THE HINDU – CURRENT NOTE 17 March
Health spending to be 2.5% of GDP
•The Centre cleared the long-awaited National Health Policy 2017, which promises to increase public health spending to 2.5% of GDP in a time-bound manner and guarantees health care services to all Indian citizens, particularly the underprivileged, on Wednesday.
•While Union Health Minister J.P. Nadda called the new policy a ‘milestone,’ rights- based activists said the government had fallen short of making health a fundamental right, a section that was removed from the final draft passed on Wednesday.
•The policy aims to move away from ‘sick care’ to ‘wellness,’ Mr. Nadda said in Parliament on Thursday. “The policy seeks to move away from sick-care to wellness, with a thrust on prevention and health promotion. While the policy seeks to reorient and strengthen public health systems, it also looks afresh at strategic purchasing from the private sector and leveraging their strengths to achieve national health goals,” said Mr Nadda.
•The government will pursue ambitious targets like reducing Under-Five Mortality to 23 by 2025 and Maternal Mortality Ratio from current levels to 100 by 2020, and Infant Mortality Rate to 28 by 2019. It also seeks to reduce neonatal mortality to 16 and stillbirth rate to “single digit” by 2025.
•In September 2016, the Supreme Court had directed the Centre to finalise the crucial health policy.
•The policy advocates a progressively incremental assurance-based approach to health care provision. Previous drafts proposed to make this a fundamental right, and failure to provide health would have legal consequences. Removing that makes this it empty promise, activists said. “The promise on health spending does not square up with the past budgets of this government. Money for critical programs has stagnated or gone down in real terms,” said Dr. Amit Sengupta, Convenor of the India Chapter of People’s Health Movement, an NGO.
GST laws ready for Parliament, State Assemblies
•The Goods and Services Tax (GST) Council has approved a 15 per cent ceiling on the cess to be levied on aerated drinks and luxury cars over and above the maximum proposed GST rate of 28 per cent, and the enabling laws for state and union territories to adopt the new indirect tax regime at its meeting on Thursday.
•While Bidis have been kept out of the GST net, separate cess ceilings have been approved for pan masala and tobacco products, including chewing tobacco and cigarettes – keeping adequate room to raise the effective rate from their existing levels.
•With the Council having already cleared three other GST laws — pertaining to central GST, integrated GST and the compensation to be paid to states for loss of revenue — this paves the way for the Centre and the states to pilot the new indirect tax system proposed to be introduced from July 1, through the Parliament and state assemblies, respectively.
•“Four of these laws have to be cleared by the Centre in Parliament, and will now be taken up by the Union Cabinet for their introduction and passage. We will try and do that expeditiously, and am sure that states would also try to expedite the state GST law by getting their respective cabinets to approve them,” Finance, Defence and Corporate Affairs Minister Arun Jaitley said after the Council meeting.
•Apart from zero-rated goods, four tax rates of 5%, 12%, 18% and 28% have been proposed under the GST. The Council on Thursday approved the ceiling rates for the cess to be levied on top of the maximum GST rate of 28% on demerit or sin goods.
•“The cess is to be levied on four or five commodities and the caps have been approved by the Council. For instance, the Council has approved a cap of 15 per cent cess on luxury cars, but that is only for empowerment. These cars are currently taxed at 40 per cent, so the cess may only be around 12 per cent,” the minister said.
•A similar 15 per cent cess cap has been approved for aerated drinks as well, and Revenue Secretary Hasmukh Adhia said that any other item that the Council decides to bring into the remit of the cess subsequently would attract the same ceiling rate of 15%. The environment cess on coal, lignite and peat has been capped at the existing rate of Rs 400 per tonne.
•For pan masala, which currently face an effective tax rate of about 135 per cent, the ceiling on cess has been kept at 135 per cent on an ad valorem basis (value of the product). For cigarettes, which currently face a specific duty of Rs 4,170 for every 1,000 sticks apart from VAT and other taxes, the ceiling has been kept at 4,170 for every 1,000 sticks and 290 per cent on an ad valorem basis, with the option to levy a combination of both.
