• GST replaced multiple indirect taxes levied by the central and state governments, simplifying the tax structure. This streamlined system reduces the complexity of compliance for businesses
• GST eliminates the cascading effect of taxes, where taxes are levied on top of other taxes. With a seamless credit mechanism, businesses can claim input tax credit on the taxes paid on their purchases, leading to a more transparent and efficient system
• GST has facilitated the creation of a common national market by harmonizing tax rates and regulations across states. This has reduced trade barriers and promoted the free flow of goods and services throughout the country
• The GST system has incorporated technology-driven processes, including electronic filing and real-time reporting, making it harder for businesses to evade taxes. This has contributed to increased tax compliance
• The input tax credit mechanism under GST benefits manufacturers, as they can claim credits for taxes paid on raw materials and input services. This has a positive impact on the cost of production and enhances the competitiveness of Indian goods in the international market
• GST brings transparency to the taxation system. The online filing of returns and the availability of transaction-level data make it easier for tax authorities to monitor and track transactions, reducing the scope for corruption
• GST has replaced a complex system of filing multiple tax returns with a more straightforward mechanism. Businesses now need to file fewer returns, reducing the compliance burden
• The implementation of GST has contributed to an improvement in the ease of doing business in India. The unified tax system has made it simpler for businesses to operate across states and has reduced the paperwork and bureaucratic hurdles associated with tax compliance
• GST has led to the harmonization of tax rates across states and union territories, minimizing the tax rate disparities that existed earlier. This creates a more predictable tax environment for businesses

• Despite the intention to simplify the tax structure, the multi-tiered rate system (0%, 5%, 12%, 18%, and 28%) and the inclusion of cess on certain goods have introduced complexity. The classification of goods and services under different tax slabs can be challenging, leading to disputes and confusion
• The successful implementation of GST relies heavily on technology. Issues such as technical glitches on the GSTN (Goods and Services Tax Network) portal, especially during the initial phases, have caused difficulties for businesses in filing returns and complying with regulations
• The compliance requirements for businesses under GST, including multiple returns filing, have been perceived as burdensome. Smaller businesses, in particular, may find it challenging to adapt to the new system and comply with the various provisions
• The transition from the previous tax regime to GST posed challenges, especially for businesses in terms of understanding the new tax structure, reconfiguring accounting systems, and ensuring a smooth transition of credits from the old tax system to the GST system
• The classification of certain goods and services into specific tax slabs has been a source of contention. Ambiguities in classification have led to disputes and litigations, with businesses seeking clarity on the applicable tax rates
• The implementation of GST has increased compliance costs for businesses due to the need for sophisticated IT infrastructure, the hiring of tax professionals, and efforts to ensure accurate reporting and filing
• Challenges related to availing and matching input tax credits have been reported. Timely matching of credits and resolving discrepancies can be cumbersome, leading to concerns about the seamless flow of credit across the supply chain
• The anti-profiteering provisions were introduced to ensure that businesses pass on the benefits of reduced tax rates to consumers. However, the implementation of anti-profiteering measures has been criticized for its complexity and potential for disputes
• The periodic changes in the GST return filing system have created challenges for businesses in adapting their processes. Delays and complexities in return filing can affect working capital management

Key functions and responsibilities of the National Health Authority include:

• Policy Formulation: The NHA is responsible for formulating policies and guidelines for the implementation of PM-JAY. It works to ensure that the scheme aligns with the broader objectives of universal health coverage and affordable healthcare for all.
• Enrollment and Beneficiary Identification: The NHA oversees the process of identifying and enrolling eligible beneficiaries for PM-JAY. This involves creating and maintaining a comprehensive database of eligible families to ensure accurate and efficient access to healthcare services.
• Empanelment of Hospitals: The NHA empanels both public and private hospitals to participate in the scheme. These hospitals are evaluated based on their infrastructure, facilities, and willingness to provide services under PM-JAY. Empanelled hospitals provide cashless and quality healthcare services to beneficiaries.
• Claims Management: The NHA is responsible for managing the claims process, which includes processing and reimbursing hospitals for the healthcare services provided to beneficiaries. This process ensures that beneficiaries can access medical treatment without facing financial barriers.
• Monitoring and Quality Assurance: The NHA monitors the implementation of PM-JAY to ensure that the services provided by empanelled hospitals meet quality standards. It conducts regular audits and assessments to maintain the quality of healthcare services.
• Technology and Data Management: The NHA employs technology extensively to manage beneficiary data, hospital empanelment, claims processing, and monitoring. This helps in creating an efficient and transparent system for the implementation of the scheme.
• Capacity Building: The NHA works on capacity-building initiatives for stakeholders involved in the implementation of PM-JAY. This includes training for healthcare providers, government officials, and other relevant personnel.
• Research and Innovation: The NHA focuses on research and innovation to improve the implementation of PM-JAY. It explores ways to enhance the scheme's reach, effectiveness, and impact.

