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(PRELIMS + MAINS FOCUS)

States advised to stamp International Convention of Road Traffic

Part of: GS Prelims and GS-III – Infrastructure

In news

• The Ministry of Road Transport and Highways has advised the States and Union Territory administrations to stamp International Convention of Road Traffic of 19th September 1949 on the first page of International Driving Permit, IDP issued by them.
• Many countries ask for the validation of IDP in accordance with the International Convention of Road Traffic of 19th September 1949.

Important value additions

• The Convention on Road Traffic is commonly known as the Geneva Convention on Road Traffic.
• It is an international treaty promoting the development and safety of international road traffic by establishing certain uniform rules among the contracting parties.
• The convention addresses minimum mechanical and safety equipment needed to be on board.
• It defines an identification mark to identify the origin of the vehicle.
• The Convention was prepared and opened for signature by the United Nations Conference on Road and Motor Transport held at Geneva from 23 August to 19 September 1949. It came into force on 26 March 1952.

IFSCA Committee Report on Development of International Retail Business

Part of: GS Prelims and GS-III – Economy; Trade; Investment

In news

• The International Financial Services Centres Authority (IFSCA) Expert Committee on international retail business development has submitted its interim report.
• Aim of the Committee: To suggest how to develop international retail business in International Financial Services Centre (IFSC).

The committee suggests that the IFSC can aim at:

• Becoming a gateway to India growth story for international investors and business
• Providing Indian diaspora and individuals from Asia and Africa with a comprehensive range of financial services from the IFSC
• Serving domestic residents availing liberalized remittance scheme.

Important value additions

• The Government of India had constituted the IFSCA with Shri I. Srinivas as its Chairperson.
• Objective: To develop and regulate the financial services market in the IFSC in India; (2) To make GIFT City a global hub for international financial services on the lines of London, Hong Kong, Singapore, and Dubai.

Gujarat International Finance Tec (GIFT) City

• It is located on the banks of the Sabarmati River.
• It is India’s first operational smart city and international financial services centre.
• It was promoted by the Government of Gujarat as a Greenfield project.

Homoeopathy Central Council (Amendment) Bill, 2020 passed

Part of: GS Prelims and GS-II – Medicine

In news

• The Lok Sabha passed the Homoeopathy Central Council (Amendment) Bill, 2020 recently.
• Rajya Sabha has already passed it.

Key takeaways

• The Bill amends the Homoeopathy Central Council Act, 1973.
• It replaces the Homoeopathy Central Council (Amendment) Ordinance, 2020 which was promulgated in April 2020.
• The Act sets up the Central Council of Homoeopathy which regulates homoeopathic education and practice.
• The period for the supersession of the Central Council has been increased from two years to three years.

Indian Medicine Central Council (Amendment) Bill, 2020 passed

Part of: GS Prelims and GS-II – Medicine

In news

• The Lok Sabha passed the Indian Medicine Central Council (Amendment) Bill, 2020.
• Rajya Sabha has already passed it.

Key takeaways

• The Indian Medicine Central Council (Amendment) Bill amends the Indian Medicine Central Council Act, 1970.
• It provides for the constitution of a Central Council which regulates the education and practice of the Indian medicine system including Ayurveda, Yoga and Naturopathy.
• It replaces the Indian Medicine Central Council (Amendment) Ordinance, 2020 which was promulgated in April 2020.
• The council will be reconstituted within one year.
• In the interim period, the Central Government will constitute a Board of Governors, which will exercise the powers of the Central Council.
• The board will consist of up to ten members.

Direct Cargo Ferry Service Between India & Maldives launched

Part of: GS Prelims and GS-II – International Relations

In news

• Direct cargo ferry service between India and Maldives was recently e-launched.
• Ministry: Indian Ministry of Shipping and Ministry of Transport and Civil Aviation of Maldives
• Operated by: The Shipping Corporation of India

Key takeaways

• During its maiden voyage, a vessel from Tuticorin to Kochi on September 21, 2020, from where it will proceed to Kulhudhuffushi port in North Maldives and then to Male port.
• This ferry service shall run twice a month.
• It will provide a cost effective direct and alternate means of transportation of goods between India and Maldives.
• It will further enhance people-to-people contact and boost bilateral trade.

