THE HINDU EDITORIAL : 25, July – 2017

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i) Taxing times for the States

The new Goods and Services Tax (GST) regime, introduced by way of the 101st Constitutional Amendment, is based on a fundamental notion that uniformity in tax administration across the country is an idea worth cherishing. Indeed, the Union government has seemingly been so enthralled by its own enactment that it rolled out the tax on July 1 by organising an extraordinary midnight session of Parliament. At its launch, Prime Minister Narendra Modi described the GST as a “good and simple tax”, and as a reform of far-reaching consequences that would help integrate India into a single market with a standard rate of taxation. That India could take such a step, he said, was an example in “cooperative federalism”. Or, as some others have described it, the GST is a product of a pooled sovereignty, where the States have voluntarily waived some of the critical fiscal powers that they hitherto enjoyed under the Constitution.

Denting fiscal autonomy

The rhetoric here can sound forceful. But much of this begs the question. For instance, we don’t know so far why uniformity in tax or the creation of a single market is necessarily a good thing for a country like India. We aren’t told how this will make us happier, or how it will enhance the causes of liberty and equality, the bedrocks on which our Constitution is built. What we do know, however, is rather damaging: that the GST, far from being a case of “cooperative federalism”, is really an incursion into the authority that India’s States have been permitted under the Constitution. The resultant withering of the States’ fiscal independence strikes at the core of the Constitution’s basic structure which the Supreme Court has held is inviolable. The Constitution, as originally adopted, establishes a clear, federal arrangement. It prescribes two levels of government, one at the Centre and the other at each of the States. Although matters of national importance, such as foreign affairs and the defence of India, are assigned to the Union, the responsibilities placed on the States are also particularly salient. For instance, the power to legislate on public order, public health and sanitation, agriculture, water and land are all exclusively vested in the State governments. This authority, as Chief Justice Maurice Gwyer observed in the context of the division made under the Government of India Act, 1935, which the Constitution largely assumed, is no slight matter. “We must again refer to the fundamental proposition… that Indian Legislatures within their own sphere have plenary powers of legislation as large and of the same nature as those of Parliament itself,” wrote Gwyer, in Bhola Prasad v. R. As the constitutional scholar H.M. Seervai has said, if Gwyer’s statements were true in 1942, when he wrote them, they are certainly true now, when we have State legislatures functioning under a system of Cabinet government.

Partners in taxation

In this constitutional scheme, where State governments are seen as equal partners, the founders thought it necessary to be very careful in allocating the powers of taxation. The partition made for this purpose was highly intricate, and they ensured that the taxes assigned to the Union and the States were mutually exclusive. For instance, while the Central government was given the power to tax income other than agricultural income, and levy indirect taxes in the form of customs and excise duties, State governments were given the sole power to tax the sale of goods and the entry of goods into a State. This division of fiscal responsibility was made with a view to making States self-sufficient, and with a view to supplying to regional powers the flexibility needed to govern according to the respective needs of their people. The underlying idea here was that States should be uninhibited in tinkering taxation policies in whatever manner they desired so long as their laws conformed to the other constitutional diktats. When resisting changes suggested to the draft Constitution in the Constituent Assembly, which demanded that the rates of sales tax be subject to parliamentary law, B.R. Ambedkar put it this way: “It seems to me that if we permit the sales tax to be levied by the provinces, then the provinces must be free to adjust the rate of the sales tax to the changing situation of the province, and, therefore, a ceiling from the Centre would be a great handicap in the working of the sales tax.”

