SMALL INDUSTRIES
Classification of Industries |
Classification/ Industry type | Micro | Small | Medium |
Investment | Not more than Rs.1 crore | Not more than Rs.10 crore | Not more than Rs.50 crore |
Annual Turnover | Not more than Rs. 5 crore | Not more than Rs. 50 crore | Not more than Rs. 250 crore |
- Expansion of Entrepreneurial Activities: The innovative approaches adopted by small industries have contributed to the growth of entrepreneurial ventures. This expansion has brought more economic sectors into the fold, offering a broader range of goods and services that cater to both domestic and international markets.
- Industrialization of Rural and Underdeveloped Areas: Small industries have helped reduce regional disparities, promoting a more equitable distribution of wealth and income throughout the nation.
- Employment Creation: Small industries are crucial to India's economic development, as they generate significant employment opportunities at a much lower capital investment compared to large-scale industries
Village Small Industries (VSI)
The term "Village and Small Industry (VSI)" is commonly used to refer to unorganized traditional sectors and small-scale industries. The VSI sector is composed of seven sub-sectors: handicrafts, handlooms, Khadi and Village Industries, coir, sericulture, power looms, and small-scale industries
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- Prime Minister’s Employment Generation Programme (PMEGP): The aim of this program is to create employment opportunities by establishing new micro-enterprises, projects, and self-employment initiatives across rural and urban areas of the country. The Khadi and Village Industries Commission (KVIC) serves as the national nodal agency responsible for implementing the scheme, while its execution at the state level is managed by State KVIC offices, State Khadi and Village Industries Boards (KVIB), District Industries Centres (DIC), Coir Board (for coir-related activities), and Banks.
- Collateral-Free Credit Provision for MSMEs: Banks and other financial institutions, including NBFCs, are mandated to provide collateral-free credit to Micro and Small Enterprises. The scheme ensures that up to ₹5 crore (effective from April 1, 2023) per borrowing unit is covered for collateral-free credit facilities (term loans and/or working capital) extended to micro and small enterprises by eligible lending institutions.
- A Scheme for Promotion of Innovation, Rural Industry & Entrepreneurship (ASPIRE): The ASPIRE program has been approved for continuation from 2021-2022 to 2025-2026 with a budget allocation of ₹194.87 crore. Updated guidelines issued on January 28, 2022, focus on the following objectives:
- Reducing unemployment and generating jobs,
- Promoting an entrepreneurial culture in India,
- Encouraging innovation to enhance the competitiveness of the MSME sector.
- Entrepreneurship and Skill Development Programmes (ESDP): This program is designed to inspire youth from diverse social backgrounds, including women, SC/ST communities, disabled individuals, ex-servicemen, and those below the poverty line, to consider careers in self-employment or entrepreneurship.
- Scheme of Fund for Regeneration of Traditional Industries (SFURTI): The scheme aims to create competitive, sustainable employment opportunities for traditional industries and artisans by organizing them into clusters. It also seeks to enhance the marketability of products produced by these clusters, upgrade the skills of traditional artisans, provide better tools and equipment, strengthen cluster governance with active stakeholder participation, and foster innovative products, advanced technologies, processes, market intelligence, and new models of public-private partnerships.
- MSME Champions Scheme: This program, set to run from 2021-2022 to 2025-2026, is divided into three components:
- MSME-Sustainable (ZED) Certification Scheme
- MSME-Competitive (Lean) Scheme
- MSME-Innovative (for Incubation, IPR, and Design) Scheme
- Greening MSME: SIDBI has introduced the "Greening MSME" initiative, which offers financial assistance up to a maximum of ₹20 crore to MSMEs for adopting energy-efficient and environmentally sustainable technologies
- Access to Finance: Access to funding is a major challenge for Indian MSMEs, with the total financing gap expected to reach $400 billion. While closing this gap will take time, targeted green finance initiatives in areas like waste management, electric vehicles, energy efficiency, and renewables can support MSME growth in these sectors.
- Interest Rates: The Central Government should lower interest rates and make consumer finance, housing loans, and vehicle loans more accessible to stimulate market demand.
- Climate Commitments and Transitioning to Low-Carbon: Small enterprises are limited to adhering to environmental regulations, while global supply chains increasingly shift to greener processes and products. There is currently no strategic plan to help MSMEs manage the risks associated with this transition.
- Unorganized Nature: Due to its fragmented structure and the predominance of micro-sized businesses, the MSME sector is one of the most vulnerable in the Indian economy. The COVID-19 pandemic has highlighted this vulnerability, with millions of MSMEs facing closure due to decreased demand caused by lockdowns.
- Green Transition of MSMEs: MSMEs are more exposed to policy and demand uncertainties, often with greater downside risks. Even if they recognize the benefits of going green, most lack the financial and technical capacity to invest in new initiatives. However, certain government programs can help address these barriers.
- Incentives and Penalties: Encouraging Small and Medium Enterprises (SMEs) to exceed mere compliance can be achieved by taxing negative externalities and offering subsidies or tax breaks for green investments. Updating environmental legislation should also consider the risks posed by different industries, and these policies should be assessed for their impact on MSMEs before widespread implementation
MSMEs should embrace best practices like implementing low-energy strategies, adopting renewable energy sources, improving waste management, ensuring women's safety, and making timely wage payments.