•Pratik Jain, indirect tax leader at PwC India said that industry still awaits clarity as to whether some of the existing cesses such as Swachh Bharat cess will continue to operate.
•By the next weekend, officials are also expected to finalise four pending draft regulations relating to issues such as valuation under the GST regime, which will then be taken up by the GST Council at its thirteenth meeting on March 31 in the capital, the minister said. Five sets of regulations relating to payments and other issues have already been approved by the Council.
•“After these rules are approved, one major action remains — the fitment of various commodities into different tax slabs which we will strive to do in the Council meeting thereafter. Once that is done, we will be ready to implement GST,” the minister said, expressing hope that the fitment of GST rates to products will be taken up immediately after March 31 to enable enough buffer time to stick to the ‘tentative roll-out date of July 1.’
•“Clearance of the model GST law is a warning bell for those who have not yet commenced their preparations for introduction of GST. It will be too short a time for the industry for preparation if the states are not passing GST law latest by second half of April,” said Sachin Menon, national head (Indirect Tax), KPMG in India.
•Mr Jain also said the roll-out time line still seems tough as the rules are still to be finalised and rates are to be determined over next couple of months. “Given all this, the Government may want to consider to implement GST from 1 September so as to give some more time to industry to prepare for this radical change,” he said.
Industries get 6 months for retrospective green nod
•In what could cheer a vast swathe of industries, the Union Environment Ministry has given a six-month window and a “one-time opportunity” to industrial projects functioning without environmental clearance (EC) to apply for a back-dated green certificate.
•The reprieve is for projects that started the work on site, expanded the production beyond the limit of EC or changed the product mix without obtaining prior EC, a press statement by the Ministry said late on Thursday.
•This is not the first time the Ministry has spelt out a procedure to regularise this category of industrial offenders. The Ministry had laid out rules on 12.12.2012 and 27.06.2013 and laid down a process for granting EC to such cases of violation.
•However, the High Court of Jharkhand had passed an order dated the November 28, 2014, declaring some of the provisions void. The National Green Tribunal also ruled that the Environment Impact Assessment Notification, 2006 provides for prior environmental clearance, hence no procedure could be laid through the Ministry orders for post-environment clearance.
•Reasoning that units could not be allowed to continue pollution unregulated, the Ministry’s latest notification, on March 14, lays down several conditions to obtain a clearance.
•These include categorising all projects as ‘grade A,’ or the highest level of scrutiny now required.
CAG pulls up I-T Dept. on shell companies
•The Comptroller and Auditor-General (CAG) has pulled up the Income Tax Department for not putting to use the tools at its disposal for effective action against shell companies that conceal unaccounted-for income and generate black money, specifically with respect to Maharashtra Sales Tax Department findings.
•In its latest report, the CAG said the State department’s website had a list of 2,059 suspicious dealers who had issued invoices involving tax evasion of over ₹10,640 crore.
•The auditor had sought details from the I-T Department in Mumbai on the assessees and the ultimate beneficiaries, but despite reminders, the data were not provided.
•In 2008-09, the MSTD had informed the Bombay High Court that it had investigated 1,555 hawala operators involving 39,488 beneficiary dealers who had passed on an input tax credit of ₹1,333 crore in three years.
•The accused claimed and got input tax credit against the declaration of fake tax invoices without actual transactions involving the sale and purchase of goods. To evade detection, payments were made against the invoices by cheque or bank transfers and the amounts were later withdrawn from the accounts of hawala operators.
•The CAG relied upon the MSTD data for analysis and found that the Income Tax Department had not even scrutinised all the assessees featuring on the list.
•“The information regarding bogus purchases was not passed on to assessing officers … the current provisions have not acted as a deterrent as there are no disincentive for giving and receiving accommodation entries. Established companies have also resorted to the practice of obtaining bogus purchases, which shows that the present system of gathering evidence and acting thereon is ineffective,” the report said.