Confusion over GST Council

The introduction of the GST, however, militates against this grand constitutional objective, against the aspiration set out in Article 1 of the Constitution, which declares India as a “Union of States”. In endeavouring to pursue the goal of creating a single market through a homogenisation of the tax regime, the amendment grants to both the Union and the State governments concomitant powers over nearly all indirect taxes. To further effectuate this effort, the law also creates a GST Council, which comprises the Union Finance Minister, the Union Minister of State in charge of revenue or finance, and the minister in charge of finance from each State government. In acting as a nodal agency of sorts, this council will recommend a number of things, among others the list of taxes that will be subsumed by the GST, the goods and services that will be exempt from the levy of tax, the rates at which tax shall be levied, and so forth. The council’s decisions will require a three-fourths majority, but the Central government’s votes will have a weightage of one-third of the total votes cast, according, thereby, to the Union a virtual veto. Now, there’s some confusion over whether the GST Council’s decisions are actually binding on the various State governments. The newly introduced Article 279A, which creates the council, describes its decisions as “recommendations”, but it also grants the council the power to establish a mechanism to adjudicate any dispute that might arise between any of its members in implementing the recommendations. If the council’s recommendations are to be treated as purely advisory, it leaves us wondering why we need a dispute resolution mechanism at all. Whichever way one wants to read the provisions of the new law, it’s clear that the amendment makes core changes to the fiscal division that the Constitution’s makers so meticulously devised. As a result, we could potentially have a scenario where one or the other of the States chooses to ignore the council’s advice, by levying additional tax not only on the sale of goods but also on services and manufacturing, subjects over which the Union enjoyed exclusive domain. On the other hand, if these recommendations are treated as obligatory, we are left with a situation where States would have altogether surrendered their fiscal autonomy to the Central government. In such a case, a State would be barred from fashioning its laws in a manner befitting the necessities of its people. India’s federal architecture is premised on a principle that promises the maintenance of an internal sovereignty, where States function as separate political entities within the domains allocated to them. But often the drive to maintain federalism, where the Constitution demands it, goes beyond any obligation to preserve the rights of the States. It goes to the root of the constraints against all arbitrary power, and, to that extent, this amendment is a grave onslaught on the Constitution’s basic structure.

ii) Network challenges

There’s a fresh twist in the tale for India’s telecom sector, which is a success story with around a billion connections issued so far and about 350 million subscribers estimated to have smart phones. About ten months after beginning commercial operations and acquiring 125 million customers with attractive data and voice service offerings, Reliance Jio has announced a plan that could disrupt the telecom landscape by challenging existing price points. For a refundable security deposit of ₹1,500 and a tenth of that as monthly charges, it plans to give away free feature phones that will support 4G services and can be returned after three years. Incumbent service providers, now saddled with high debt that could turn into non-performing assets for lenders, would naturally be wary of this move — although analysts expect overall industry revenue to rebound from its declining trajectory. Similarly, Jio’s proposition of connecting the phone to the television has affected the stock prices of direct-to-home service providers, though it may only offer three-four hours of such viewing per day. While rivals may need to rejig their service offerings to keep up, the disruptive potential of this development could be far more profound, especially in terms of bridging the country’s digital divide. India’s Internet adoption rate remains among the lowest in the Asia-Pacific region with 422 million subscribers. A large chunk of them access the Net through smart phones. Although wireless data usage has shot up dramatically over the past year, 500-550 million Indians use feature phones that offer no data services. A Kleiner Perkins Internet Trends Report for 2017 notes that even though smart phone and data costs are declining in India, they are still too high for most. Cheaper phones as well as data are essential to bring online the next 100-200 million people. While market forces will come into play here, policymakers need to step up their game too. The government must rationalise the multiple statutory levies on telecom service providers, which have been flagged as major stress points for the sector. Moreover, if data is indeed the new currency, people must have greater control and negotiating power over how their own data is used by service providers or application developers. The Telecom Regulatory Authority of India, whose chairman R.S. Sharma has said network neutrality is critical in this digital era, must create an ecosystem where users are not stuck in walled garden environments offered by individual players. The government should consider the merits of China’s cyber security law that requires tech firms to store all relevant data of local users within its sovereign borders. Apple has agreed to do this in China, but Indian iPhone users cannot even share logs pertaining to data speeds on local networks with the telecom regulator. A new strong new law should protect users’ data and govern lopsided consent clauses set by service providers.

Words / Vocabulary

1) Cherishing

Meaning: Keep (a hope or ambition) in one’s mind.

Example: He had long cherished a secret fantasy about his future.

Synonyms: Harbor, Have

Antonyms: Abandon

2) Enthralled

Meaning: Capture the fascinated attention of.

Example: She had been so enthralled by the adventure that she had hardly noticed the cold

Synonyms: Captivate, Charm

Antonyms: Bore, Repel

3) Waived

Meaning: Refrain from insisting on or using (a right or claim).

Example: He will waive all rights to the money.

Synonyms: Relinquish, Renounce

Antonyms: Claim, Pursue

4) Bedrocks

Meaning: The fundamental principles on which something is based.

Example: Honesty is the bedrock of a good relationship.

Synonyms: Core, Basis

5) Incursion

Meaning: An invasion or attack, especially a sudden or brief one.

Example: Incursions into enemy territory.