Governments, business associations, civil society organizations, and other stakeholders can play a proactive role in promoting awareness, sharing best practices, and providing training and resources. Financial incentives, such as tax breaks, subsidies, grants, and low-interest loans, can be offered by governments and investors to encourage MSMEs to adopt sustainable practices or invest in sustainable technologies.
Larger companies can support MSMEs in adopting sustainable practices by offering training, technical support, and financial assistance
For Prelims: Current events of national and international importance For Mains: GS III - Indian Economy |
Previous year Questions1. Consider the following statements with reference to India: (UPSC 2023)
1. According to the 'Micro, Small and Medium Enterprises Development (MSMED) Act, 2006', the 'medium enterprises' are those with investments in plant and machinery between Rs. 15 crore and Rs. 25 crore.
2. All bank loans to the Micro, Small, and Medium Enterprises qualify under the priority sector.
Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2
Answer: B
2. Which of the following can aid in furthering the Government's objective of inclusive growth? (UPSC 2011)
1. Promoting Self-Help Groups
2. Promoting Micro, Small and Medium Enterprises
3. Implementing the Right to Education Act
Select the correct answer using the codes given below:
A. 1 only
B. 1 and 2 only
C. 2 and 3 only
D. 1, 2 and 3
Answer: D
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ANTIMICROBIAL RESISTANCE
1. Context
As mental health awareness gains momentum in India, a surreptitious menace is insidiously undermining this edifice of progress: the unbridled use of antibiotics. Whilst the threat of antimicrobial resistance (AMR) is ubiquitously acknowledged as a formidable public health hazard, its profound implications on mental well being remain under examined
2. What is Anti Microbial Resistance?
Antimicrobial Resistance (AMR) occurs when bacteria, viruses, fungi, and parasites change over time and no longer respond to medicine making infections harder to treat and increasing the risk of disease spread severe illness, and death.
3. Emergence and spread of AMR
- AMR occurs naturally over time, usually through genetic changes.
- Antimicrobial-resistant organisms are found in people, animals, food, plants, and the environment (in water, soil, and air).
- They can spread from person to person or between people and animals, including from food of animal origin.
- The main drivers of antimicrobial resistance include the misuse and overuse of antimicrobials, lack of access to clean water, sanitation, and hygiene (WASH) for both humans and animals, and poor infection and disease prevention and control in healthcare facilities and farms. Poor access to quality, affordable medicines, vaccines, and diagnostics, lack of awareness and knowledge, and lack of enforcement of legislation.
4. Factors causing AMR in India
- The high disease burden
- The rising income
- The easy and cheap availability of these medicines to the public.
- The uncontrolled sales of antibiotics
- Poor Public health infrastructure
- Lack of awareness regarding the misuse of antibiotics.
6. Government Initiatives that help to curb Antimicrobial Resistance In India
- Through the Swacch Bharat Program, the government has taken active steps to improve hygiene and sanitation and reduce the environmental spread of pathogens.
- Vaccination is an equally important public health measure, and through Mission Indradhaniush, India has set itself an ambitious goal of increasing routine immunization coverage to 90% within just a few years.
6.1 Red Line Campaign
7. WHO's Global plan on Anti-Microbial Resistance?
- To improve awareness and understanding of antimicrobial resistance through effective communication, education, and training.
- To Strengthen the knowledge and evidence base through surveillance and research.
- To reduce the incidence of infection through effective sanitation, hygiene, and infection prevention measures.
- To Optimize the use of antimicrobial medicines in human and animal health.
- To develop the economic case for sustainable investment that takes account of the needs of all countries and to increase investment in new medicines, diagnostic tools, vaccines, and other interventions.
8. Global efforts
For Prelims: Food and Agriculture Organization (FAO), UN Environment Programme, the World Health Organization (WHO), World Organisation for Animal Health, Mission Indradhaniush, Red Line Campaign.
For Mains: 1.Antimicrobial resistance (AMR) is considered one of the most significant challenges the world faces today. Discuss.
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Previous Year Questions
1.Which of the following are the reasons for the occurrence of multi-drug resistance in microbial pathogens in India? ( UPSC CSE 2019)
Select the correct answer using the code given below. (a) 1 and 2 Answer: (b) |
INDIA - CHINA BORDER DISPUTE

Border Dispute:
- The India-China border is divided into three sectors:
- Western Sector: Aksai Chin, claimed by India but controlled by China.
- Middle Sector: Less contentious, but areas like Barahoti in Uttarakhand witness minor disputes.
- Eastern Sector: Arunachal Pradesh, claimed by China as part of South Tibet.
- The Sino-Indian War of 1962 remains a significant point of contention, with unresolved border claims.
Recent Standoffs
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Doklam (2017):
- A 73-day standoff occurred at the tri-junction of India, China, and Bhutan.
- Triggered by Chinese road construction near Bhutanese territory, viewed as a threat to India's strategic Siliguri Corridor (Chicken’s Neck).
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Galwan Valley (2020):
- Marked by the first casualties in 45 years; 20 Indian soldiers and an unknown number of Chinese troops died.
- Followed by a series of disengagement talks.
