GDP AND GVA
1. Context
The GDP data also reveals that net exports, through a sequential increase in exports and decrease in imports, actually helped add to the headline growth figure by as much as about 1.4 percentage points. “A closer look though suggests that higher provisional GDP growth of FY23 than second advance estimate has primarily been driven by higher exports and lower imports in Q4FY23. As a result, the net exports dropped from Rs (-) 975.1 billion in Q3FY23 to Rs (-) 62.6 billion Q4 FY23. This also helped the Q4 FY23 GDP to come in at 6.1%, much higher than Ind-Ra’s expectation of 4.1%.
2. Key Points
- India's gross domestic product or GDP grew by 6.3 per cent in Q2 on a year-on-year basis.
- In other words, it was 6.3 per cent more than the GDP in the same months in 2021.
- MoSPI also reported that India's Gross Value Added (or GVA) in Q2 grew by 5.6 per cent on a year-on-year basis.
3. GDP and GVA
- GDP and GVA are two main ways to ascertain the country's economic performance. Both are measures of national income.
- The GDP measures the monetary measure of all "final" goods and services that are bought by the final user produced in a country in a given period.
- The GDP does this by adding up the total expenditures in the economy; in other words, it looks at who spent how much. That is why GDP captures the total "demand" in the economy.
Broadly speaking there are four key "engines of GDP growth". These are
- All the money Indians spent on their private consumption (that is, Private Final Consumption Expenditure or PFCE).
- All the money the government spent on its current consumption, such as salaries (Government, Final Consumption Expenditure or GFCE).
- All the money is spent towards investments to boost the economy's productive capacity. This includes business firms investing in factories or the governments building roads and bridges (Gross Fixed Capital Expenditure).
- The net effect of exports (What foreigners spent on our goods) and imports (what Indians spent on foreign goods) (Net Exports or NE).
- The GVA calculates the same national income from the supply side.
- It does so by adding up all the value added across different sectors.
| According to the RBI, the GVA of a sector is defined as the value of output minus the value of its intermediary inputs. This "value added" is shared among the primary factors of production, labour and capital. |
- By looking at GVA growth one can understand which sector of the economy is robust and which is struggling.
4. How are the two related?
- When looking at quarterly it is best to look at GVA data because this is the observed data.
- The GDP is derived by looking at the GVA data.
| The GDP and GVA are related by the following equation; GDP= (GVA)+ (Taxes earned by the Government)- (Subsidies provided by the government). |
- As such, if the taxes earned by the government are more than the subsidies it provides, the GDP will be higher than GVA.
- Typically, that is how it is. For the second quarter too, the GDP (at 38, 16, 578 crores) is much higher than the GVA (Which is at Rs 35, 05, 5999 crores).
- The GDP data is more useful when looking at annual economic growth and when one wants to compare a country's economic growth with its past or with another country.
5. GVA data
5.1 Manufacturing sector
- It is a contraction in the manufacturing sector. In Q2, manufacturing GVA declined by 4.3 per cent.
- This is significant because manufacturing carries a huge potential for job creation and can soak up excess labour from the agriculture sector.
- The contraction has meant that manufacturing GVA has grown by just 6.3 per cent over the three years since the Covid pandemic; look at the change between FY23 and FY20 in the Chart.
- However, it would be a mistake to believe that only Covid and its after-effects are responsible for the lacklustre manufacturing performance.
- The fact is, as borne by the data, manufacturing GVA grew by just 10.6 per cent between FY 17 and FY20.
- For perspective, it is important to remember that between FY14 and FY17, manufacturing GVA grew by 31.3 per cent.
- In other words, Indian manufacturing has been struggling to add value for the past six years.
- This would explain why data from the Centre for Monitoring Indian Economy (CMIE) shows that jobs in the manufacturing sector halved between 2016 and 2020.
5.2 Trade and hotels
- Almost 15 per cent growth in services such as trade and hotels etc.