5. Is National Health Authority a Statutory Body?

• The National Health Authority (NHA) is a statutory body. It was established by an Act of Parliament known as the " National Health Authority Act, 2019.
• The Act was passed to provide a legal framework for the creation and functioning of the NHA, which is responsible for the implementation of the Pradhan Mantri Jan Arogya Yojana (PM-JAY), also known as Ayushman Bharat.
• The National Health Authority Act, 2019, outlines the composition, Powers, functions, and responsibilities of the NHA.
• It grants the NHA the authority to manage and oversee the implementation of PM-JAY, which is one of the largest government-funded health insurance schemes in the world.
• The Act also provides the NHA with the necessary legal framework to carry out its role effectively, including policy formulation, enrollment of beneficiaries, empowerment of hospitals, claims processing, and quality assurance.
• As a statutory body, the National Health Authority operates within the legal framework provided by the Act and has the authority to make decisions, issue guidelines, and implement policies related to the functioning of PM-JAY.
• This legal status ensures that the NHA has the necessary autonomy and powers to carry out its responsibilities in the implementation of the healthcare scheme.

CAPITAL GAIN TAX (CGT)

 

 

1. Context

 

Following outrage and concerns from certain quarters over the Budget proposal to remove indexation benefits on long-term capital gains (LTCG), the government Tuesday decided to offer taxpayers a choice to pay 20 per cent LTCG tax with indexation benefit on sale of property acquired before July 23, 2024.

 

2. What is Capital Gain Tax (CGT)?

 

Capital Gain Tax is a tax on the profit realized from the sale of a capital asset, such as stocks, bonds, real estate, or other investments. When you sell an asset for more than its purchase price, the difference is considered a capital gain and may be subject to taxation

Types of Capital Gains:

• Short-Term Capital Gains: Gains from assets held for a short period, typically less than one year. These gains are usually taxed at the individual's regular income tax rate.
• Long-Term Capital Gains: Gains from assets held for more than one year. These gains are often taxed at a lower rate than short-term gains, as an incentive for long-term investment.

 

3. Advantages and Disadvantages of CGT

 

Advantages:

 

• Capital gains tax provides a significant source of revenue for governments, which can be used to fund public services such as healthcare, education, infrastructure, and social programs
• It helps in balancing budgets and reducing deficits by tapping into the wealth generated from investments
• Capital gains tax can be structured to be progressive, meaning higher-income individuals who are more likely to benefit from substantial capital gains pay a higher rate, promoting income equality
• Ensures that individuals who gain from the appreciation of their investments contribute a fair share to public finances, as opposed to relying solely on wage earners for tax revenue
• By taxing short-term gains at a higher rate, it can discourage speculative trading and promote more stable, long-term investment behavior
• Reducing excessive speculation can lead to more stable and efficient markets, with prices more accurately reflecting underlying values
• Differential rates for short-term and long-term capital gains can incentivize investors to hold assets for longer periods, potentially leading to more sustainable and thoughtful investment decisions
• Encourages investment in businesses, as individuals may prefer to hold onto their stocks or other investments longer to benefit from lower long-term capital gains rates

Disadvantages:

 

• Calculating capital gains can be complex, requiring detailed record-keeping and familiarity with tax laws. This complexity can lead to increased administrative burdens for taxpayers
• Individuals and businesses may incur additional costs for tax preparation and professional advice to ensure compliance with CGT regulations
• Investors may be reluctant to sell assets to avoid triggering CGT, leading to inefficient allocation of capital. This "lock-in" effect can prevent the reallocation of resources to more productive investments
• ax considerations can distort investment decisions, leading investors to prioritize tax-efficient strategies over economically optimal ones
• CGT can disproportionately affect entrepreneurs and small business owners, who often rely on the sale of their businesses as a significant source of retirement funds.