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Eastern Ladakh (2020-present):
- Ongoing disputes in areas like Pangong Tso Lake, Depsang Plains, and Hot Springs.
- Despite disengagement in some areas, tensions persist.
The Line of Actual Control is a 4,057-kilometer-long (2,520 mile) disputed border line that separates Indian-controlled territory from Chinese-controlled territory in the Himalayan region. It runs through the disputed border regions of Ladakh, Aksai Chin, and other areas along the India-China border.
Key characteristics of the LAC include:
- Undefined Demarcation: Unlike most international borders, the LAC is not precisely demarcated or delineated. It is essentially a loose line of perception where both Indian and Chinese troops are positioned.
- Historical Context: The LAC emerged after the Sino-Indian War of 1962, which resulted in a ceasefire but did not resolve the underlying territorial disputes.
- Disputed Sections: There are multiple areas along the LAC where both countries have different perceptions of where the actual line should be, leading to occasional tensions and military standoffs.
- Strategic Importance: The region is geographically challenging, with high-altitude terrain including mountain passes, glaciers, and rugged landscapes.
- Periodic Tensions: In recent years, particularly in 2020, there have been significant military confrontations between Indian and Chinese troops, most notably in the Galwan Valley region of Ladakh.
The LAC is divided into three sectors:
- Western Sector (Ladakh)
- Middle Sector (Uttarakhand, Himachal Pradesh)
- Eastern Sector (Arunachal Pradesh)
Early Friendship (1947–1954)
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Common Goals and Anti-Colonial Sentiments:
- India and China, as newly independent nations, sought to rebuild their societies and oppose colonialism and imperialism.
- Prime Minister Jawaharlal Nehru admired China’s cultural legacy and revolutionary transformation under the Communist regime led by Mao Zedong.
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Support for China on the Global Stage:
- India was one of the first non-communist nations to recognize the People’s Republic of China (PRC) in 1949.
- Nehru supported China's entry into the United Nations, arguing that the PRC represented the Chinese people rather than Taiwan (Republic of China).
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Signing of the Panchsheel Agreement (1954):
- India and China signed the Panchsheel Agreement, based on five principles of peaceful coexistence:
- Mutual respect for sovereignty and territorial integrity.
- Non-aggression.
- Non-interference in each other's internal affairs.
- Equality and mutual benefit.
- Peaceful coexistence.
- The slogan "Hindi-Chini Bhai-Bhai" symbolized the optimism in bilateral ties
- India and China signed the Panchsheel Agreement, based on five principles of peaceful coexistence:
Emerging Tensions (1954–1959)
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The Tibetan Question:
- China's annexation of Tibet (1950–51) and its suppression of Tibetan uprisings created friction.
- India’s grant of asylum to the 14th Dalai Lama in 1959 after the failed Tibetan rebellion was viewed as interference by China.
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Border Disputes:
- Despite the Panchsheel Agreement, India and China had unresolved territorial disputes:
- Aksai Chin (Western Sector): Controlled by China, claimed by India.
- Arunachal Pradesh (Eastern Sector): Claimed by China as South Tibet.
- Discovery of China's construction of a road in Aksai Chin (1957–58) intensified tensions
- Despite the Panchsheel Agreement, India and China had unresolved territorial disputes:
Deterioration and War (1959–1962)
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Border Incursions and Skirmishes:
- China’s aggressive patrols and incursions along the Line of Actual Control (LAC) exacerbated hostilities.
- Nehru’s "Forward Policy" (establishing advanced Indian outposts along the disputed border) was seen as provocative by China.
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Sino-Indian War (October–November 1962):
- China's invasion of Aksai Chin and parts of Arunachal Pradesh marked a turning point.
- The war exposed India's military vulnerabilities, resulting in territorial losses in Aksai Chin.
- China declared a unilateral ceasefire and withdrew from Arunachal Pradesh but retained control over Aksai Chin.
Differences Between the Terms
Term | Scope | Focus | Finality |
---|---|---|---|
De-induction | Broader withdrawal | Long-term stability | Final withdrawal of troops |
Disengagement | Specific sites/areas | Preventing skirmishes | Temporary or site-specific |
De-escalation | Entire conflict zone | Reducing overall tensions | Long-term trust-building |
For Prelims: Current events of national and international importance.
For Mains: General Studies II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.
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Previous Year Questions
1.“Belt and Road Initiative” is sometimes mentioned in the news in the context of the affairs of : (UPSC CSE 2016)
(a) African Union (b) Brazil (c) European Union (d) China Answer (d)
The Belt and Road Initiative (BRI) is a global development strategy launched by China in 2013 under President Xi Jinping. It aims to enhance connectivity and cooperation among countries primarily in Asia, Africa, and Europe through infrastructure projects, investments, and trade networks. The BRI includes two main components:
BRI is often in the news due to its economic, geopolitical, and strategic implications for participating countries and its criticism for creating debt traps Mains 1.‘China is using its economic relations and positive trade surplus as tools to develop potential military power status in Asia’, In the light of this statement, discuss its impact on India as her neighbour. (UPSC CSE GS2, 2017) 2.With respect to the South China sea, maritime territorial disputes and rising tension affirm the need for safeguarding maritime security to ensure freedom of navigation and over flight throughout the region. In this context, discuss the bilateral issues between India and China. (UPSC CSE GS2, 2014) |
RENEWABLE ENERGY
1. Context
2. Why use Renewable energy
- Today we primarily use fossil fuels to heat and power our homes and fuel our cars.
