GST impact on the Infrastructure sector | Livemint

GST impact on the Infrastructure sector

The infrastructure sector is the backbone of the Indian economy. The government has been making efforts to boost the sector through various schemes and incentives.According to the government, total infrastructure spending is expected to be about 10% of GDP (gross domestic product) during the 12th Five-year Plan (2012–17), up from 7.6% during the previous Plan.

GST impact | Background

  • In the pre-GST era, there was dichotomy in the applicable indirect tax regime relevant to infrastructure. While Central laws provided exemptions and concessions, state VAT (value-added tax) and entry tax laws were applicable to goods procured.
  • In addition, the cascading effect of Central and state indirect taxes was a concern, due to a high base for levy of respective taxes and a restrictive credit mechanism.
  • There was also litigation at the Central and state levels on classification of contracts, valuation, jurisdiction of state on inter-state works contracts and other issues.

GST impact | Analysis

GST being a concurrent tax on supply of goods and services is expected to bring in predictability for infrastructure projects.

  • There are some changes that would have an impact on indirect taxation—taxability of works contracts being one. As works contracts are limited to only immovable properties, turnkey contracts which do not result in immovable property would now be treated as composite supplies.
  • Works contracts would be regarded as supply of services, so the valuation of goods and services in works contracts that sparked differences earlier would be put to rest.
  • Other contracts which do not result in immovable property could be regarded as composite supplies, and depending on the principal supply, tax liability would arise either as a supply of goods or services.
  • While there is apprehension that a flat GST rate of 18% would lead to increased incidence on infra projects, availability of input tax credits would neutralize such concerns.
  • Exemptions and concessions to infrastructure have been completely withdrawn. This could also lead to increased working capital requirements. Project cost could rise due to increased burden of indirect taxes.
  • Electricity being outside the purview of GST, power generation companies would continue to have indirect taxes as a significant cost factor
  • Withdrawal of exemptions for road, water supply and sewerage projects sponsored by government and local authorities is expected to increase government spend.

GST impact | Conclusion

Therefore, the introduction of GST seems to be a mixed bag for the infra sector—predictability and efficiency being the key advantages, while non-inclusion of sub-sectors, higher rate and certain restrictions are negatives.

Vibrant Democracy, Dormant Parliament | Livemint

As an institution, Parliament is central to the very idea of democracy and was assigned a pivotal role in our Constitution by the founding fathers of the republic. Yet, so many decades later, it has neither evolved nor matured as it could, might or should have. If anything, slowly but surely, it has diminished in stature and significance

Role of Parliament

There are three designated roles for Parliament in a democracy

  1. It is responsible for legislation—laws of the land—by which people govern themselves.
  2. It must ensure accountability of governments—on policies or actions—to the people.
  3. t should engage in discourse and debate on issues that concern the nation and the citizens.

Qualitative decline in Parliament’s performance in recent times

  • The process of legislation is slow and lagged.
  • There are times when it extends from one Parliament to the next.
  • Laws are often passed in a rush through loud voices or large numbers.
  • There is little scrutiny of draft legislation.
  • There is almost no follow-up on rules when laws are put in place.

Reasons for decline

There are two reasons for this decline –

  1. Parliament does not meet or work long enough – The duration for which Parliament meets in India, compared with other democracies, is short. In the UK, both the House of Commons and the House of Lords meet for more than 150 days per year. In the US, both the House of Representatives and the Senate meet for 133 days per year. In Japan, as a norm, the Diet meets for 150 days per year and this is often extended.
  2. Institutional constraints 
  • The allocation of time for MPs to speak is proportional to the strength of their political party in the house and its leadership decides who gets to speak and for how long. The only other opportunities for MPs are during question hour or zero hour. Answers to unstarred questions are simply laid on the table of the house. Starred questions are too many. Only a few come up for discussion. And these are just not taken up if the concerned MP is not present at the time. In zero hour, the speaker or the chairman have the discretion to invite an MP to speak, but time is too little and speeches are often drowned out in pandemonium.
  • It is not only time. MPs do not quite have the freedom to speak in our Parliament as in other democracies. For one, they are afraid of what the party leadership might think, which could affect their future. For another, party whips, of three types, are a problem. A one-line whip is non-binding, informing members of the vote. A two-line whip requires attendance in the house for the vote. A three-line whip is a clear-cut directive to be present in the house during the vote and cast their vote in accordance with the party line. Any violation of this whip could lead to an MP’s expulsion from the house.
  • In India, the anti-defection law stipulates that a three-line whip can be violated only if more than one-third of a party’s MPs do so. This is the unintended consequence of a law that might have mitigated one problem but created another, which is emasculating our Parliament as an institution. 
  • The standing committees and select committees can be diligent and are often not partisan. Alas, these committees are often used in form than substance. Moreover, their recommendations are not binding. 

Way forward

The answers lie, inter alia –

  • in electoral reform through public funding of elections,
  • political reform that mandates disclosure on the sources of financing for political parties, and
  • set rules for elections within political parties to foster intra-party democracy that has been stifled not only by dynasties but also by oligarchies.

Conclusion

Almost 70 years after we began life as a republic, there is a clear and present danger that we could be the world’s most vibrant democracy with the world’s least effective, and perhaps most dormant, Parliament. It is time for MPs in India to reclaim their rights in Parliament as representatives of the people.