Domestic Systemically Important Insurers (D-SIIs)

Part of: GS Prelims and GS-III – Insurance

In news

• The Insurance Regulatory and Development Authority of India (IRDAI) has identified the Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC) and The New India Assurance Co. as Domestic Systemically Important Insurers (D-SIIs) for 2020-21.

Key takeaways

• The three public sector insurers shall raise the level of corporate governance, identify all relevant risks and promote a sound risk management culture.
• As D-SIIs, they will also be subjected to enhanced regulatory supervision.
• D-SIIs shall be listed on an annual basis.
• Size in terms of total revenue, including premium underwritten and the value of assets under management are among the parameters on which the insurers are identified.

Important value additions

• D-SIIs refer to insurers of such size, market importance and domestic and global interconnectedness whose distress or failure would cause a significant dislocation in the domestic financial system.
• Their continued functioning is critical for the uninterrupted availability of insurance services to the national economy.
• D-SIIs are perceived as insurers that are too big or too important to fail. Such a perception and the expectation of government support may amplify risk taking, reduce market discipline, create competitive distortions and increase the possibility of distress in future.

Electric buses under FAME scheme sanctioned

Part of: GS Prelims and GS-II – Policies & GS-III – Climate change; Pollution

In news

• In a big push towards electric mobility, the Government has sanctioned 670 Electric buses in various states.
• States: Maharashtra, Goa, Gujarat and Chandigarh and 241 Charging Stations in Madhya Pradesh, Tamil Nadu, Kerala, Gujarat and Port Blair under Phase-II of FAME India Scheme.

Important value additions

The FAME (Faster Adoption and Manufacture of (Hybrid and) Electric Vehicles)

• Launched by: The Ministry of Heavy Industries and Public Enterprises in 2015
• Objective: To incentivize the production and promotion of eco-friendly vehicles including electric vehicles and hybrid vehicles
• Two phases of the scheme: Phase I: started in 2015 and was completed on March 31st, 2019; (2) Phase II: started from April 1st, 2019, will be completed by March 31st, 2022.

FAME II Key Features

• It proposes to give a push to electric vehicles (EVs) in public transport.
• It seeks to encourage adoption of EVs by way of market creation and demand aggregation.
• It envisages the holistic growth of EV industry, including providing for charging infrastructure, research and development of EV technologies and push towards greater indigenization.
• The outlay of ₹10,000 crore has been made for three years till 2022 for FAME 2 scheme.
• There is also provision for setting up of charging stations for electric vehicles in India.
• The plug-in hybrid vehicles and those with a sizeable lithium-ion battery and electric motor will also be included in the scheme.
• FAME 2 will offer incentives to manufacturers, who invest in developing electric vehicles and its components.
• Eligibility to get incentive: Only buses priced up to ₹2 crore, strong and plug-in hybrids under₹15 lakh, three-wheelers under ₹5 lakh and two-wheelers under ₹1.5 lakh.

National Medical Commission (NMC) constituted

Part of: GS Prelims and GS-II – Health

In news

• The National Medical Commission (NMC), along with four Autonomous Boards was recently constituted.
• The old institution of the Medical Council of India (MCI) stands abolished.

Key takeaways

• Along with NMC, the four Autonomous Boards of UG and PG Medical Education Boards, Medical Assessment and Rating Board, and Ethics and Medical Registration Board have also been constituted.
• The Regulator is now ‘selected’ on merits, as opposed to an ‘elected’ Regulator.
• Dr S C Sharma (retd. Prof, ENT, AIIMS, Delhi) has been selected as the Chairperson for a period of three years.
• Besides the Chairperson, NMC will have 10 ex-officio members.

New ‘sonification’ project unveiled by NASA

Part of: GS Prelims and GS-III – Space

In news

• The NASA’s Chandra X-Ray Center (CXC) has unveiled a new ‘sonification’ project that transforms data from astronomical images into audio.

