i) Questions about the GST cess

As part of the Goods and Services Tax (GST) reformbankers that have been implemented in the country, a new levy called the GST Compensation Cess has been introduced to make good apprehended losses to States in the first five years of GST implementation. The Cess has been introduced through the GST (Compensation to States) Act, 2017 and is levied on inter- and intra-State supply of notified goods such as aerated drinks, coal, tobacco, automobiles and the ambiguous category of ‘other supplies’. The proceeds of the cess will be distributed to loss-incurring States on the basis of a prescribed formula. The schedule to the Act mentions the maximum rates of the cess, which extend to 290%. The levy would be over and above the four GST slabs of 5%, 12%, 18% and 28%. The cess has been making headline news due to frequent changes in the rates, the latest being the increase in the rate of luxury, mid-sized cars and sport utility vehicles. While the policy flip-flop on the tax rates reveals the ad hoc implementation of the cess, there is much to say about the legal validity of the Act in terms of legislative competence and conformity with the Constitution. A cess is a levy for a specific purpose which may bear the characteristics of a tax or a fee. The quintessential feature of a cess is that it is levied for a ‘specific purpose’ and the proceeds are earmarked as such. Under Article 270 of the Constitution, a cess tax has special privilege as the proceeds can be retained exclusively by the Union and need not be shared with States. The object of granting this special status is to ensure expenditure for a specific purpose, as is evident from the Fourth Finance Commission Report.

Dilution of characteristics

A cess must have an earmarked purpose and the contributor and beneficiary must be relatable. In the past, cesses were imposed by the Central government to raise finances for specific industries and labour welfare within chosen industries. If compensating State governments is considered to be a specific purpose, any general revenue raising measure can be considered to be backed by an earmarked purpose. Once the money is transferred to State governments, it can be used to fund just about any scheme and may even be used merely to adjust the respective State government’s fiscal deficit. Further, there is no relation between the persons contributing to the cess and the recipients, the State governments. All these factors make the cess look more like an additional tax or surcharge which becomes problematic as surcharge on the GST is prohibited under Article 271. Section 18 of the 122nd Constitution Amendment Bill, 2014 proposed a 1% additional tax to compensate States but this was withdrawn while enacting the Amendment Act. The version of Section 18 adopted in the Amendment Act, 2016 merely says that Parliament shall, on the GST Council’s recommendations, provide for compensation to States for a period of five years. There is no provision for an additional tax. As per Article 279A(4)(f), the GST Council’s power to recommend a special rate is confined to raising additional resources during any natural calamity or disaster. The cess cannot be justified under such power. Moreover, pursuant to the 101st Constitution Amendment Act, 2016, Article 271 has been amended to state that an additional tax/surcharge cannot be imposed over and above the GST tax rates. Thus it appears that by enacting the cess, Parliament is seeking to do indirectly that which cannot be done directly, which amounts to it being a colourable piece of legislation.

Burdening select goods

The goods identified in the Act, such as aerated drinks, coal, tobacco, automobiles and the ambiguous category of “other supplies”, do not form a distinct category or class deserving the liability to pay the cess so as to compensate States, and it is doubtful it will succeed if tested under the anvil of the right to equality under Article 14. While the sin goods argument is alluring, it is erroneous, looking at misfits such as coal and aerated drinks and the uncovered sin goods including luxury goods, jewellery, gadgets and the like. Similarly, “other supplies” leaves much to the unfettered discretion of the government. The cess reflects the same lack of coherence as the GST regime in general, the appeasement measures being weighed down by the legal entanglements created therein. It also raises the question as to whether the targeted goods have been chosen merely because of their inelasticity — less dependence of demand on price change — ensuring the generation of not just adequate but also surplus funds for the government. While the Delhi High Court has granted relief to a coal trader against implementation of the Act, it remains to be seen if the legislation will be tested by courts on legislative competence and colourable action.

ii) Gauging the status quo

The Brazil, Russia, India, China and South Africa grouping (BRICS) has since long ceased to be of material significance as multilateral institutions go. The recent BRICS Summit in Xiamen (China) only seemed to confirm this. It suggests that BRICS may be going the way of quite a few other organisations.