- This is also a huge sector for job creation. But again, if one looks at the Q2FY23 level and compares it to the pre-Covid level (Q2 of FY20), the growth is barely over 2 per cent.
- That this sector grew by over 26 per cent in the three years between FY17 and FY20 when India was experiencing a serious economic declaration shows how badly it has been affected by the Covid disruption.
5.3 Mining and quarrying
- Another sector crucial for job creation, even though it is smaller in terms of overall contribution to India's GVA, is mining and quarrying it, too, has contracted by almost 3 per cent.
- Looking back over the past six years, it has contracted by 3.5 per cent between FY17 and FY20 and grown by just 2.5 per cent since then.
5.4 Agriculture
- One positive story emerging from the GVA pertains to agriculture (along with forestry and fishing), which has done better than expected by growing at 4.6 per cent.
- Typically, this is a good growth rate for this sector and has happened despite some worries that the sowing of crops did not happen in time.
- Overall, while the GVA has grown by 5.6 per cent year-on-year, the growth is just 7.6 per cent when compared to the pre-Covid level set in FY20.
6. GDP data
6.1 Private Consumption Expenditure
- GDP is the biggest engine of growth in private consumption expenditure.
- It typically contributes over 55 per cent of India's total GDP.
- This component is also crucial because if this is depressed, it robs the business of any incentive to make fresh investments; and expenditures towards investments are the second biggest contributors to the GDP, accounting for around 33per cent of the total.
- Data shows that private consumption has grown by a healthy 9.7 per cent over the past year.
- However, the growth is relatively modest just 11 per cent when compared over the last three years.
- That between FY 14 and FY17, this component grew by almost 28 per cent providing some perspective.
6.2 Investment expenditure
- The investment expenditures have grown by 10.4 per cent over FY21 and by almost 21 per cent between FY20 and FY23.
- This is the best growth over any three years going back to FY14.
- This suggests brighter prospects for the economy over the medium term.
6.3 Government final consumption expenditures
- The biggest surprise though from the GDP is the contraction in government final consumption expenditures.
- While these types of expenditures account for just about 10-11 per cent of the GDP, they can prop up an economy during tough times when people and businesses hold back spending.
- Oddly enough, data shows that not only did government consumption expenditure contract by 4.4. per cent in Q2 (Over the Q2 of 2021), but that it is almost 20 per cent below the pre-covid level.
6.4 Net Exports data
- The last component of the GDP equation is the Net Exports data.
- Typically, since India imports far more than it exports, the NX value is negative.
- In Q2, this negative value swelled by 89 per cent.
- Over the past three years, this drag on GDP has also increased in size by almost 150 per cent.
For Prelims and Mains
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For Prelims: GDP, GVA, India's economic growth data, Net Exports data, Centre for Monitoring Indian Economy (CMIE), Government final consumption expenditures, Investment expenditure, Private Consumption Expenditure, Mining and quarrying, Agriculture, Trade and hotels, Manufacturing sector,
For Mains:
1. What is the difference between GDP and GVA and discuss their contributions to National development? (250 Words)
2. What are the engines of GDP growth? Explain the factors influencing economic growth. (250 Words)
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Source: The Indian Express
PROJECT CHEETAH
1. Context
Six more cheetahs will be released into the wild at Kuno National Park in the coming weeks, Cheetah Steering Committee head Dr Rajesh Gopal said Thursday. Dr Gopal, secretary general of the Global Tiger Forum and an acclaimed tiger expert, had been tasked to head the committee following the death of three cheetah cubs at Kuno National Park
2. Why was Project Cheetah launched?
- India's cheetah relocation program is perhaps among the most ambitious of its kind in the world.
- The attempt is to, over the next decade, bring in five to 10 animals every year until a self-sustaining population of about 35 is established.
- Unlike, cheetahs in South Africa and Namibia, which live in fenced reserves, India's plan is to have them grown in natural, unfenced, wild conditions.