Important value additions

Data Sonification

• It refers to the use of sound values to represent real data.
• It is the auditory version of data visualisation.
• In NASA’s Chandra (sonification) project, for instance, data is represented using a number of musical notes.
• The birth of a star, a cloud of dust or even a black hole can be ‘heard’ as a high- or low-pitched sound.

Chandra X-ray Project

• The Chandra X-ray Observatory was launched by Space Shuttle Columbia in 1999.
• It is part of NASA’s fleet of “Great Observatories”.
• X-ray universe: It refers to the universe as observed with telescopes designed to detect X-rays.
• X-rays are produced in the cosmos when matter is heated to millions of degrees.
• Such temperatures occur where high magnetic fields, or extreme gravity, or explosive forces exist in space.
• The telescope is named after the Nobel Prize-winning Indian astrophysicist Subrahmanyan Chandrasekhar.

SAARC and CICA Meetings held

Part of: GS Prelims and GS-II – International Relations

In news

• Recently, the Foreign Ministers’ meetings of the SAARC and the Conference on Interaction and Confidence-Building Measures in Asia (CICA) took place in a virtual manner.

Key takeaways

• India called the SAARC countries to collectively resolve to defeat the scourge of terrorism, including the forces that nurture, support and encourage an environment of terror and conflict.
• Pakistan also made a detailed statement on the resolution of “long-standing disputes”
• All SAARC nations built a common stand on the need to cooperate in battling the coronavirus pandemic.

Important value additions

Conference on Interaction and Confidence-Building Measures in Asia (CICA)

• It is a multi-national forum for enhancing cooperation towards promoting peace, security and stability in Asia.
• The First Ministerial Meeting of CICA took place in September, 1999.
• It consists of 27 member nations from Asia including Afghanistan, Bangladesh, Cambodia, China, Egypt, India etc.
• Japan, Indonesia, USA etc. are some of its Observer Nations.
• Republic of Tajikistan is the CICA Chairman for the period 2018-2020.

Miscellaneous

JIMEX 2020

• The 4th edition of India – Japan Maritime bilateral exercise JIMEX, will be held in North Arabian Sea from 26 to 28 September 2020.

• It is conducted biennially between the Indian Navy and Japanese Maritime Self-Defense Force (JMSDF)
• JIMEX series of exercises commenced in January 2012 with special focus on maritime security cooperation.

Centre For Disability Sports

• Centre for Disability Sports was recently inaugurated at Gwalior, Madhya Pradesh.
• Organized by: DEPwD, Ministry of Social Justice and Empowerment.
• At present no training facilities are available in the country for sports person with disabilities.
• It will provide facilities of international standards to sportspersons with disabilities to compete at international level.
• The Centre will be registered under the Societies Registration Act, 1860.
• Governing Body under the Chairpersonship of Secretary, DEPwD has been constituted.

(MAINS FOCUS)

ECONOMY/ FEDERALISM/ GOVERNANCE

Topic: General Studies 2:

• Government Budgeting.
• Government policies and interventions for development in various sectors and issues arising out of their design and implementation

Cess pool: On CAG report on GST

Context: The latest audit of the Union Government’s accounts by Comptroller and Auditor General of India (CAG), was tabled in Parliament

What is Cess?