- It’s convenient to use coal, oil, and natural gas for meeting our energy needs, but we have a limited supply of these fuels on Earth.
- We’re using them much more rapidly than they are being created. Eventually, they will run out.
- And because of safety concerns and waste disposal problems, the United States will retire much of its nuclear capacity by 2020.
- In the meantime, the nation’s energy needs are expected to grow by 33 per cent during the next 20 years.
- Renewable energy can help fill the gap
- Even if we had an unlimited supply of fossil fuels, using renewable energy is better for the environment.
- We often call renewable energy technologies “clean” or “green” because they produce few if any pollutants.
- Burning fossil fuels, however, sends greenhouse gases into the atmosphere, trapping the sun’s heat and contributing to global warming.
- Climate scientists generally agree that the Earth’s average temperature has risen in the past century.
- If this trend continues, sea levels will rise, and scientists predict that floods, heat waves, droughts, and other extreme weather conditions could occur more often.
- Other pollutants are released into the air, soil, and water when fossil fuels are burned.
- These pollutants take a dramatic toll on the environment—and humans.
- Air pollution contributes to diseases like asthma.
- Acid rain from sulfur dioxide and nitrogen oxides harms plants and fish. Nitrogen oxides also contribute to smog.
- Renewable energy will also help us develop energy independence and security.
- Replacing some of our petroleum with fuels made from plant matter, for example, could save money and strengthen our energy security.
- Renewable energy is plentiful, and the technologies are improving all the time.
- There are many ways to use renewable energy.
- Most of us already use renewable energy in our daily lives.
2.1.Hydropower
- Hydropower is our most mature and largest source of renewable power, producing about 10 per cent of the nation’s electricity.
- Existing hydropower capacity is about 77,000 megawatts (MW). Hydropower plants convert the energy in flowing water into electricity.
- The most common form of hydropower uses a dam on a river to retain a large reservoir of water. Water is released through turbines to generate power.
- “Run of the river” systems, however, divert water from the river and direct it through a pipeline to a turbine.
- Hydropower plants produce no air emissions but can affect water quality and wildlife habitats.
2.2.Bioenergy
- Bioenergy is the energy derived from biomass (organic matter), such as plants. If you’ve ever burned wood in a fireplace or campfire, you’ve used bioenergy.
- But we don’t get all of our biomass resources directly from trees or other plants.
- Many industries, such as those involved in construction or the processing of agricultural products, can create large quantities of unused or residual biomass, which can serve as a bioenergy source.
2.3.Geothermal Energy
- The Earth’s core, 4,000 miles below the surface, can reach temperatures of 9000° F.
- This heat—geothermal energy—flows outward from the core, heating the surrounding area, which can form underground reservoirs of hot water and steam.
- These reservoirs can be tapped for a variety of uses, such as to generate electricity or heat buildings.
- By using geothermal heat pumps (GHPs), we can even take advantage of the shallow ground’s stable temperature for heating and cooling buildings.
2.4.Solar Energy
- Solar technologies tap directly into the infinite power of the sun and use that energy to produce heat, light, and power.
2.5. Wind Energy
- For hundreds of years, people have used windmills to harness the wind’s energy.
- Today’s wind turbines, which operate differently from windmills, are a much more efficient technology.
- Wind turbine technology may look simple: the wind spins turbine blades around a central hub; the hub is connected to a shaft, which powers a generator to make electricity.
- However, turbines are highly sophisticated power systems that capture the wind’s energy using new blade designs or airfoils.
- Modern, mechanical drive systems, combined with advanced generators, convert that energy into electricity.
- Wind turbines that provide electricity to the utility grid range in size from 50 kW to 6
- Wind energy has been the fastest growing source of energy since 1990.
2.6.Ocean Energy
- The ocean can produce two types of energy: thermal energy from the sun’s heat, and mechanical energy from the tides and waves.
- Ocean thermal energy can be used for many applications, including electricity generation.
- Electricity conversion systems use either the warm surface water or boil the seawater to turn a turbine, which activates a generator.
- The electricity conversion of both tidal and wave energy usually involves mechanical devices.
- A dam is typically used to convert tidal energy into electricity by forcing the water through turbines and activating a generator.
- Meanwhile, wave energy uses mechanical power to directly activate a generator or to transfer to a working fluid, water, or air, which then drives a turbine/generator.
2.7.Hydrogen
- Hydrogen is high in energy, yet its use as a fuel produces water as the only emission.
- Hydrogen is the universe’s most abundant element and also its simplest.
- A hydrogen atom consists of only one proton and one electron.
- Despite its abundance and simplicity, it doesn’t occur naturally as a gas on the Earth.
- Today, industry produces more than 4 trillion cubic feet of hydrogen annually.
- Most of this hydrogen is produced through a process called reforming, which involves the application of heat to separate hydrogen from carbon. Researchers are developing highly efficient, advanced reformers to produce hydrogen from natural gas for what’s called Proton Exchange Membrane fuel cells.
