📰 Don’t harbour unrealistic illusions, China tells India
Will safeguard security at any cost, says Defence Ministry
•China said on Monday that it will safeguard its security interests at “any cost” as its sovereignty was “indomitable”, amid a standoff with India in the Sikkim sector.
•Chinese Defence Ministry spokesman Wu Qian made this assertion ahead of this week’s National Security Advisers’ (NSA) talks to resolve the standoff.
•Maintaining China’s hardline stance on the issue, Mr. Wu told a media briefing that “India should not leave things to luck and not harbour any unrealistic illusions.”
‘Correct your mistake’
•Commenting on the over a month-long standoff between the troops of the two countries in the Doklam area in the Sikkim section, Mr. Wu urged India to “correct its mistake.”
•Stating that the People’s Liberation Army (PLA) had taken emergency measures in the region and continued to increase focused deployments and drills, he said, “We strongly urge India to take practical steps to correct its mistake, cease provocations, and meet China halfway in jointly safeguarding the border region’s peace and tranquillity.”
•His comments came as National Security Adviser Ajit Doval is set to travel to Beijing this week to attend the BRICS NSAs’ meeting scheduled to be held from July 27-28 during which he is expected to hold talks with his Chinese counterpart Yang Jiechi. Both Mr. Doval and Mr. Yang are Special Representatives of the two countries in the boundary talks. Chinese officials say while there may not be a formal meeting between the two officials, keeping with Beijing’s public position that no talks will be held without India withdrawing troops, they could hold discussions on the sidelines to end the deadlock.
📰 Centre seeks more time on cattle slaughter rules
Everything in totality is being considered, it tells SC
•The Centre on Monday asked the Supreme Court for more time to report back on the progress in modifying the controversial cattle slaughter ban rules. “Everything in totality is being considered,” it said.
•The rules ban the sale of cattle for slaughter in livestock markets. Hearing a bunch of petitions challenging the rules on July 11, a Bench led by Chief Justice of India J.S. Khehar had recorded a submission made by the Centre that a Madras HC’s stay on the implementation of the rules was applicable across the country.
Order challenged
•But the July 11 order itself had subsequently come under challenge. Animal rights activist Gauri Maulekhi filed an application asking the SC to clarify its order. Ms. Maulekhi contended that the High Court had only stayed a provision of the Prevention of Cruelty to Animals (Regulation of Livestock Markets) Rules, 2017, regarding slaughter and not the entire gamut of rules and its twin — The Prevention of Cruelty to Animals (Maintenance of Case Property Animals) Act, 2017. However, the Centre had intervened with assurances that the Environment Ministry was having a re-look at the rules and “nothing would happen” in the meantime.
•Additional Solicitor General P.S. Narasimha said the Centre would revisit the rules in the light of the public furore it had caused and fresh rules may be notified possibly in August 2017.
•The court scheduled the hearing on August 4.
📰 Opposition seeks scrutiny of Banking Regulation Bill
Finance Minister says the issues will be dealt with when the Bill, which seeks to authorise the RBI to resolve the problem of stressed assets, comes up for a discussion
•Union Finance Minister Arun Jaitley introduced the Banking Regulation (Amendment) Bill, 2017, in the Lok Sabha on Monday. The Bill seeks to authorise the RBI to resolve the problem of stressed assets, even as the Opposition demanded that it be sent to a standing committee for scrutiny.
•The Bill seeks to amend the Banking Regulation Act, 1949, and replace the Banking Regulation (Amendment) Ordinance promulgated in May. It allows the RBI to open an insolvency resolution process in respect of specific stressed assets. The RBI will also be empowered to issue directives for resolution and appoint authorities or committees to advise the banking companies on stressed asset resolution.
Desperate step
•Before that, Trinamool Congress member Saugata Roy said he opposed the ordinance itself and called it a “desperate step by a desperate government”. Non-performing assets of banks have risen to over Rs. 9 lakh crore, and now the RBI was empowered to refer the cases to the Insolvency and Bankruptcy Board, he said.