Inconsequential declaration

Little of consequence appears to have happened, or to have emerged, from the latest summit. The Xiamen Declaration is proof of this. Considering that this meeting was taking place in the shadow of significant global events, notably North Korea’s nuclear provocations and the U.S. response, other serious developments in Asia, including Afghanistan and West Asia, apart from issues of consequence elsewhere, the absence of any reference to these events in the Summit Declaration suggests that BRICS is clearly out of sync with current realities. Much has been made by the media about theinclusion of Pakistan-based terrorist groups such as the Lashkar-e-Taiba and the Jaish-e-Mohammed among the many terrorist groups active in the region. It, however, needs to be understood that this was merely a reiteration of something already mentioned in the declaration of the Heart of Asia Conference held in India in December 2016. The Heart of Asia declaration had highlighted the ‘gravity of the security situation in Afghanistan and in the region, drawing attention to the high levels of violence caused by the Taliban, terrorist groups including the Islamic State, al-Qaeda and its affiliates, the Haqqani network, Islamic Movement of Uzbekistan, East Turkestan Islamic Movement (ETIM), Lashkar-e-Taiba, Jaish-e-Mohammed, Tehreek-e-Taliban Pakistan, Jamaat-ul-Ahrar, Jundullah and other foreign terrorist groups’. To attach special significance to the inclusion of this passage in the Xiamen Declaration, and view it as China administering a resounding slap on its ally, would be a profound mistake. The BRICS declaration is perhaps more significant for what it did not include. Absence of any mention of China’s Belt and Road Initiative (BRI) — even though Beijing sets such great store by it — is one. At this point one can only speculate on the reason. It is possible that China may not have wanted to introduce a discordant note into the proceedings — knowing India’s reservations regarding the project — of a conference that it was presiding over. Or perhaps, China does not think that BRICS could make a material contribution to the achievement of its objective.

BRICS’ limited scope

One takeaway from the conference also could be that China sees little use of BRICS to achieve its geopolitical and geo-economic objectives across Asia and beyond. BRICS as a body can hardly help China in dealing with a knotty problem like North Korea. It has no need for BRICS to deal with problems such as the South China Sea and freedom of navigation on the seas. From its point of view, BRICS is an outlier as far as pressing problems in the region and beyond are concerned. BRICS suffers from other infirmities as well. Brazil and South Africa are increasingly becoming peripheral to BRICS’ aims and objectives. Russia is currently more preoccupied with establishing its supremacy in Eurasia, and its interest in BRICS is not of the same order as in the past. This leaves only India, and limits the scope of BRICS to issues and regions such as Afghanistan that have featured in previous BRICS meetings.The summit, however, provided an opportunity for leaders to meet and conduct business. For instance, Prime Minister NarendraModi’s intervention at the BRICS Business Council helped highlight India’s emergence as one of the most open economies on the globe. At the BRICS Emerging Markets and Developing Countries Dialogue, Mr.Modi highlighted India’s long tradition of partnership with fellow developing countries. Among the ten commitments he listed was that of creating a safer world by “organised and coordinated actions on at least three issues: counter-terrorism, cyber security and disaster management”. The Prime Minister also called for a skilled, healthier and equitable world, as also the critical importance of sustainable development goals.

Bilaterals, Beijing détente

Considerable significance attaches to the meetings held between Mr.Modi and the Russian and Chinese leaders on the side-lines of the summit. The emphasis during his meeting with Russian President Vladimir Putin seems to have been on the restoration of ties between the two countries to levels that existed in the past. Discussions also centred on ways to boost bilateral trade and investment, especially in the oil and natural gas sectors.The meeting with Chinese President Xi Jinping acquired particular significance coming as it did after the over two-month-long stand-off at the Doklam Plateau. The convergence between the two countries on international terrorism at the BRICS Summit seems to have led to a thaw for the time being. Assurances emanating from the meeting, and the adoption of a low-key approach, were aimed at enhancing mutual trust. The intention seemed to be to establish ‘new ways’ to prevent future incidents such as Doklam, and concentrate on essentials needed to establish better relations.Notwithstanding the carefully structured discussions between the two leaders — and while Doklam did not figure in the discussions — relations between India and China are unlikely to show any marked improvement in the near, and perhaps even in the medium, term. For the present, avoidance of a conflict will remain the principal objective on both sides, with China no doubt looking for an expansion of opportunities for trade. The key watchwords would, hence, be peace and tranquillity.