3. Steps were taken by the government to promote Renewable energy
The Indian renewable energy sector is the fourth most attractive renewable energy market in the world. India was ranked fourth in wind power, fifth in solar power and fourth in renewable power installed capacity, as of 2020.
3.1.Distribution of prominent renewable energy Hubs
- Rajasthan
- Gujarat
- Andhra Pradesh
- Karnataka
- Telangana
- Tamil Nadu

3.2.Steps taken
- Permitting Foreign Direct Investment (FDI) up to 100 per cent under the automatic route,
- Waiver of Inter-State Transmission System (ISTS) charges for inter-state sale of solar and wind power for projects to be commissioned by 30th June 2025,
- Declaration of trajectory for Renewable Purchase Obligation (RPO) up to the year 2022,
- Setting up of Ultra Mega Renewable Energy Parks to provide land and transmission to RE developers on a plug-and-play basis,
- Schemes such as Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM), Solar Rooftop Phase II, 12000 MW CPSU Scheme Phase II, etc,
- Laying of new transmission lines and creating new sub-station capacity under the Green Energy Corridor Scheme for evacuation of renewable power,
- Setting up of Project Development Cell for attracting and facilitating investments,
- Standard Bidding Guidelines for tariff-based competitive bidding process for procurement of Power from Grid Connected Solar PV and Wind Projects.
- Deployment of large-scale renewable energy (RE) has the potential to create numerous employment opportunities in rural India in the coming decades. By 2030, it is projected that the clean-energy sectors could provide jobs for around one million individuals in the country.
- However, the expansion of RE may have significant impacts on communities reliant on the land, involving changes in land use, modifications to ecosystems, shifts in livelihoods, and overall effects on land productivity.
- As India progresses in scaling up RE, striking a balance between these interests may result in project commissioning delays, contributing to a waning interest among developers in RE tenders.
- In 2020, wind developers, facing setbacks such as delays in land allocation, sought to terminate power-purchase agreements for approximately 565 MW wind capacity signed with the Solar Energy Corporation of India (SECI), prompting a decline in developers' enthusiasm for RE projects. Commissioning delays not only pose substantial financial risks but also jeopardize the reputation of RE developers.
- In the pursuit of responsible RE deployment and the enhancement of communities in and around project sites, many developers actively support local development activities and community-led programs through corporate social responsibility (CSR) initiatives.
- As an illustration, Tata Power Solar has established integrated vocational training programs for women and youth in multiple project sites.
- Given the pivotal role of project developers in interacting with communities during land acquisition, construction, and operational phases, they play a crucial role in driving responsible practices. Additionally, regulators and investors prioritize assessing the responsible practices of new projects.
- To encourage all developers to contribute to the rapidly growing RE ecosystem and promote responsible practices, two essential prerequisites need to be addressed
GOODS AND SERVICE TAX (GST)
- The Goods and Services Tax (GST) is a value-added tax levied on the supply of goods and services at each stage of the production and distribution chain. It is a comprehensive indirect tax that aims to replace multiple indirect taxes imposed by the central and state governments in India.
- GST is designed to simplify the tax structure, eliminate the cascading effect of taxes, and create a unified national market. Under the GST system, both goods and services are taxed at multiple rates based on the nature of the product or service. The tax is collected at each stage of the supply chain, and businesses are allowed to claim a credit for the taxes paid on their inputs.
- The GST system in India came into effect on July 1, 2017, replacing a complex tax structure that included central excise duty, service tax, and state-level taxes like VAT (Value Added Tax), among others. The GST Council, consisting of representatives from the central and state governments, is responsible for making decisions on various aspects of GST, including tax rates and rules.
- GST is intended to create a more transparent and efficient tax system, reduce tax evasion, and promote economic growth by fostering a seamless flow of goods and services across the country. It has a significant impact on businesses, as they need to comply with the new tax regulations and maintain detailed records of their transactions for GST filing
3.Goods and Services Tax (GST) and 101st Amendment Act, 2016
The Goods and Services Tax (GST) in India was introduced through the 101st Amendment Act of 2016. This constitutional amendment was a crucial step in the implementation of GST, which aimed to create a unified and comprehensive indirect tax system across the country.
Here are some key points related to the 101st Amendment Act and GST:
- The 101st Amendment Act was enacted to amend the Constitution of India to pave the way for the introduction of the Goods and Services Tax.
- It added a new article, Article 246A, which confers concurrent powers to both the central and state governments to levy and collect GST
- The amendment led to the creation of the GST Council, a constitutional body consisting of representatives from the central and state governments. The council is responsible for making recommendations on GST rates, exemptions, and other related issues
- The amendment introduced a dual GST structure, where both the central government and the state governments have the power to levy and collect GST on the supply of goods and services
- For inter-state transactions, the 101st Amendment Act provides that the central government would levy and collect the Integrated Goods and Services Tax (IGST), which would be a sum total of the central and state GST
- The amendment also included a provision for compensating states for any revenue loss they might incur due to the implementation of GST for a period of five years
In India, the Goods and Services Tax (GST) is structured into different tax rates based on the nature of the goods and services. As of my last knowledge update in January 2022, the GST rates are divided into multiple slabs. It's important to note that tax rates may be subject to changes, and new amendments could have been introduced since then. As of my last update, the GST rates are as follows:
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Nil Rate:
- Some goods and services are categorized under the nil rate, meaning they attract a 0% GST. This implies that no tax is levied on the supply of these goods or services.