•“It is the same RBI which had not been able to count notes [after demonetisation]. Giving such powers to the RBI will switch its attention from macro-economic issues to micro-economic issues and render the bank management useless,” Mr. Roy said. He wanted the Bill referred to a standing committee.
•Speaker Sumitra Mahajan asked Mr. Jaitley if he wanted to respond to Mr. Roy’s remarks. The Finance Minister said the issues would be dealt with when the Bill came up for a discussion.
📰 Admiralty Bill gets Rajya Sabha nod
One is on maritime claims and the other on footwear design institute
•The Rajya Sabha on Monday passed two Bills on jurisdiction and settlement of maritime claims and the Footwear Design and Development Institute. However, the Motor Vehicle (Amendment) Bill, 2017, could not be taken up.
•The Admiralty (Jurisdiction and Settlement of Maritime Claims), Bill, 2017, passed by the Lok Sabha in March, seeks to consolidate the laws relating to admiralty jurisdiction, legal proceedings in connection with vessels, their arrest, detention, sale and other related matters. While earlier only the High Courts of Bombay, Calcutta and Madras could take up maritime cases, the Bill extends the power to the High Courts of Karnataka, Kerala, Hyderabad, Orissa and Gujarat, besides any other High Courts as notified by the Centre.
Current scenario
•Moving the Bill, Minister of State for Road Transport and Highways and Shipping Mansukh L. Mandaviya said the old maritime admiralty laws in India needed to be changed in accordance with the current global scenario. He said the Bill was aimed at bringing in clarity to the law.
•The Footwear Design and Development Institute Bill, 2017, as earlier passed by the Lok Sabha, is to establish it as an institution of national importance. Although all members supported the Bill, some said recent developments had an adverse impact on leather industry. Referring to the recent incidents involving “cow vigilantes,” Congress member P.L. Punia sought protection to those engaged in the industry.
•Samajwadi Party’s Ram Gopal Yadav and BSP’s Veer Singh raised the issue of Agra-based traders saying they were facing severe supply shortage.
•Responding to Mr. Yadav’s remarks, Minister of State for Commerce and Industry Nirmala Sitharaman said flaws of the past were being corrected now.
•She said earlier, leather was being supplied from unregulated, unlicensed and illegal sources, which should not have happened.
•The government was just trying to regulate the supplies.
•Ms. Sitharaman informed the House that the programme currently has 12 campuses, of which seven units are already functional.
📰 ‘Enough political will to seal RCEP talks’
People’s groups seek to halt negotiations; claim FTA will harm farmers, industry
•India is ‘fully committed’ to taking forward the negotiations for a mega Free Trade Agreement (FTA) called the Regional Comprehensive Economic Partnership (RCEP), to ensure that it is a ‘balanced’ pact that benefits all the 16 Asia-Pacific nations including itself that are participating in the talks, according to commerce secretary Rita Teaotia.
•The senior official, in effect, dismissed speculations that the India-China border standoff will have an adverse impact on the trade talks.
•While the RCEP negotiations — aiming to liberalise norms in the 16 countries including India and China to boost trade and investment in the Asia-Pacific region — are underway behind closed doors at the Hyderabad International Convention Centre, several people’s groups from across the country held demonstrations demanding a halt to the talks.
•They claimed that the mega-regional FTA will, among other things, adversely impact not only farmers’ rights but also access to affordable medicines, besides threatening the protections to India’s digital industry.
Surge feared
•However, the commerce secretary told The Hindu that “all the 16 countries, including India, have expressed willingness to constructively engage in the talks and have put forward revised offers in goods and services to negotiate a mutually beneficial outcome.” Amid fears that the FTA will result in a surge in inflow of cheap goods into India from these countries including China, in turn impacting the Indian industry and farmers, the senior official said the Indian negotiating team is confident that they can “protect India’s interests and ensure that the FTA is not unfair to India.”