4. What is the Cost Inflation Index?

The Cost Inflation Index (CII) is a financial tool used primarily in tax calculations, especially for capital gains.

Here's an overview:

• It adjusts the purchase price of an asset to account for inflation over time
• Calculating long-term capital gains tax, particularly in countries like Indi
• Reduces tax burden by adjusting the original purchase price of an asset to its present-day value
• Purchase price is multiplied by (CII of sale year / CII of purchase year)
• Introduced to make capital gains tax calculations fairer in inflationary economies
• Most commonly used in India, though similar concepts exist elsewhere

 

5.Way Forward

 

Capital gains tax (CGT) is a crucial element of modern tax systems, offering significant benefits such as generating government revenue, promoting fairness, and encouraging long-term investment. Its advantages include providing funds for public services, incentivizing stable investment behavior, and contributing to economic stability and equity. However, CGT also presents several challenges, including complexity in compliance, potential distortions in investment decisions, and impacts on specific groups such as entrepreneurs and retirees

For Prelims: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc. For Mains: GSIII: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment

 

Previous Year Questions 1.Enumerate the indirect taxes which have been subsumed in the Goods and Services Tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017. (UPC CSE GS III 2019)

 

Source: Indianexpress

 

HIROSHIMA DAY

 

 

 

1. Context

Hiroshima Day is observed every year on August 6 to mark the horrific bombing of the Japanese city. Let’s see how the horrors of world’s first atomic bombing underline the significance of striving for global peace and disarmament.

2. Background for Hiroshima Day

 

• During World War II, humanity witnessed the unprecedented use of radioactive elements' fission properties to develop a weapon of mass destruction. On August 6, 1945, a B-29 bomber named Enola Gay dropped a uranium-based gun-type atomic bomb on Hiroshima. Three days later, on August 9, the U.S. deployed a second atomic bomb, "Fat Man," over Nagasaki.
• This marked a grim conclusion to the conflict ignited by Hitler’s invasion of Poland in September 1939. World War II was characterized by a clash of ideologies and personalities.
• The dictatorial regimes of Adolf Hitler in Germany, Benito Mussolini in Italy, Gen. Hideki Tojo in Japan, Antonio Salazar in Portugal, Juan Peron in Argentina, and Francisco Franco in Spain opposed the Allied nations, which included Great Britain, France, the Soviet Union, and the United States.
• The Axis powers embodied totalitarian ideologies and absolute control, while the Allied Powers advocated for self-determination, democratic governance, and anti-racism. Despite Germany’s surrender in May 1945 and Italy’s earlier defeat in September 1943, the rationale behind the decision to drop the atomic bomb on Japan remains a topic of inquiry

3. Attack on Pearl Harbour

 

• Following the surrender of Italy and Germany, the focus of the war shifted to the Pacific, where conflict ensued between the United States, stationed in the Hawaiian Islands, and the persistent Japanese forces in the Western Pacific.
• A major crisis erupted when 353 Japanese Imperial Air Force planes launched an attack on the US base, resulting in the deaths of 2,404 military personnel and civilians.
• The first half of 1945 saw intense battles between the Japanese and US forces. The timeline alone does not fully clarify the decision to use atomic bombs. In February 1945, the US invaded and captured the Japanese island of Iwo Jima, incurring 30,000 casualties.
• In April 1945, the US also invaded Okinawa, suffering around 50,000 casualties. During this period, Japan experienced significant losses to its Air Force and Navy due to US retaliatory attacks. These events unfolded alongside ongoing developments in the Manhattan Project

4. What is the Manhattan Project?

 