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5% Rate:
- This is a lower rate, applicable to essential goods such as certain food items, medical supplies, and other basic necessities.
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12% Rate:
- Goods and services falling in this category attract a 12% GST rate. Items such as mobile phones, processed foods, and certain services fall under this slab.
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18% Rate:
- A higher rate of 18% is applicable to goods and services such as electronic items, capital goods, and various services.
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28% Rate:
- The highest GST rate of 28% is applied to luxury items, automobiles, and certain goods and services that are considered non-essential or fall into the luxury category.
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Compensation Cess:
- In addition to the above rates, some specific goods attract a compensation cess, which is levied to compensate the states for any revenue loss during the transition to GST. This is often applied to items like tobacco and luxury cars.
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Zero Rate:
- Certain categories of goods and services may be specified as "zero-rated," which means they are effectively taxed at 0%. This is different from the nil rate, as it allows businesses to claim input tax credit on inputs, capital goods, and input services.
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Exempt Supplies:
- Some goods and services may be exempt from GST altogether. This means that they are not subject to any GST, and businesses cannot claim input tax credit on related inputs
Subject | Central GST (CGST) | State GST (SGST) | Union Territory GST (UTGST) | Integrated GST (IGST) |
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Levied by | Central Government | Respective State Governments | Union Territory Administrations | Central Government (on inter-state transactions) |
Applicability | On intra-state supplies (within the same state) | On intra-state supplies (within the same state) | On intra-union territory supplies (within the same union territory) | On inter-state supplies (across states or union territories) |
Rate Determination | Determined by the Central Government | Determined by the Respective State Government | Determined by the Union Territory Administration | IGST rate is a sum of CGST and SGST rates |
Revenue Collection | Collected by the Central Government | Collected by the Respective State Government | Collected by the Union Territory Administration | Collected by the Central Government (on inter-state transactions) |
Utilization of Revenue | Shared between Central and State Governments | Retained by the Respective State Government | Retained by the Union Territory Administration | Shared between Central and State Governments |
Purpose | Part of the dual GST structure, meant to cover central taxes | Part of the dual GST structure, meant to cover state taxes | Applicable in union territories for intra-territory supplies | Applied to regulate and tax inter-state supplies |
Input Tax Credit (ITC) | ITC available for CGST paid on inputs and services | ITC available for SGST paid on inputs and services | ITC available for UTGST paid on inputs and services | ITC available for both CGST and SGST paid on inputs |
Tax Jurisdiction | Applies within a particular state | Applies within a particular state | Applies within a particular union territory | Applies to transactions across states and union territories |
GSTN Portal for Filing Returns | Central GSTN portal | State-specific GSTN portals | UTGSTN portal | Integrated GSTN portal |
- 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
The GST Council consists of the following members:
- The Union Finance Minister, who is the Chairperson of the Council.
- The Union Minister of State in charge of revenue or any other Minister of State nominated by the Union Government.
- One Minister from each state, nominated by the Governor of that state.
- The Chief Secretary of each state, ex-officio.
- If the President, on the recommendation of the Council, so directs, one representative of each Union territory which has a legislature, to be nominated by the Lieutenant Governor of that Union territory.
- Three to seven members (other than Ministers) to be nominated by the Union Government, of whom at least one member shall be from the field of economics and another from the field of chartered accountancy, legal affairs or public finance
For Prelims: Economic and Social Development and Indian Polity and Governance
For Mains: General Studies II: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein
General Studies III: Inclusive growth and issues arising from it |
Previous Year Questions
1.Which of the following are true of the Goods and Services Tax (GST) introduced in India in recent times? (UGC Paper II 2020)
A. It is a destination tax
B. It benefits producing states more
C. It benefits consuming states more
D. It is a progressive taxation
E. It is an umbrella tax to improve ease of doing business
Choose the most appropriate answer from the options given below:
A.B, D and E only
B.A, C and D only
C.A, D and E only
D.A, C and E only
Answer (D)
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HIGH SEAS TREATY
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Covering 64% of the ocean's surface and approximately 43% of the Earth's area, the high seas are home to around 2.2 million marine species and up to a trillion types of microorganisms. These international waters are open to all, granting equal rights for navigation, overflight, economic ventures, scientific research, and the establishment of infrastructure such as undersea cables.
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The lack of designated responsibility for the high seas has led to widespread issues such as resource overexploitation, biodiversity loss, pollution—including plastic waste—and ocean acidification. According to the United Nations, an estimated 17 million tonnes of plastic were dumped into oceans in 2021, a figure projected to rise in the years ahead.
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Concluded in March 2023, the treaty focuses on ocean areas beyond any nation's jurisdiction. National jurisdictions typically extend up to 200 nautical miles (370 km) from the coastline, known as exclusive economic zones (EEZs). Beyond these zones lie the high seas or international waters. This treaty, formally titled the Agreement on Conservation and Sustainable Use of Marine Biological Diversity of Areas Beyond National Jurisdiction, addresses the conservation and sustainable use of marine resources in these global commons
➤ Sustainable utilization of marine genetic resources and fair distribution of benefits derived from them.