• Definition: Cess is a form of tax charged/levied over and above the base tax liability of a taxpayer.
• Used for Specific Purpose: A cess is usually imposed additionally when the state or the central government looks to raise funds for specific purposes. For example, the government levies an education cess to generate additional revenue for funding primary, secondary, and higher education.
• Temporary Tax: Cess is not a permanent source of revenue for the government, and it is discontinued when the purpose levying it is fulfilled.
• No Sharing with States: The central government does not need to share the cess with the state government either partially or in full, unlike some other taxes.
• Easy to enact: The procedure for introducing cess is comparatively simpler than getting the provisions done for introducing taxes, which usually means a change in the law. Cess is also easier to modify and abolish.
• Levied on both types of Tax: Cess can be levied on both indirect and direct taxes
• Proceeds of Cess: While all taxes go to the Consolidated Fund of India (CFI), cess may initially go to the CFI but has to be used for the purpose for which it was collected.
• Unspent Cess Amount: If the cess collected in a particular year goes unspent, it cannot be allocated for other purposes. The amount gets carried over to the next year and can only be used for the cause it was meant for
• Purpose for which it is levied: The government can impose cess for any purposes such as disaster relief, generating funds for cleaning rivers, etc. For example, after Kerala floods in the year 2018, the state government imposed a 1% calamity cess on GST and became the first state to do it
• Cess & GST: Under the GST (Goods and Services Tax) regime, certain sin goods and luxury items also attract a cess.

Key findings of the CAG report related to Cess

• Union Finance Ministry quietly retained over 40% of all cess collections in 2018-19 in the Consolidated Fund of India (CFI).
• As many as 35 different cesses, levies and charges yielded ₹2.75-lakh crore in the year, but just around ₹1.64-lakh crore was remitted to the specific reserve funds for which these cesses were levied.
• Crude Oil Cess: Over 10 years, not a paisa of the ₹1.25-lakh crore of cess collected on crude oil was transferred to an oil industry development body it was meant to finance
• Part of the hefty cess collected as additional excise duties on petrol and diesel, to finance roads and infrastructure, was similarly retained in the CFI.
• A new 4% Health and Education Cess on income tax was partly deployed towards education, but no fund was created for health. Same with a Social Welfare surcharge levied on customs.
• The GST Compensation Cess with ₹47,272 crore, was not remitted to its rightful account over the first two years of GST

Analysis of above findings

• Distortion of Union’s Fiscal Position: Such type of Cess practices by Union government helped understate India’s revenue and fiscal deficit numbers
• Did not meet Cess Objective: The purposes for which Parliament approved such cesses — be it health, education or infrastructure development — were not met.
• Distortion of Fiscal Federalism: Compensation cess transfers to States were accounted as Grants-in-aid to States, distorting the Centre-States fiscal math.
• Increased reliance on Cess: Centre’s reliance on cesses and surcharges to raise revenue has increased significantly especially after the States’ share of the divisible pool of taxes was raised to 42% in line with the 14th Finance Commission’s suggestions.
• Complicates tax structure: There are debated over whether such levies are in sync with a nation trying to simplify its tax regime

Way Forward

• Cesses, starting with the excise duties on petrol and diesel, need to be rationalised.
• Transparency is needed in the management of cess receipts so that Parliament and the people do not need to wait for audit findings

Connecting the dots:

• Analysis of the working of GST

ECONOMY/ GOVERNANCE/ INTERNATIONAL

Topic: General Studies 3:

• Indian Economy and issues relating to planning, mobilization, of resources, growth, development.
• Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Retrospective taxation: the Vodafone case

Context: The Permanent Court of Arbitration at The Hague gave a Unanimous ruling on Vodafone case.

What is the case?

• In May 2007, Vodafone International Holding (Dutch Firm) had bought a 67% stake in Hutchison Whampoa for billion. This included the mobile telephony business and other assets of Hutchison in India
• In September 2007, the India government for the first time raised a demand of Rs 7,990 crore in capital gains and withholding tax from Vodafone
• Government argued that Vodafone should have deducted the tax at source before making a payment to Hutchison.
• Vodafone challenged the demand notice in the Bombay High Court, which ruled in favour of the Income Tax Department. Subsequently, Vodafone challenged the High Court judgment in the Supreme Court
• Supreme Court in 2012 ruled that Vodafone Group’s interpretation of the Income Tax Act of 1961 was correct and that it did not have to pay any taxes for the stake purchase.

How did government tried to overrule Supreme Court Judgement?

• In 2012, the government of the day circumvented the SC’s ruling by proposing an amendment to the Finance Act, thereby giving the Income Tax Department the power to retrospectively tax such deals.
• The case had by then become infamous as the ‘retrospective taxation case’.
• Once Parliament passed the amendment to the Finance Act in 2012, the onus to pay the taxes fell back on Vodafone

What is retrospective taxation?