•“We are going to have more frequent rounds of negotiations. There will also be a Ministerial meeting in September,” she said, indicating that there is enough political will to expedite the conclusion of the talks.
•This is the 19th Round of the RCEP Trade Negotiating Committee meeting at the technical level. In addition to this, so far there have been four Ministerial Meetings and three ‘Inter-sessional Ministerial Meetings’.
•India Inc. is learnt to have reservations against India undertaking any binding commitment to immediately eliminate duties on most traded goods, as part of the FTA. However, Ms. Teaotia said “one should not underestimate India’s strengths in various sectors.” She added that FTA negotiations are always on the basis of “give and take” and that there will be “gains for India” from the pact.
•India is pushing for liberalisation of services, including easing norms for movement of professionals across borders for short-term work. However, the slow progress of the services negotiations has been worrying India.
📰 Ambiguity on GST irks solar players
‘Suppliers yet to pass on input tax credits; higher costs will be passed on to end users’
•Ambiguity surrounding the Goods and Services Tax rate on various inputs is troubling the solar sector, with industry players also saying that their suppliers are not passing on the benefit arising out of input tax credits, leading to higher prices and eventually higher tariffs for customers.
•“There is no clarity when it comes to the GST rates,” Sanjeev Aggarwal, MD and CEO of Amplus Energy Solutions told The Hindu . “While the government is saying that there is a 5% rate on solar components, the truth is that the weighted average rate comes at about 10%. Some items are taxed at 18%, and some at the lower 5%. Others, like inverters, are even taxed at 28%.”
•“Suppliers have also not yet started passing on the benefits of the input tax credits to us, so we are not getting the advantage of that either,” Mr. Aggarwal added.
•While the 5% tax rate specified by the GST Council for solar components has increased the cost of the projects, the ambiguity over the other inputs — which are used for projects other than in the solar sector — is creating confusion among solar developers.
•“The module, which is almost half of the cost of the solar system..., earlier there was no tax on it,” Gagan Vermani, founder and CEO at MYSUN said. “Now, it has come under 5%. Ultimately, it will increase the cost of the modules by 5%. And, we have to pass this on to the customers. Our cost of procurement has gone up, so the selling price will also go up.”
‘End use classification’
•“There is also a little confusion on solar right now because the detailed gazette talks about structures, invertors, wires, and other components without specifying whether they are for solar or not,” Mr. Vermani added. “But there is a separate line item that says for solar utilities, the rate is 5%. So, there is confusion about whether an inverter, if it is being used for solar, comes under 5% or the normal rate of 28%.”
•“Because GST is an end-use tax, the government cannot even discriminate between uses by saying that, say, an inverter used for solar purposes will be taxed this much, but for other purposes at a higher rate,” Mr. Aggarwal said. “This will be very difficult to implement and will also lead to misuse. How will one prove for what purpose it is being used for?”
•The same is true for the other components as well.
•“Everyday we are sitting with our tax consultants and trying to figure out the eventual impact on our projects,” Sanjay Garudapally, director, business development, Rays Power Infra said. “We are getting different answers. Some are saying 10%, others are saying other rates. Nothing has been clarified so far since GST has rolled out, but we expect something to be done in about three weeks to a month.”
📰 SC for more data on GM mustard
•The Supreme Court on Monday asked the government to stop itself from embarking on any project on, or commercial release of, genetically modified (GM) mustard.
•A Bench of Chief Justice of India J.S. Khehar and Justice D.Y. Chandrachud said an injunction order would be passed if it was found that GM mustard affected health and lives for generations.
•The court agreed with Additional Solicitor-General Tushar Mehta’s suggestion to get more scientific information on GM mustard by July 28 to address the apprehensions raised by the court and petitioner Aruna Rodrigues, represented by advocate Prashant Bhushan, on the after-effects of GM mustard. The court scheduled the case for hearing on July 31.