The road after Doklam

It would take much longer for trust to return; as it is, trust between the two countries had begun to be affected as India moved closer to the U.S., strengthened its relations with countries like Japan and Vietnam that were not too well disposed towards China, and participated in multilateral defence exercises which appeared to have an anti-China slant. In the circumstances, restoring trust is not going to be easy.In Astana in June this year, when the Indian and Chinese leaders met on the side-lines of the Shanghai Cooperation Organisation Summit, the emphasis was on not allowing “differences to become disputes”. This was reflected in the so-called Astana Understanding. Doklam effectively put paid to this. While Mr.Modi is possibly willing to put Doklam behind him, the Chinese are unlikely to do so and are more likely to moderate their response keeping the Doklam incident in mind. China may continue to reiterate the obvious and talk of ‘peaceful co-existence and mutually beneficial cooperation to strengthen bilateral relations’, but India needs to be cautious. China is likely to view India’s actions with even greater suspicion than hitherto.The kind of language employed by the Chinese side in the context of the meeting of the two leaders is an index of this. Mr. Xi observed that China and India are “each other’s opportunities and not threats”; India and China “need to show to the world that peaceful co-existence and win-win cooperation is the only right choice for the two countries”; China would like to work with India to uphold the Five Principles of Peaceful Co-existence (Panchsheel), advance political mutual trust, mutually beneficial cooperation and move forward the development of bilateral relations along the right track. This might sound like accenting the positive in Sino-Indian relations and moving to a more calibrated approach, but it does not necessarily reflect any greater willingness on the part of China to see the other side’s point of view.Evidently, the China-centric world view will continue to prevail. For the moment, China is anxious to maintain peace on its border with India, as China has lately been sensing opposition to its policies from many other countries, apart from a host of problems in its neighbourhood. In totality, these could undermine the Chinese Dream of Mr. Xi. North Korea is perhaps the most vexatious of the problems, one that is happening on China’s doorstep. Smaller countries of Southeast Asia such as Indonesia, and even Singapore and Vietnam, are signalling opposition to China’s restrictions on rites of maritime passage and freedom of navigation in the seas around China.China also faces an ever widening arc of threats from terrorists of different categories such as the ETIM, the Islamic Movement of Uzbekistan and Uighur separatists to its West. With the critical 19th Party Congress set to take place soon, peace and tranquillity on its periphery has thus become an imperative necessity.

Words/ Vocabulary:

1) Apprehended

Meaning: Understand or perceive.

Example: We enter a field of vision we could not otherwise apprehend.

Synonyms: Comprehend, Realize

2) Aerated

Meaning: (of a liquid) made effervescent by being charged with carbon dioxide or some other gas.

Example: Aerated spring water.

3) Ambiguous

Meaning: Not clear or decided.

Example: The election result was ambiguous.

Synonyms: Equivocal, Ambivalent

Antonyms:Unambiguous, Clear

4) Competence

Meaning: The legal authority of a court or other body to deal with a particular matter.

Example:The court’s competence has been accepted to cover these matters.

Synonyms: Authority, Power

5) Conformity

Meaning: Compliance with standards, rules, or laws.

Example: Conformity to regulations.

Synonyms: compliance with, adherence to

Antonyms: Flouting

6) Quintessential

Meaning: Representing the most perfect or typical example of a quality or class.

Example: He was the quintessential tough guy—strong, silent, and self-contained.

Synonyms: Typical, Prototypical

7) Earmarked

Meaning: Designate a particular outcome for (someone or something).

Example: The yard has been earmarked for a complete overhaul.

8) Evident

Meaning: Clearly seen or understood; obvious.

Example: She ate the biscuits with evident enjoyment.

Synonyms: Obvious, Apparent


9) Relatable

Meaning: Enabling a person to feel that they can relate to someone or something.

Example:Mary-Kate’s problems make her more relatable.

10) Surcharge

Meaning: An additional charge or payment.

Example: We guarantee that no surcharges will be added to the cost of your holiday

11) Enacting

Meaning: Make (a bill or other proposal) law.

Example: Legislation was enacted to attract international companies.

Synonyms: Pass, Approve


12) Pursuant

Meaning: In accordance with (a law or a legal document or resolution).

Example: the local authority applied for care orders pursuant to section 31 of the Children Act 1989.

13) Deserving

Meaning: Worthy of being treated in a particular way, typically of being given assistance.

Example: The deserving poor.

Synonyms: Worthy, Meritorious


14) Alluring

Meaning: Powerfully attract or charm; tempt.

Example: Will sponsors really be allured by such opportunities.

Synonyms: Attract, Lure


15) Erroneous

Meaning: Wrong; incorrect.

Example: Employers sometimes make erroneous assumptions.

Synonyms: Wrong, Incorrect

Antonyms: Right, Correct

16) Coherence

Meaning: The quality of being logical and consistent.

Example: This raises further questions on the coherence of state policy.

Synonyms: Consistency, Soundness

Antonyms: Incoherence

17) Appeasement

Meaning: Pacify or placate (someone) by acceding to their demands.

Example: Amendments have been added to appease local pressure groups.