• As the name suggests, retrospective taxation allows a country to pass a rule on taxing certain products, items or services and deals and charge companies from a time behind the date on which the law is passed
• Countries use this route to correct any anomalies in their taxation policies that have, in the past, allowed companies to take advantage of such loopholes.
• Global Norm: Apart from India, many countries including the US, the UK, the Netherlands, Canada, Belgium, Australia and Italy have retrospectively taxed companies, which had taken the benefit of loopholes in the previous law.

Consequence of Retrospective Taxation on Market

• Hurts Companies: While governments often use a retrospective amendment to taxation laws to “clarify” existing laws, it ends up hurting companies that had knowingly or unknowingly interpreted the tax rules differently.
• Hurts Investor Confidence: The amendment was criticised by investors globally, who said the change in law was “perverse” in nature. This impacted the market sentiment and the flow of foreign funds to India.

How did government tried to handle Vodafone case post global outrage?

• Following international criticism, India tried to settle the matter amicably with Vodafone, but was unable to do so
• By 2014, all attempts by the telco and the Finance Ministry to settle the issue had failed.
• In 2014, the Vodafone Group initiated arbitration against India at the Permanent Court of Arbitration at the Hague, under Article 9 of the Bilateral Investment Treaty (BIT) between India and the Netherlands.
• After the new NDA government came to power, it said it would not create any fresh tax liabilities for companies using the retrospective taxation route. But the provision in Finance Act remained.

What is the Bilateral Investment Treaty?

• In 1995, India and the Netherlands had signed a BIT for promotion and protection of investment by companies of each country in the other’s jurisdiction.
• The two countries would, under the BIT, ensure that companies present in each other’s jurisdictions would be “at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other”.
• The BIT between India and the Netherlands expired on September 22, 2016.

What did the Permanent Court of Arbitration at The Hague say?

• The court ruled that India’s retrospective demand of Rs 22,100 crore as capital gains and withholding tax imposed on Vodafone for a 2007 deal was “in breach of the guarantee of fair and equitable treatment”.
• The court ruled that Indian order was in violation of United Nations Commission on International Trade Law (UNCITRAL).
• The court has also asked India not to pursue the tax demand any more against Vodafone Group

Implication of the ruling

• Policy Setback: The ruling in favour of Vodafone signals a setback for the country’s retrospective taxation policies.
• Sets a precedence: The ruling also raises the possibility of other cases under arbitration being decided on similar lines.

Connecting the dots:

• Protectionism in economically interconnected world
• Bilateral Investment Treaties and Concerns

(TEST YOUR KNOWLEDGE)

Model questions: (You can now post your answers in comment section)

Note:

• Correct answers of today’s questions will be provided in next day’s DNA section. Kindly refer to it and update your answers.
• Comments Up-voted by IASbaba are also the “correct answers”.

Q.1 Consider the following statements regarding International Convention of Road Traffic:

1. It defines an identification mark to identify the origin of the vehicle.
2. It promotes safety of international road traffic by establishing certain uniform rules among the contracting parties.

Which of the above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Q.2 Consider the following statements regarding GIFT city:

1. It is located in Gurgaon, Haryana.
2. It is India’s first operational international financial services centre.

Which of the above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Q.3 Which of the following were recently announced as Domestic Systemically Important Insurers (D-SIIs) for 2020-21:

1. Life Insurance Corporation of India (LIC)
2. General Insurance Corporation of India (GIC)
3. The New India Assurance Company

Select the correct code:

1. 1 only
2. 1 and 2 only
3. 2 and 3 only
4. 1, 2 and 3

Q.4 Which of the following Ministry is associated with FAME Scheme?

1. Ministry of Roadways
2. Ministry of Civil Aviation
3. Ministry of Electronics and IT
4. Ministry of Heavy Industries and Public Enterprises

ANSWERS FOR 25th September 2020 TEST YOUR KNOWLEDGE (TYK)

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