions for devolution of finances to state accordingly.
3.States have to be encouraged to build upon their existing taxation base and increase revenue collection.inclusion of performance grants within the terms of reference for 15th FC are a step in the right direction
4.Since at present states provide employment to 1.5 times as compared to centre, and bears 58% of total government expenditure, the shift in greater financial autonomy as well as ability towards state is only inevitable. Therefore centre should try to prepare states for these greater challenges as well.
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