➤ Implementation of environmental impact assessments for significant oceanic activities.
➤ Promotion of capacity-building initiatives and technology transfer
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Marine-Protected Areas (MPAs): MPAs are zones in the ocean where ecosystems and biodiversity are under stress from human activities or climate change. They are akin to national parks or wildlife sanctuaries on land. Activities within these areas will be strictly regulated, with conservation measures similar to those implemented in forest and wildlife reserves. Currently, only about 1.44% of high seas are protected, according to the International Union for Conservation of Nature (IUCN).
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Marine Genetic Resources: Oceans are home to an immense variety of life forms, many of which hold potential for applications like drug development. Genetic data from these organisms is being extracted and studied for potential benefits. The treaty aims to ensure that any resulting benefits, including financial ones, are equitably shared and not restricted by stringent intellectual property rights. Additionally, knowledge gained from these explorations is to remain openly accessible to all.
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Environmental Impact Assessments (EIAs): The treaty mandates conducting prior environmental impact assessments for activities that could harm marine ecosystems or conservation efforts. These assessments must be made publicly available. EIAs are also required for activities within national jurisdictions if their impact extends to the high seas.
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Capacity Building and Technology Transfer: Emphasis is placed on capacity building and technology transfer to support countries, particularly small island nations and landlocked states, that lack the resources or expertise to participate effectively in conservation or sustainable exploitation of marine resources. The treaty seeks to alleviate the additional burden these nations might face, such as conducting environmental impact assessments
Ratification and Treaty
Ratification refers to the formal process through which a country commits to being legally obligated by the provisions of an international law. This is distinct from simply signing the law. Signing signifies a country’s agreement with the law's principles and its intention to adhere to them. However, until the country completes the ratification process— which differs across nations— it is not legally required to comply with the provisions of that law
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The United Nations Convention on the Law of the Sea (UNCLOS) is a comprehensive international legal framework that establishes guidelines for the proper use and governance of seas and oceans globally. It outlines nations' rights and responsibilities concerning oceanic activities and addresses issues such as sovereignty, navigation, and exclusive economic rights. Territorial waters and Exclusive Economic Zones (EEZs) are demarcated based on UNCLOS provisions.
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According to UNCLOS, the Territorial Sea (TS) extends up to 12 nautical miles from a nation’s coastline. While a state exercises complete sovereignty over the waters within its TS, the EEZ grants the state exclusive economic rights over the resources beneath the sea's surface without full sovereignty.
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UNCLOS provides overarching principles for fair access to ocean resources and the conservation of biodiversity and marine ecosystems. However, it does not detail the methods for achieving these goals. This gap is addressed by the High Seas Treaty, which functions as an implementation agreement under UNCLOS, similar to how the Paris Agreement operates within the framework of the UN Framework Convention on Climate Change (UNFCCC)
For Prelims: UN high seas, UN high seas treaty, UNCLOS, Biodiversity of Areas Beyond National Jurisdiction (BBJN), Exclusive Economic Zone, Territorial Waters.
For Mains: 1. Discuss the significance of the Treaty of High Seas and explain how to save our high seas from overfishing and pollution.
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Previous year Question
1. Concerning the United Nations Convention on the Law of Sea, consider the following statements: ( UPSC 2022)
Which of the statements given above is correct? A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer : D
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UNLAWFUL ACTIVITIES (PREVENTION) ACT (UAPA)
Delhi High Court on Tuesday declined to grant bail to Umar Khalid, Sharjeel Imam, Gulfisha Fatima, and seven others charged as key conspirators of the February 2020 Delhi riots, saying the riots were a “premeditated, well-orchestrated conspiracy”.
The accused have been charged under various provisions of the Unlawful Activities (Prevention) Act, 1967 (UAPA), including Section 16, which prescribes the death penalty for committing a “terrorist act”.
The Unlawful Activities (Prevention) Act (UAPA) is an Indian law that was enacted in 1967 to effectively prevent unlawful activities that pose a threat to the sovereignty and integrity of India.
Key highlights of the UAPA
- Objective: The primary objective of the UAPA is to provide law enforcement agencies with effective tools to combat terrorism and other activities that threaten the security of the nation.
- Definition of Unlawful Activities: The act defines unlawful activities to include actions that intend to or support the cession of a part of the territory of India or disrupt the sovereignty and integrity of the country.
- Powers of Designation: The government has the authority to designate an organization as a terrorist organization if it believes that such an organization is involved in terrorism. This designation has significant legal consequences, including the freezing of assets.
- Powers of Arrest and Detention: The UAPA provides law enforcement agencies with powers of arrest and detention to prevent individuals from engaging in unlawful activities. The act allows for preventive detention to curb potential threats before they materialise.
- Banning of Terrorist Organizations: The government can proscribe organizations as terrorist organizations, making their activities illegal. This includes banning these organisations, freezing their assets, and taking other measures to curb their operations.
- Admissibility of Confessions: The UAPA allows for confessions made to police officers to be admissible in court, subject to certain safeguards. This provision has been a point of contention, with concerns about potential misuse and coercion.
- Designation of Individuals as Terrorists: In addition to organizations, the UAPA allows the government to designate individuals as terrorists. This designation carries legal consequences, including restrictions on travel and freezing of assets.