Synonyms: Attack on, Assault on

Antonyms: Retreat

6) Withering

Meaning:  Cease to exist because no longer necessary after the dictatorship of the proletariat has implemented the necessary changes in society.

Example: The state in socialist societies has failed to wither away.

7) Inviolable

Meaning: Never to be broken, infringed, or dishonoured.

Example: An inviolable rule of chastity.

Synonyms: Inalienable, Absolute

Antonyms: Partial

8) Intricate

Meaning: Very complicated or detailed.

Example: An intricate network of canals.

Synonyms: Complex, Complicated

Antonyms: Simple, Straightforward

9) Uninhibited

Meaning: Not having been restrained or suppressed.

Example: Fits of uninhibited laughter.

Synonyms: Unrestrained, Unrepressed

Antonyms: Inhibited, Controlled

10) Tinkering

Meaning: Attempt to repair or improve something in a casual or desultory way.

Example: He spent hours tinkering with the car.

Synonyms: Try to mend/ improve

11) Endeavouring

Meaning: Try hard to do or achieve something.

Example: He is endeavouring to help the Third World.

Synonyms: Try, Attempt

12) Concomitant

Meaning: A phenomenon that naturally accompanies or follows something.

Example: He sought promotion without the necessary concomitant of hard work”.

Synonyms: Attendant, Associated

Antonyms: Unrelated

13) Effectuate

Meaning: Put into force or operation.

Example: School choice would effectuate a transfer of power from government to individuals.

14) Subsumed

Meaning: Include or absorb (something) in something else.

Example: Most of these phenomena can be subsumed under two broad categories

15) Adjudicate

Meaning: Pronounce or declare judicially.

Example: He was adjudicated bankrupt.

16) Dispute

Meaning: A disagreement or argument.

Example: A territorial dispute between the two countries.

Synonyms: Debate, Discussion

Antonyms: Agreement

17) Meticulously

Meaning: In a way that shows great attention to detail; very thoroughly.

Example: A meticulously researched book

18) Devised

Meaning: Plan or invent (a complex procedure, system, or mechanism) by careful thought.

Example: a training programme should be devised.

Synonyms: Conceive, Think up

19) Obligatory

Meaning: Required by a legal, moral, or other rule; compulsory.

Example: Use of seat belts in cars is now obligatory.

Synonyms: Compulsory, Mandatory

Antonyms: Voluntary, Optional

20) Befitting

Meaning: Appropriate to the occasion.

Example: A country which can run the prestigious tournament in a befitting manner.

Synonyms: In keeping with, as befits

Antonyms: Out of keeping with

21) Onslaught

Meaning: A fierce or destructive attack.

Example: A series of onslaughts on the citadel.

Synonyms: Assault, Attack

22) Incumbent

Meaning: Necessary for (someone) as a duty or responsibility.

Example: The government realized that it was incumbent on them to act.

Synonyms: Binding, Obligatory

Antonyms: Optional

23) Saddled

Meaning: Burden (someone) with an onerous responsibility or task.

Example: He’s saddled with debts of $12 million.

Synonyms: Burden, Encumber

24) Trajectory

Meaning: The curved path that an object follows after it has been thrown or shot into the air.

Example: The trajectory of a bullet/missile.

Synonyms: Bends, Loops and curves

25) Disruptive

Meaning: Innovative or groundbreaking.

Example: Breaking a disruptive technology into the market is never easy.

Synonyms: Innovative, Inventive

Antonyms: Unimaginative, Conservative

26) Flagged

Meaning: Mark (an item) for attention or treatment in a specified way.

Example: The spell check program flags any words that are not in its dictionary.

Synonyms: Indicate, Identify

27) Relevant

Meaning: Closely connected or appropriate to what is being done or considered.

Example: What small companies need is relevant advice.

Synonyms: Pertinent, applicable

Antonyms: Irrelevant

28) Pertaining

Meaning: Be appropriate, related, or applicable to.

Example: Matters pertaining to the organization of government.

Synonyms: Concern, Relate to

29) Lopsided

Meaning: With one side lower or smaller than the other.

Example: A lopsided grin.

Synonyms: Asymmetrical, Unsymmetrical

Antonyms: Even, Level

30) Consent

Meaning: Permission for something to happen or agreement to do something.

Example: No change may be made without the consent of all the partners.

Synonyms: Agreement, Assent

Antonym: Dissent

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