•“If nothing happens, if there is no problem, then it is fine. But if there is going to be an impact, we would like to have an injunction in place, by either us or by you,” Chief Justice Khehar told Mr. Mehta categorically. Mr. Mehta said discussions and studies were still on about the large number of representations received from the public and scientific bodies about GM mustard.
📰 What’s brewing in Darjeeling
The Gorkhaland movement constitutes an opting out of West Bengal’s domination and opting in to the democratic frameworks of India
•The Darjeeling hills are in crisis. A resurgent Gorkhaland movement and subsequent state crackdown have infused life with violent uncertainty. Visitors to the ‘queen of the hills’ will be hard-pressed to find the idyllic tea plantations, mountain views, and quaint footpaths that characterise Darjeeling. Challenging these figments of the postcolonial imagination has always been another side to Darjeeling, now undeniably visible in the tear gas, burning vehicles, crippling strikes, tourist evacuations, foreboding police and military presence, and deaths at the hands of both state forces and political activists.
•The current crisis was born of a perfect storm. In May, the West Bengal government announced Bengali as a compulsory language in schools across the State. By June, this triggered protests and claims of ‘linguistic imperialism’ in the Darjeeling and Kalimpong districts (where the lingua franca is Nepali). Chief Minister Mamata Banerjee then decided to hold a Cabinet meeting in Darjeeling for the first time in over 40 years. Little effort was made to include representatives of the Gorkhaland Territorial Administration (GTA) or the three hill MLAs, eliciting protests. The ensuing clash with police left government property destroyed and many protesters injured. The Army was brought in to staunch unrest, but it escalated instead. Subsequent protests and crackdowns have led to further destruction and deaths.
•With ‘Jai Gorkha, Jai Gorkhaland’ reverberating through the hills, Darjeeling has plunged again into the throes of agitation. Internet and cable television have been suspended for the last month. Strikes and security threats have devastated the local economy at the peak of tourist season. While fear is rampant, so is a shared sense of resistance and solidarity. Uncertainty notwithstanding, the crisis has made clear: Darjeeling is not what it’s often made out to be.
•The time has come to take a deeper look at the histories undergirding Darjeeling’s latest crisis. This requires asking: What is Gorkhaland? And why is it deemed necessary by those who call the region home?
The crux of the movement
•The Gorkhaland movement is a long-standing quest for a separate State of Gorkhaland within India for Nepali-speaking Indian citizens (often known as ‘Gorkhas’). With roots dating back over a century, Gorkhaland is a classic subnationalist movement, not unlike those that have produced other States, most recently Telangana, Uttarakhand, Jharkhand, and Chhattisgarh. Beyond all else, Gorkhaland is a desire for the recognition, respect, and integration of Gorkha peoples in the Indian nation-state. Contra popular misunderstanding, the movement is neither separatist nor anti-nationalist; it is about inclusion and belonging in India. As Gorkha National Liberation Front founder Subash Ghisingh explained during the first Gorkhaland agitation in the 1980s, “We Nepali-Indians who have nothing to do with Nepal are constantly confused with ‘Nepalis’, that is, citizens of Nepal, a foreign country. But if there is Gorkhaland then our belonging to an Indian State, just like your identity, will be clear.”
•With those demands unrequited, a second Gorkhaland movement emerged in 2007 under the leadership of Bimal Gurung of the Gorkha Janmukti Morcha (GJM) and has flared intermittently. Heralding self-governance, recognition, and belonging in India, Gorkhaland remains the dream for Darjeeling citizens and many Nepali-speaking Indians across the country. It stands as a key means to redress the Gorkhas’ enduring history of discrimination, misconception, and marginalisation in India. Herein lies the rub — and primary antagonism with West Bengal. By demanding Gorkhaland, the people of Darjeeling-Kalimpong are opting out of West Bengal’s domination, and opting in to the democratic frameworks of India writ large.