- At Kuno, only six of the 17 adults are in the wild with the rest lodged in large, specially designed enclosures to help the animals acclimatize to Indian conditions.
- The plan is to release all the animals into the open by the yearend. The animals are radio-collared and tracked 24/7.
3. How do cheetahs die?
- The South African study also documented the causes of mortality, where it could be established, for 293 cheetah deaths.
- It found that holding camps caused 6.5% of cheetah deaths, immobilization/ transit caused 7.5% of deaths, and another 0.7% were caused by tracking devices. This added up to almost 15% so, one in every seven cheetah deaths was attributed to handling and management.
- Predation turned out to be the biggest killer in the study, accounting for 53.2% of cheetah mortality. Lions, leopards, hyenas, and jackals were primarily responsible. Several other wildlife including warthogs, baboons, snakes, elephants, crocodiles, vultures, zebras, and even ostriches killed cheetahs.
- It is well documented that cheetahs suffer very high cub mortality up to 90% in protected areas mainly due to predation. Consequently, nearly 80% of all cheetahs throughout their range in Africa are found living outside of protected parks and reserves.
4. Were these unfortunate cheetah deaths unexpected?
- The Cheetah Project did anticipate high mortality. The criteria for the project’s short-term success was only “50% survival of the introduced cheetah for the first year”. That would be 10 out of 20.
- As a result, the Madhya Pradesh government set a six-month deadline for readying Gandhisagar in the Chambal river valley in Mandsaur and Nimach districts for the cheetahs. There is also talk about moving a few animals from Kuno to the safety of an 80-sq-km fenced area in Rajasthan’s Mukundra Hills Tiger Reserve.
- The focus, therefore, is shifting from the project’s stated purpose that of establishing the cheetah in an open landscape as a free-roaming and self-sustaining population occupying thousands of square miles to managing the African imports as a few pocket populations in fenced-in or restricted areas.
5. How successful has Project Cheetah been so far?
- In September 2023, it will be one year since a batch of eight cheetahs from Namibia arrived in India.
- They were followed by 12 others from South Africa in February 2023. The official Cheetah Action Plan, the guiding document behind the project, observes that even half the cheetahs surviving the first year would be “an indicator of success”.
- Independent critics have, however, argued that there are some basic flaws in the project. For one, it is a mistake to have had all 20 cheetahs at Kuno as there is too little space and prey, given that the animal is a courser and needs larger fields of play.
- Some animals should have gone to the Mukundara reserve in Rajasthan. Forest officials in Madhya Pradesh have also admitted that they are stretched.
- However, the officials in the National Tiger Conservation Authority, the nodal agency of the Environment Ministry tasked with coordinating the project, say that Kuno is capable of hosting the first lot of animals and future batches will be sent to other reserves.
- The experience of raising cheetahs in fenced reserves in Africa can’t be replicated in India, say, experts, because India’s cultural values promote coexistence with beasts, and that underpinned the success of tiger, lion, and leopard conservation programs.
| For Prelims: Kuno National Park, National Tiger Conservation Authority (NTCA), Project Cheetah, Chambal river valley, and South Africa. |
Previous year Question
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1. Recently there was a proposal to translocate some of the lions from their natural habitat in Gujarat to which one of the following sites? (UPSC 2017)
A. Corbett National Park
B. Kuno Palpur Wildlife Sanctuary
C. Mudumalai Wildlife Sanctuary
D. Sariska National Park
Answer: B
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Source: The Hindu
EL NINO IN 2023
1.Context
Despite a few heat waves, India has had an unusually pleasant summer so far. Temperatures in most places have been 1 to 4 degrees Celsius below normal, going against predictions of a very hot summer. Intermittent, sometimes heavy, rain, mainly over northwest and central India, has played a role in keeping temperatures in check. Rainfall in March, April, and May has been higher than usual, and central India has been especially wet. However, the relatively comfortable weather so far should not be considered an indication of the way things will unfold in the rest of the year. The monsoon season, which officially began on Thursday, will be critical as always.