- Amendments and Stringency: Over the years, the UAPA has undergone several amendments to strengthen its provisions and make it more effective in dealing with emerging threats. However, these amendments have also been criticized for potential violations of civil liberties.
- International Cooperation: The UAPA allows for cooperation with foreign countries in matters related to the prevention of unlawful activities. This includes extradition of individuals involved in such activities.
3. Unlawful Activities (Prevention) Act (UAPA) and Human Rights
The Unlawful Activities (Prevention) Act (UAPA) and human rights lie in the impact the act can have on various fundamental rights guaranteed by the Constitution of India and international human rights standards.
The key points connecting the UAPA and human rights:
- The UAPA allows for preventive detention, which means individuals can be detained without formal charges based on suspicions of involvement in unlawful activities. This raises concerns about the right to liberty, as individuals may be deprived of their freedom without the presumption of innocence until proven guilty.
- The admissibility of confessions made to police officers under the UAPA raises issues related to the right against self-incrimination. There is a risk that such confessions might be obtained under duress or coercion, compromising the fairness of legal proceedings.
- Designating individuals as terrorists and proscribing organizations without due process may impinge on the right to a fair trial. This includes the right to be informed of charges, the right to legal representation, and the right to present a defense.
- The UAPA provides authorities with the power to proscribe organizations as terrorist organizations, limiting their activities. Critics argue that this may infringe upon the right to freedom of association, particularly when such designations are made without sufficient evidence or proper legal procedures.
- The potential for misuse of the UAPA to target individuals or organizations critical of the government raises concerns about freedom of expression. If the act is used to suppress dissent or stifle legitimate political or social activities, it can undermine this fundamental right.
- The UAPA grants authorities the power to intercept communications and conduct surveillance on individuals suspected of engaging in unlawful activities. This raises concerns about the right to privacy, as individuals may be subjected to intrusive surveillance without adequate safeguards.
- Human rights standards require that any restrictions on rights, such as those imposed by the UAPA, must be proportionate and necessary for achieving a legitimate aim. Critics argue that the broad scope of the UAPA may lead to disproportionate measures that unduly restrict individual rights.
- The UAPA's compatibility with international human rights standards, including the International Covenant on Civil and Political Rights (ICCPR), is a critical point of consideration. Ensuring that the act aligns with these standards is essential to upholding human rights principles.
4. Unlawful Activities (Prevention) Act (UAPA) and Article 22 of the Constitution
The Unlawful Activities (Prevention) Act (UAPA) and Article 22 of the Indian Constitution lie in how the UAPA's provisions for arrest and detention intersect with the constitutional safeguards provided under Article 22.
- Article 22 provides certain protections to individuals who are arrested or detained. It outlines the rights of arrested individuals, emphasizing safeguards to prevent arbitrary or unlawful detention.
- Article 22(1) states that every person who is arrested and detained shall be informed, as soon as may be, of the grounds for such arrest. This provision ensures that individuals are aware of the reasons behind their arrest, preventing arbitrary or secret detentions.
- Article 22(1) also guarantees the right of an arrested person to consult and be defended by a legal practitioner of their choice. This ensures that individuals have access to legal assistance during the legal process, contributing to a fair and just legal system.
- The UAPA includes provisions for preventive detention, allowing authorities to detain individuals to prevent them from committing certain offences. However, Article 22(4) allows preventive detention only under specific circumstances, and certain safeguards must be followed, such as providing the detenu with the grounds for detention and an opportunity to make a representation against the detention.
- Article 22(4) further mandates that a person detained under a law providing for preventive detention must be afforded the earliest opportunity to make a representation against the detention. Additionally, the case of every person detained is required to be placed before an advisory board within three months.
- The UAPA allows for confessions made to police officers to be admissible in court, subject to certain safeguards. However, this provision has been a point of concern concerning Article 22, as confessions obtained under duress or coercion may violate the right against self-incrimination.
- Article 22(2) ensures the right to be brought before the nearest magistrate within 24 hours of arrest, excluding the time necessary for the journey. This provision aims to prevent prolonged detention without judicial oversight and contributes to the right to a speedy trial.
For Prelims: Unlawful Activities (Prevention) Act, Article 22, Terrorism
For Mains:
1. Discuss the key provisions of the Unlawful Activities (Prevention) Act (UAPA) and analyze how they may impact fundamental human rights. Elaborate on the balance between national security concerns and the protection of individual rights. (250 Words)
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Previous Year Questions 1. Under Article 22 of the Constitution of India, with the exception of certain provisions stated there in, what is the maximum period for detention of a person under preventive detention? (MPSC 2014) A. 2 months B. 3 months C. 4 months D. 6 months
2. Article 22 of the Constitution ensures (CTET 2016) A. Right not to be ill-treated during arrest or while in custody B. Right to Constitutional Remedies C. Right against Exploitation D. Right to Education Answers: 1-B, 2-A Mains 1. Indian government has recently strengthed the anti-terrorism laws by amending the Unlawful Activities(Prevention) Act, (UAPA), 1967 and the NIA Act. Analyze the changes in the context of prevailing security environment while discussing scope and reasons for opposing the UAPA by human rights organizations. (UPSC 2019) |
Source: The Indian Express