•Understanding Gorkhaland requires understanding its underlying histories. In many ways, the Gorkhas of Darjeeling have yet to taste the liberation of India’s Independence. The local economy illustrates the continuities between the colonial and postcolonial eras: Gorkhas remain pegged to the lowest levels of employment, while outsiders own the tea industry, meaning its profits flow out of the hills. These economic constraints are exacerbated by the misunderstandings Gorkhas face when they seek education and work in places like Kolkata, Bengaluru, and New Delhi. Called ‘foreigners’, ‘outsiders’ and ‘chinkys’, racial discrimination affects aspiring Gorkhas at every turn.
Reasons for resurgence
•The political circumstances are equally frustrating. Since 1947, the Darjeeling-Kalimpong region has remained under the thumb of West Bengal, despite no substantive pre-Partition evidence to support West Bengal’s territorial claims to this region. Conciliatory set-ups like the Darjeeling Gorkha Hill Council (1988-2012) and the GTA (2012-present) have failed to provide meaningful autonomy. These problems don’t emanate solely from the hands of Bengalis, yet much of the marginalisation coalesces under the shadow of West Bengal’s domination. Thus, when Ms. Banerjee and others stridently lay claim to Darjeeling, insisting that Bengal will never be divided, it strikes a nerve for the Gorkha peoples of India, evoking painful, yet ever-present, histories.
•Instances like the attempted imposition of compulsory Bengali are not read as one-off events or mere slights in Darjeeling. They are seen as extensions of precisely the histories of domination that the Gorkhas are trying to escape. Ms. Banerjee’s Trinamool Congress (TMC) has lately made significant inroads into the hills. West Bengal’s recent creation of the Kalimpong district (2017) and the State’s doling out of Tribal Development Boards to ethnicities within the Gorkha conglomerate (Tamang, Sherpa, etc.) might appear well-intended gestures but in paving the way for the TMC’s electoral gains, they appear to many as clear examples of ‘divide and rule’ — causing splits in the Gorkha electorate and undermining the already-limited authority of the GTA. Indeed, the GJM’s instigation of the current agitation was at least partly in response to TMC encroachment. GTA elections were imminent, but the GJM’s popularity was waning in the face of considerable rewards flowing from West Bengal’s coffers. By summoning thousands to the streets, the GJM demonstrated its ability to evoke the emotional force of Gorkhaland. But then violence took hold, and the Gorkhaland movement once again became something else — something bigger than any one party.
•The sudden resurgence of Gorkhaland has caught many by surprise. But today’s turmoil mustn’t obscure deeper histories. For Gorkhas, the troubling realities of colonial and present-day Darjeeling are eerily similar: linguistic chauvinism, ethnic and racial discrimination, resource extraction, unilateral territorial claims, the denial of self-governance, political suppression; and ultimately, an unwillingness to respect the ‘native point of view’. This double bind of colonial nostalgia and neocolonial regional domination produces a sense of constant déjà vu, leading to the desperate feeling that genuine progress is out of reach. These unsettling truths demand some soul-searching.
•A reconsideration is in order. Brisk air, Himalayan vistas, and beautiful tea plantations may be Darjeeling’s enduring attributes, but these do not define the life experiences of those who call this embattled place home. Today’s unrest makes this painfully clear — and calls out in intermittently poignant and frustrated voices for a new kind of engagement.
•Rune Bennike (Copenhagen University), Sarah Besky (Brown University), Nilamber Chhetri (Maharashtra National Law University), Townsend Middleton (University of North Carolina), Roshan P. Rai (DLR Prerna), Swatahsiddha Sarkar (University of North Bengal), Debarati Sen (Kennesaw State University), Jayeeta Sharma (University of Toronto), Sara Shneiderman (University of British Columbia), and Miriam Wenner (Goettingen University) on behalf of The Darjeeling Studies Collective, a group of more than a dozen scholars with long-term research experience in the Darjeeling region
📰 Bilateral catalyst
American cooperation in science, technology and innovation will help India’s start-up ecosystem
•Prime Minister Narendra Modi’s recent visit to the U.S. is likely to deepen bilateral ties in multiple strategic areas. Among them, science and technology, a key driver for innovation and job creation in both countries, needs to take centre stage.