2.Background
- By contrast, the preceding five years from 2014 to 2018 registered an average annual rainfall of just 1,072.1 mm and 812.4 mm during the southwest monsoon
- The surplus precipitation – more than the “normal” or historical long period annual average of 1,160.1 mm and 868.6 mm for the monsoon season – during the last four years has helped deliver higher agricultural growth, relative to the previous period that recorded poor rain in three (2014, 2015 and 2018) out of the five years
- According to the national accounts data, the farm sector has grown by an average of 4.3% per year during 2019-20 to 2022-23 (the Modi government’s second term), as against 3.2% during 2014-15 to 2018-19
3. La Nina Bounty rain
- The bountiful rainfall during 2019-22 has been significantly attributed to La Niña – an atmospheric wind and sea surface temperature (SST) variability phenomenon occurring over the equatorial Pacific, but causing worldwide weather disruptions
- La Niña basically refers to an abnormal cooling of the central and eastern Pacific Ocean waters off the coasts of Ecuador and Peru
- Such cooling (SSTs falling 0.5 degrees Celsius or more below a 30-year average for at least five successive three-month periods) is a result of strong trade winds blowing west along the equator, taking warm water from South America towards Asia
- The warming of the western equatorial Pacific, then, leads to increased evaporation and concentrated cloud-formation activity around that region, whose effects may percolate to India as well
- The latest La Niña event was one of the longest ever, lasting from July-September 2020 to December-February 2022-23
- And it brought copious rains to India – just as two previous “strong” La Niñas in 2007-08 and 2010-11, followed by one “moderate” episode in 2011-12, had done
- The most recent Oceanic Niño Index or ONI value a three-month running-average SST deviation from the normal in the east-central equatorial Pacific was minus 0.4 degrees Celsius for January-March 2023
- Since La Niña is characterised by a negative ONI exceeding or equal to minus 0.5 degrees, it means that the so-called ENSO (El Niño-Southern Oscillation) cycle has entered a “neutral” phase
4. Threats by El Nino
- While La Niña is associated with good rainfall in India, this isn’t the case with El Niño – the opposite “warm” phase of ENSO
- During El Niño, the trade winds weaken or even reverse: Instead of blowing from east (South America) to west (Indonesia), they could turn into westerlies
- As the winds blow from the west to east, they cause the masses of warm water to move into the central and eastern equatorial Pacific Ocean
- The rise in SSTs there, thus, produces increased rainfall along western Latin America, the Caribbean and US Gulf Coast, while depriving Southeast Asia, Australia and India of convective currents
- The ENSO cycle, as already pointed out, is currently in the “neutral” state
- According to the US National Oceanic and Atmospheric Administration’s most recent update, ENSO-neutral conditions are likely to “persist through the Northern Hemisphere early summer 2023”
- However, “a transition to El Niño is favoured by July-September 2023”, with its chances “increasing through the fall (September-November)”
- The Australian Bureau of Meteorology, too, has forecast “a 50% chance that an El Niño may develop later in 2023”
- This is “about twice the normal likelihood”, the agency has said in its report, adding that “warmer than average SSTs have already emerged in parts of the eastern tropical Pacific in recent weeks”
- The India Meteorological Department is scheduled to issue its first long-range forecast of rainfall for the 2023 southwest monsoon in the coming week
5. Implications
- Most global models are seeing the transition from ENSO-neutral to El Niño happening this year
- But that would probably affect the monsoon only in the second half (August-September) of the season
- It shows that practically all drought years in India since Independence – marked by large declines in foodgrain production or monsoon failures – have witnessed El Niño events of varying intensity
- The sole exception was 1966-67, although the year before had recorded a “strong” El Niño (To elaborate, mean SSTs have to be at least 0.5 degrees Celsius higher than the average for a minimum of five overlapping three-month periods to qualify as an El Niño event
