The Hindu Editorial – May, 20 – 2017

A) GST clarity, at last

The long wait for the new indirect tax rates that will apply to thousands of goods and services is finally over. The Goods and Services Tax Council that met in Srinagar has released details of the rates at which over 1,200 goods will be taxed when the GST regime takes effect. The rate fitment process has been a subject matter of speculation for months now, accompanied by fears that the new tax rates and slabs would be influenced by special interest lobbies. So it is welcome that the government has offered better clarity. The July 1 rollout of the tax also looks more likely now with the GST Council showing its intent to get things going. Under the new structure, judging from the initial list of 1,211 items, the predominant share (43%) of goods will be taxed at 18%, while 17% and 14% of the notified items will fall under the 12% and 5% tax rate slabs, respectively. Around 7% of the items, which include essential goods such as milk, fruits, cereals and poultry, have been exempted from all taxes. A significant share (19%) of goods, however, has been tucked under the highest tax slab of 28%: many of these cater to the daily needs of the growing middle class. Apart from these four regular tax slabs, additional cess taxes of varying rates have also been imposed on sin and luxury goods such as pan masala, cigarettes and sport utility vehicles to compensate the States for loss of revenue during the initial years. Winners and losers are sure to emerge as tax rates undergo a major revision. But overall, the government has said the new tax regime will be revenue-neutral. If so, the GST’s influence on private spending will possibly remain muted. The four-slab structure of the GST regime gives it the look of a progressive tax code, in contrast to similar consumption-based taxes prevalent in other countries, which are essentially simple, lat taxes. While progressive taxes may be justified given the wide disparities in income levels in India, the principle of simplicity is being compromised. The new tax regime disappoints on earlier expectations that the top tax rate would be capped below 20% too. The middle class will now have to bear the brunt of higher prices. The challenge going forward will be to prevent backdoor rigging of rates through additional levies that are completely discretionary. States that have added significantly to their debt burden in recent years must be kept in check. Or additional discretionary taxes would add to the overall tax burden and particularly compromise on tax predictability. Lastly, the Centre and States must keep their pressing fiscal demands from influencing tax rates upwards in the future. Otherwise, the decision to do away with tax competition among States, in favour of a simple centralised tax system, will be done no justice.

B) Vote for status quo?

Results of the local body elections held in three of Nepal’s seven provinces on May 14 are still trickling in, but the Communist Party of Nepal (Unified Marxist-Leninist) and the Nepali Congress (NC) will be reasonably satisfied with their performance. These elections were mostly held in the hill areas, with the second phase scheduled for June 14, in which the Madhesi parties — that are still demanding amendments to the Constitution related to state restructuring — are expected to participate. Local body elections are being held after a gap of 20 years, which saw epochal changes in Nepal’s polity without much development to show on the ground. These polls are to elect representatives in the ward, village, municipal and metropolitan councils that will have decentralised decision-making powers related to local revenue generation and spending, along with the formulation of laws in this regard. These councils are similar to the village development committees of the past, but have far more powers as self-governing units envisaged in the new Constitution. For too long, Nepal’s polity has been caught up with Constitution-writing and wrangling over power amid political instability. This has resulted in lack of attention to economic development leading to large-scale labour migration of Nepalis, and poor response systems to disasters such as the massive earthquake that struck two years ago. Local representation should return the focus to local development, as long as Nepal’s dominant political actors desist from turning this enhanced power into opportunities for rent-seeking and patronage. The voter turnout of close to 71% suggests high enthusiasm for the first polls held after the promulgation of the new Constitution. The strong performance of the UML and the NC is a repeat of the mandate in the 2013 Constituent Assembly elections, in which these parties did well in the hill districts. The Maoists could not improve on their 2013 performance. At that time the Maoists were punished for their inability to provide stability and work for development, planks that had catapulted them to a dominant position in the first CA polls in 2008. Now, their finishing in the third place in the hills is a reflection of the failure of their leadership, including Prime Minister Pushpa Kamal Dahal, to differentiate itself as a credible alternative to the UML and the NC. The UML’s success so far will embolden it to continue its status quoist positions on the redrawing of provincial boundaries. With Madhesi parties saying that their participation in the June 14 round of local polls is contingent upon a constitutional amendment, it remains to be seen how the NC-Maoist coalition government will respond. Working out a reasonable concession to the plains-dwellers will yield the ruling parties better support in the other provinces headed to the polls. It will also lead to greater stability and thereby a much-needed shift to economic priorities.

Words/Vocabulary from the Editorial

1) Regime

Meaning: A government, especially an authoritarian one.

Example: Ideological opponents of the regime.

Synonyms: Government, authorities

2) Intent

Meaning: Intention or purpose.

Example: With alarm she realized his intent.

Synonyms: Aim, purpose

Antonyms: Reluctant

3) Predominant

Meaning: Present as the strongest or main element.

Example: The predominant colour was white.

Synonyms: Main, chief

Antonyms: Subsidiary, minor

4) Prevalent

Meaning: Widespread in a particular area or at a particular time.

Example: The social ills prevalent in society today.

Synonyms: Widespread, prevailing 

Antonyms: Uncommon, rare

5) Compromised

Meaning: Settle a dispute by mutual concession.

Example: In the end we compromised and deferred the issue.

6) Brunt

Meaning: The worst part or chief impact of a specified action.

Example: Education will bear the brunt of the cuts

Synonyms: Force, impact

7) Discretionary

Meaning: Available for use at the discretion of the user.

Example: There has been an increase in year-end discretionary bonuses

Synonyms: Optional

Antonyms: Compulsory, obligatory 

8) Envisaged

Meaning: Contemplate or conceive of as a possibility or a desirable future event.

Example: The Rome Treaty envisaged free movement across frontiers.

Synonyms: Foresee, predict

9) Wrangling

Meaning: Have a long, complicated dispute or argument.

Example: The bureaucrats continue wrangling over the fine print.

Synonyms: Argue, quarrel

Antonyms: Agree

10) Desist

Meaning: Stop doing something; cease or abstain.

Example: Each pledged to desist from acts of sabotage.

Synonyms: Abstain, refrain

Antonyms: Continue.

11) Patronage

Meaning: The support given by a patron.

Example: The arts could no longer depend on private patronage.

Synonyms: Sponsorship, backing, funding

12) Mandate

Meaning: An official order or commission to do something.

Example: A mandate to seek the release of political prisoners.

Synonyms: Instruction, directive  

13) Planks

Meaning: A long, thin, flat piece of timber, used especially in building and flooring.

Example: Rough wooden planks

Synonyms: Board, floorboard

14) Catapulted

Meaning: Hurl or launch (something) with or as if with a catapult.

Example: The explosion catapulted the car 30 yards along the road.

Synonyms: Propel, launch

15) Embolden

Meaning: Give (someone) the courage or confidence to do something.

Example: Emboldened by the claret, he pressed his knee against hers.

Synonyms: Encourage, hearten

Antonyms: Dishearten, discourage