Inflated expenses
•The shell companies are used to generating bogus bills showing inflated expenses on various counts. They receive payments through the banking channel to project the transactions as genuine, and then return the rest to the ultimate beneficiaries after charging a commission. Unscrupulous tax consultants and chartered accounts are also involved in the setting up of such entities.
•In 35 cases with PAN records, the auditor found that assessees had either not filed their returns, or had disclosed meagre or no income, or had stopped filing the returns. “The Income Tax Department did not take any action to examine the veracity of the facts reported therein, nor did they fully follow the information provided by their own investigation wing,” the report said.
•The CAG report recommended that in cases of false disclosure, the department should have moved the Settlement Commission for withdrawal of immunity to the applicants.
•Interestingly, the Finance Ministry — under which the I-T Department functions — told the CAG that there was no loss of revenue as each bogus purchase involved bogus sales also.
Leaving no one behind
•The National Institution for Transforming India (NITI Aayog) is formulating a Vision 2030 document. This document is coterminous with the UN’s 2030 Sustainable Development Goals (SDGs), all 17 of which equally affect persons with disabilities as they do any other citizen.
•The National Centre for Promotion of Employment for Disabled People conducted a seminar in December 2016. The government, the private sector, and leaders from various development fields participated to take stock of the current situation and deliberate on how disability could be integrated in Vision 2030. A starting point was that the government, the NITI Aayog, and all the associated stakeholders should interpret the provisions of the SDGs in line with the requirements and spirit of the UN Convention on the Rights of Persons with Disabilities (UNCRPD). What may a road map for creating a disability-inclusive development agenda look like?
A starting point
•Disability is still seen as an opportunity for dispensing charity rather than as a development or a human rights issue. The knowledge of MPs and State legislatures must be refreshed on the rights, needs and issues of persons with disabilities based on the changing disability landscape, the UNCRPD, and the Rights of Persons with Disabilities Act, 2016. The NITI Aayog must invest effort in building awareness for NGOs, academics, civil society, the private sector, etc., in order to articulate a disability-inclusive development agenda.
•Persons with disabilities must be seen as integral to the decision-making process and not as an afterthought. They must be mentioned in the outcome metrics defined for each goal, target or indicator, and these matrices must elaborate specific strategies for persons with disabilities. There must be seven-year checkpoints for ministries or departments to assess the outcomes. Fair and adequate representation of disability groups during the consultation process is imperative.
•The NITI Aayog has mapped each goal to a nodal ministry and each target with the government’s key programmes and departments to make these targets accountable and realise them within a specified time period. However, disability is an issue that cuts across several ministries; it is not just a subject for the Ministry of Social Justice and Empowerment. Our analysis indicates that there are 26 ministries where there needs to be a dedicated focus towards persons with disabilities and a specific cell to address their concerns. Specific budgets need to be allocated across initiatives and ministries to address the needs of persons with disabilities. The NITI Aayog too must have a dedicated cell which acts as a focal point and works with all ministries to monitor implementation and track progress across all initiatives for persons with disabilities.
•The document must insist that data for persons with disabilities are appropriately collected, maintained and disaggregated. This must include all government initiatives that capture any data related to population or human resources or human development, including employment, education, poverty and hunger. While reporting from the SDGs’ point of view, the NITI Aayog must ensure that the process of data collection and disaggregation for disability must not be relegated to the silos of seven targets which explicitly mention persons with disabilities, or the additional six targets which mention people in vulnerable situations. In addition, there are universal targets, which must also be achieved for persons with disabilities. Our analysis indicates that there are more than 85 targets across 15 goals encompassing more than 100 indicators where there is a need to collect, analyse, disaggregate and report data for persons with disabilities. All data must be available in the public domain, and published in an an accessible format and in a timely manner.