Directly Elected Mayors | Livemint

Last week, the Maharashtra cabinet approved a proposal for direct election of the village sarpanch, the head of the gram panchayat. Earlier, the sarpanchwas elected indirectly, by elected representatives.

Background

  • The centralization of governance in postcolonial India is also at variance with the long history of local self-governments coexisting with ancient kingdoms.
  • Currently, the head of the municipal corporation, the mayor, is merely a ceremonial authority and executive decisions are carried out by the municipal commissioner appointed by the state government.

Analysis

The direct elections for the posts of sarpanch and municipal council president need to be extended to municipal corporations that govern larger urban areas.India needs directly elected and empowered mayors for all its big cities.

Case for directly elected mayors

It helps in the construction of central leadership. Several countries have successful mayors go on to head national governments. For instance,

  • the current presidents of Indonesia and Turkey—Joko Widodo and RecepTayyipErdoğan—had previously served as mayors of Solo and Istanbul, respectively.
  • Both Jiang Zemin and Zhu Rongji were mayors of Shanghai before reaching the highest echelons of Chinese national politics.
  • While Jawaharlal Nehru and Vallabhbhai Patel honed their administrative skills as mayors of Allahabad and Ahmedabad, Subhas Chandra Bose served as the chief executive officer of the Calcutta Corporation before stepping into the role of Calcutta’s mayor.

Directly Elected Mayors | Challenges

  • The state governments do not want to let go of their powers. The resources generated from the cities are used to lubricate the political economies in rural areas.
  • The structures of local government created by the 73rd and 74th amendments did not go far enough; the resources and the powers continue to be vested with the state governments, which have been reluctant to delegate them.
  • Another issue is the short tenure of mayors in many states. For instance, the BMC mayor’s tenure is two-and-a-half years—hardly enough to create lasting changes in a large metropolis. Sometimes, directly elected mayors run into corporations dominated by members of rival political parties. This leads to snags in day-to-day governance.
  • Since power lies largely with state and Central governments, the new dynasts that proliferate in Indian politics also prefer the parliamentary and legislative bastions controlled for generations rather than proving their mettle by transforming a city.

Directly Elected Mayors | Way forward

A solution can be founded in a private member Bill that was introduced in the Lok Sabha by Congress parliamentarian Shashi Tharoor last year. Tharoor’s Bill on direct elections for mayors included a provision for a mayor-in-council that would be nominated by the directly elected mayor. Such a council, with an executive role, has existed in Kolkata and has performed reasonably well.

Directly Elected Mayors | Conclusion

The excessive fear of fragmentation in a newly independent India led to a reluctant federation and a dirigiste economy. While the pace of economic liberalization remains slow, the decentralization of administration has been slower. It is high time for corrective steps.

Greece's Economic Crises

 

Greece’s Economic Crises | Background

Greece's Economic Crises - economy

  • UK referendum on European Union (EU) membership
  • Refugee crisis
  • Increasingly desperate European Central Bank (ECB).
  • Greece, which is caught in a spat between Germany and the International Monetary Fund (IMF) over debt relief as it more bailout money.
  • Dutch rejection of a treaty between the EU and Ukraine

Greece’s Economic Crises | Origin of the Issue

Greece—whose economic crisis already threatened to destroy the irrevocable nature of euro membership

Greece’s Economic Crises |Consequences :

  1. Direct Political Consequnces
  • British decision to quit may prompt other countries to hold ballots on their own membership
  • Marine Le Pen has already promised referendums as part of her campaign strategy for the 2017 French presidential elections
  1. Direct Economic Consequences
  • Investors are now charging Portugal 3.3 percentage points more for 10-year money than they demand from Germany, a spread that’s well above its six-month average of 2.2 points.
  • Italy’s risk premium rose to 1.3 points last week, up from December’s low of 0.9 points, while Spain is at 1.4 points, up from 1.2 points a month ago.
  1. Overlapping Consequences
  • As Greece’s debt repayment deadlines approach, EU officials may be busy fighting fires kindled by Britain’s 23 June referendum on EU membership.
  • With Prime Minister David Cameron embroiled in the wake of Panama Papers, government popularity is likely to take a hit. That can only help the anti-EU campaign.
  • EU may find itself trying to hand money over to its weakest and most begrudging member Greece just when one of Europe’s most important participants called it quits( Brexit vote ).
  • The IMF, which says Greece can’t turn itself around without debt relief, may be unable to reconcile its differences with Germany.

What does the Opinion Poll Say?

The European Commission’s regular survey of attitudes to the EU, known as the eurobarometer, has already taken a turn for the worse, with the most recent poll showing rising discontent.

Conclusion :

Europe’s leaders may find themselves trying to stop their sandcastle from crumbling.
NOTE:
Greece, Germany and IMF

  • Itwas the Germans who insisted on the IMF’s involvement in the Greek bailouts because it did not trust the political will of the other creditors to do whatever was necessary to force Greece into compliance.
  • That process did not work here and the relationship between Germany and Greece deteriorated to such an extent that the IMF had to turn on Germany because what it was demanding of the Greeks was not only inappropriate but was destroying the country and counterproductive.

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