•The shared values and interests of both the countries provide the essential underpinning for future collaboration. Besides, India has the advantage of enjoying bipartisan support in the U.S. in this regard. Over the years, knowledge and technology have become central to most of the bilateral agreements and strategic dialogues between the two countries. Bilateral agreements such as the Partnership to Advance Clean Energy and joint participation in mega projects in the areas of fundamental science such as the High Intensity Superconducting Proton Accelerator, the Thirty Meter Telescope, the Laser Interferometer Gravitational Observatory and the NASA-ISRO Synthetic Aperture Radar Mission will have a far-reaching impact. Going forward, we can reap higher pay-offs if collaborative engagements are focused on sector-agnostic technologies, such as information technology, nanotechnology, and gene-editing technology. This will have positive impact on all spheres of collaboration such as education, economy and trade, defence and homeland security, energy and climate, health, agriculture and space.
The science landscape
•To further strengthen the existing system of collaboration and help initiate new ones, we need to understand the science, technology and innovation (STI) landscape in the U.S. Learning the best practices on grant management and science administration from key American federal agencies such as the National Institutes of Health, the Department of Energy, the National Science Foundation, the National Aeronautics and Space Administration and the U.S. Department of Agriculture will be a good starting point for India’s science departments and research institutions.
•Knowledge generated through science and technology needs to be capitalised in order to fuel the process of innovation and the creation of an entrepreneurial class which can help find solutions for the society at multiple levels. The American system provides one of the best models for this. The core components of our innovation ecosystem need to be supported by enabling systems and practices to transform technologies and inventions into products. Learning from U.S. institutions the practices of the innovation value chain — ranging from ideation to prototyping and business-friendly incubation of the prototypes and the fostering of a proper legal and investor-friendly milieu — will make a visible difference on the ground. Second, an innovation does not necessarily have to be of the cutting-edge kind. The right solutions should be need-based and affordable.
•Where required, we should model our institutional system to enable our scientists and engineers to pair up with business mentors to make the successful journey from the laboratory to the marketplace. The ongoing efforts to promote innovation and entrepreneurship through initiatives like the U.S.-India Science and Technology Endowment Fund, the Stanford-India Biodesign Programme and the Khorana Technology Transfer programme should be strengthened to enhance the efficiency and productivity of our emerging innovation system. Integrating American technologies with products of Indian grassroots innovations will enhance the value of the latter and make them scalable, affordable and marketable.
Deepening of ties
•A database of U.S.-based inventors, their inventions and technologies relevant to India needs to be created. Further, the existing collaborative partnerships and student exchange programmes between research institutions and universities in both the countries need to be strengthened at various levels — including university-to-university, university-to-industry, industry-to-industry, and consortia-to-consortia levels. Joint incubators, to enable Indian start-ups to introduce products in the U.S. market and to facilitate U.S.-based start-ups to enter India with inflow of technologies, mentors and best business practices, should be set up.
•Finally, the knowledge and skills of the successful Indian diaspora and Indophiles in the American administration should be leveraged to not only support the Indian start-up ecosystem but also to raise funds for programmes that will help India achieve inclusive development. India’s pledge to manufacture locally, create more jobs and stay ahead of the competition can be redeemed to a great extent by marrying the Indian skills of low-cost innovation, for example in launching satellites and in space exploration, with the American prowess in science and technology.
📰 Taxing times for the States
The withering of the States’ fiscal independence under GST strikes at the core of federalism
•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.