• On the morning of July 16, 1945, at the White Sands Missile Range in Alamogordo, New Mexico, Robert Oppenheimer, often regarded as the 'father of the atomic bomb,' famously quoted the Gita, saying, “Now I have become death,” following the successful detonation of the plutonium device known as ‘Gadget.’ This moment was documented by Project General L.R. Groves in a report submitted to the War Secretariat.
• The successful test provided the US military with a significant new asset. Diplomatic discussions among the Allies began regarding the use of this new weapon.
• On July 26, the leaders of the US, Britain, and the Soviet Union, known as the Big Three, convened at Cecilienhof Palace in Potsdam, Germany, and issued an ultimatum to Japan demanding unconditional surrender.
• According to US military records, various alternatives to the use of atomic bombs were considered, including a demonstration of the bomb off Tokyo’s coast with minimal impact or a planned full-scale invasion of the Japanese island, codenamed Olympia, in October 1945. Additionally, the decision was influenced by the personal experience of former US President Harry Truman

 

5. Postdam declaration and Japan's response

 

 

• Japan's response to the Potsdam Declaration, issued on July 26, 1945, was one of cautious rejection. The declaration, which demanded Japan's unconditional surrender and outlined the terms for ending World War II, was initially met with a firm stance from the Japanese government.
• Japanese leaders, including Emperor Hirohito, were reluctant to accept the terms, as they feared the loss of national sovereignty and the preservation of their imperial institution.
• On August 1, 1945, Japan formally rejected the Potsdam Declaration, leading to continued hostilities. This rejection played a significant role in the decision to use atomic bombs on Hiroshima and Nagasaki in early August 1945.
• The devastating effects of these bombings, coupled with the Soviet Union's declaration of war on Japan on August 8, ultimately compelled Japan to reconsider its position.
• On August 15, 1945, Japan announced its unconditional surrender, effectively ending World War II. This decision was influenced by the overwhelming destruction wrought by the atomic bombs and the realization that further resistance was futile

 

6.Nuclear disarmament and India

 

• According to United Nations data, approximately 13,400 nuclear weapons are still in existence globally, with over 2,000 tests having been conducted. The initial effort toward nuclear disarmament began in 1946, when the United Nations General Assembly established a Commission to address issues related to atomic energy and its peaceful applications. Since then, various nuclear disarmament agreements and forums have emerged.
• These include the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), the Treaty Banning Nuclear Weapon Tests in the Atmosphere, in Outer Space, and Under Water (Comprehensive Nuclear-Test-Ban Treaty, CTBT), signed in 1963 but not yet in force, and the Treaty on the Prohibition of Nuclear Weapons (TPNW).
• India participates in the Conference on Disarmament in Geneva and is committed to achieving global, non-discriminatory, and verifiable nuclear disarmament. India also advocates for an internationally verified Fissile Material Cutoff Treaty.
• India's stance on the NPT, CTBT, and TPNW reflects its strategic policy. The NPT, established in 1968, recognizes only the five permanent members of the UN Security Council (the US, Russia, the UK, France, and China) as nuclear powers and allows other countries to join only as non-nuclear weapon states. India views this arrangement as a threat to its security and sovereign right to self-defence.
• India has pledged to maintain a voluntary and unilateral moratorium on further nuclear testing. It remains the only nuclear-armed state to assert that its security would be strengthened, not weakened, in a world without nuclear weapons

7. Hiroshima peace memorial

 

• The ruins of the Genbaku Dome serve as a poignant reminder of the consequences of nuclear warfare. The industrial promotion center in Hiroshima bore the brunt of the atomic blast directly overhead. While nearly the entire city was reduced to rubble, the industrial complex remained largely intact.
• Now known as the ‘Hiroshima Peace Memorial,’ the term "Genbaku" in Japanese translates to "atom bomb." The historical significance of the site was underscored when former US President Barack Obama visited the Genbaku Dome on May 27, 2016, and met with a Hibakusha, a survivor of the Hiroshima atomic bombing.
• The introduction of new atomic terminology into the Japanese language and the presence of radiation effects in the genes of many Japanese people stand as enduring testaments to the history of human conflict.

 

 

 

For Prelims: Current events of national and international importance   For Mains: GS I - World History

 

 

Source: Indianexpress