Synonyms: Conciliate, Placate

Antonyms: Provoke, Inflame

18) Entanglements

Meaning: Cause to become twisted together with or caught in.

Example: Fish attempt to swim through the mesh and become entangled.

Synonyms: Intertwine, Tangle

19) Provocations

Meaning: Action or speech that makes someone angry, especially deliberately.

Example: You should remain calm and not respond to provocation.

Synonyms: Incitement, Rousing

20) Reiteration

Meaning: The action of repeating something, typically for emphasis or clarity.

Example:The reiteration of his campaign promise to cut taxes.

21) Affiliates

Meaning: Officially attach or connect (a subsidiary group or a person) to an organization; (of an organization) admit as a member.

Example: They are national associations affiliated to larger organizations.

Synonyms: Associate with, Join with

22) Speculate

Meaning: Form a theory or conjecture about a subject without firm evidence.

Example:My colleagues speculate about my private life.

Synonyms: Conjecture, Theorize

23) Discordant

Meaning: Disagreeing or incongruous.

Example: The operative principle of democracy is a balance of discordant qualities.

Synonyms: Divergent, Contradictory

Antonyms:Harmonious, Compatible

24) Knotty

Meaning: Extremely difficult or complex.

Example: A knotty legal problem.

Synonyms: Complex, Complicated

Antonyms:Straightforward, Simple

25) Infirmities

Meaning: Physical or mental weakness.

Example: Old age and infirmity come to men and women alike.

Synonyms: Frailty, Weakness

Antonyms:Strength, Certainty

26) Peripheral

Meaning: Of secondary or minor importance; marginal.

Example: She will see their problems as peripheral to her own.

Synonyms: Secondary, Subsidiary

Antonyms:Central, Vital

27) Supremacy

Meaning: The state or condition of being superior to all others in authority, power, or status.

Example: The supremacy of the king.

Synonyms: Ascendancy, Predominance

28) Détente

Meaning: The easing of hostility or strained relations, especially between countries.

Example: His policy of arms control and detente with the Soviet Union.

29) Stand-off

Meaning: A deadlock between two equally matched opponents in a dispute or conflict.

Example: The 16-day-old stand-off was no closer to being resolved.

Synonyms: Deadlock, Stalemate

30) Convergence

Meaning: (of lines) tend to meet at a point.

Example: A pair of lines of longitude are parallel at the equator but converge toward the poles.

Synonyms: Meet, Intersect

Antonyms:Separate, Diverge

31) Thaw

Meaning: An increase in friendliness or cordiality.

Example: A thaw in relations between the USA and the USSR.

Synonyms: Become friendlier.

32) Emanating

Meaning: Give out or emit (a feeling, quality, or sensation).

Example: He emanated a powerful brooding air.

Synonyms: Exclude, Give out

33) Tranquillity

Meaning: The quality or state of being tranquil; calm; free from disturbance.

Example: Passing cars are the only noise that disturbs the tranquillity of rural life.

Synonyms: Peace, Repose

Antonyms: Commotion

34) Emphasis

Meaning: Special importance, value, or prominence given to something.

Example: They placed great emphasis on the individual’s freedom.

Synonyms: Prominence, Importance

35) Disputes

Meaning: A disagreement or argument.

Example: A territorial dispute between the two countries.

Synonyms: Debate, Discussion


36) Obvious

Meaning: Easily perceived or understood; clear, self-evident, or apparent.

Example: Unemployment has been the most obvious cost of the recession.

Synonyms: Clear, Plain, Evident

Antonyms:Imperceptible, Inconspicuous

37) Hitherto

Meaning: Until now or until the point in time under discussion.

Example: Hitherto part of French West Africa, Benin achieved independence in 1960.

Synonyms: Previously, Formerly

38) Accenting

Meaning: Emphasize (a particular feature).

Example: Fabrics which accent the background colours in the room.

Synonyms: Focus attention on, Underline

Antonyms: Mask

39) Calibrated

Meaning: Carefully assess, set, or adjust (something abstract).

Example: The regulators cannot properly calibrate the risks involved.

40) Prevail

Meaning: Prove more powerful or superior;

Example: It is hard for logic to prevail over emotion.

Synonyms: Win, Exist

41) Vexatious

Meaning: Causing or tending to cause annoyance, frustration, or worry.

Example: The vexatious questions posed by software copyrights.

Synonyms: Annoying, Irritating

42) Imperative

Meaning: Of vital importance; crucial.

Example: Immediate action was imperative.

Synonyms: All-important, Vital

Antonyms:Unimportant, Optional