•It is important for India to have the addition of a universally accepted disability question(s) on all existing data instruments. The UN recommends the Washington Group Short Set of Questions on Disability, while India has been using a different question. A standard question needs to be developed, taking into account the socio-cultural sensitivities of people with disabilities and their families. The NITI Aayog should call for a national-level consultation with cross-disability groups and arrive at a consensus on the right question, which should then be unified across all data instruments of all sources of demographic information, including the impending Unique Disability ID, the population census, civil registration, sample surveys conducted by the National Sample Survey Organisation, Sample Registration System and for all social schemes.
•The overarching principle of Vision 2030 is to “leave no one behind”. We, as disabled citizens, are anxious to learn how this crucial document, which will encompass the SDGs 17 goals and 169 targets, will be inclusive of our needs and aspirations.
Start-up firms may soon find it easy to wind up
•To enable faster exit for start-ups and to bring the winding up process in line with global best practices, the Department of Industrial Policy and Promotion (DIPP) has written to the Ministry of Corporate Affairs (MCA) to notify start-ups as ‘Fast Track firms.’
•“Once this is notified, start-ups shall be able to wind up their business within a period of 90 days from making an application for the same,” according to a government report (dated March 15) on start-ups.
Debt structures
•The DIPP is the nodal Central government body for the Start-up India initiative, while the MCA is the concerned authority for notifications on winding up of companies. Fast Track firms will be start-ups with simple debt structures or those meeting certain criteria that will be specified.
•The ‘Bharat Navodaya: Start-Up India Reform Report’, released on March 6, had recommended expediting the company winding up process in India, “which is currently long-drawn and requires substantial documentation.”
•The Report was prepared by the Infosys founder N.R. Narayana Murthy-chaired Alternative Investment Policy Advisory Committee (AIPAC) following a request from capital markets regulator SEBI.
•It pointed out that winding up in the U.K. can be initiated by downloading a simple form and calling for a shareholders meeting. “In Singapore, a simple online application is needed to be made by a director or Company Secretary following which, the process is quite straightforward. Most economic zones in UAE allow for winding down of the business in two to three days.”
Notification
•The report said expediting the company winding up process in India would require the notification of Sections 304-323 of the Companies Act, 2013, relating to voluntary winding up. “The benefits of voluntary winding up operations involve no court supervision,” it added.
•It is more economical than following this same process in a tribunal…” Given the high risks of start-ups, some of them fail, the AIPAC report said, adding: “Often the entrepreneur leaves from his previous venture and starts a new venture. There should be a provision to carry forward the losses of the failed venture to the new venture.” Therefore, it recommended that the unutilised losses of an eligible start-up, which is being wound up, should be allowed to be carried forward and set off by the founder of that start-up, against the profits of a new eligible start-up set up within a period of three years from date of winding up of the failed start-up.
•The SEBI had asked AIPAC to spell out the issues being faced by start-ups in India and recommend reform measures. The 24 members of AIPAC, chaired by, included top officials from finance ministry, the RBI, the SEBI and SIDBI, besides representatives from the venture capital sector and leading consultancy firms. Touching upon the “complex winding up process” in India, the report’ said: “Several parties including start-ups and venture capital investors have expressed concerns that the process of winding up a company is extremely long and cumbersome, adding to the risk of starting up and operating an enterprise as well as wastage of invaluable human capital.”
•The government in its March 15 report said to facilitate easier exit for firms, “the Insolvency and Bankruptcy Board of India has been constituted and the provisions regarding corporate insolvency resolution have been implemented on December1, 2016. The provisions related to liquidation have been notified on December 9, 2016.” The AIPAC report had quoted Roma Priya, a legal adviser and founder of Burgeon BizSupport LLP -- an adviser to start-ups, as saying “The long process, paper work and costs involved in the closure are the main reasons why several companies remain dormant. In some instances, entrepreneurs may continue to run companies on paper, filing tax returns and preparing annual reports every year, even if it is no longer operational.”