- The positive ONI values or SST deviations have to be 1.5-1.9 degrees for categorisation as “strong”, above 2 degrees for “very strong”, 1-1.4 degrees for “moderate” and 0.5-0.9 degrees for “weak”)
- While all drought years have invariably been El Niño years, the reverse doesn’t hold true though. Another table below gives a list of all the El Niño years that weren’t bad agriculture years
- The best examples are 1982-83 and 1997-98. Foodgrain output fell only marginally in these two “very strong” El Niño years
- Agricultural GDP growth was similarly positive in 1951-52, 1963-64, 1968-69 and 1994-95; all of them saw “moderate” El Niño events
- To sum up, 2023 could well end the run of good rainfall years since 2019. The statistical probability of that is high, whether or not there is an El Niño. Moreover, El Niño itself can turn out to be “weak”
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For Prelims: La Nina, El Nino, Monsoons, Southwest Monsoons
For Mains:
1. What is the difference between El Nino and La Nino?. Discuss the impacts of these two on Indian Monsoon. ( 250 words)
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Previous year Questions:
1. La Nina is suspected to have caused recent floods in Australia. How is La Nina different from El Nino? (UPSC 2011)
1. La Nina is characterised by unusually cold ocean temperature in the equatorial Indian Ocean whereas El Nino is characterised by unusually warm ocean temperature in the equatorial Pacific Ocean. 2. El Nino has an adverse effect on the south-west monsoon of India, but La Nina has no effect on the monsoon climate. Which of the statement/s given above is/are correct? A. 1 Only B. 2 Only C. Both 1 and 2 D. Neither 1 Nor 2
Answer (D)
2. Consider the following Statements (MPSC 2017)
1. La Nina is a little girl
2. During the time of La Nina cold water in the Ocean rises to the Surface
3. La Nina strengthens the Indian Monsoon
4. During the time of El Nino, trade winds weaken, and warm water moves east in the Ocean
Which of the above-given statement is/ are true
A. 1 and 2 B. 1, 2 and 3 C. 2 and 3 D. All of the above
Answer (D)
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Source: indianexpress
US-TAIWAN
1. Context
China’s government criticised the United States’ plans to sign a trade treaty with Taiwan and called on Washington on Thursday to stop official contact with the self-ruled island democracy claimed by Beijing as part of its territory. The agreement due to be signed on Thursday comes amid increased Chinese efforts to intimidate Taiwan by flying fighter jets and bombers near the island, a global centre for high-tech industry. American and European politicians have visited Taiwan in a show of support for its elected government.
2. Background
- China has condemned US Speaker Nancy Pelosi's visit to Taiwan, calling it "extremely dangerous."
- It is the highest-ranking visit by an American politician to the island in 25 years.
- China sees Taiwan as a breakaway province that will eventually be under Beijing's control again.
- However, Taiwan sees itself as an independent country, with its constitution and democratically-elected leaders.
- China's President Xi Jinping has said "reunification" with Taiwan "must be fulfilled" - and has not ruled out the possible use of force to achieve this.
3. About Taiwan
- Taiwan is an island, roughly 100 miles from the coast of southeast China.
- It sits in the so-called "first island chain", which includes a list of US-friendly territories that are crucial to US foreign policy.
- If China was to take over Taiwan, some western experts suggest it could be freer to project power in the western Pacific region and could even threaten US military bases as far away as Guam and Hawaii.
- But China insists that its intentions are purely peaceful.
4. Historical Ties between China and Taiwan
- Historical sources suggest that the island first came under full Chinese control in the 17th Century when the Qing dynasty began administering it. Then, in 1895, they gave up the island to Japan after losing the first Sino-Japanese war.
- China took the island again in 1945 after Japan lost World War Two.
- But a civil war erupted in mainland China between nationalist government forces led by Chiang Kai-shek and Mao Zedong's Communist Party.
- The communists won in 1949 and took control of Beijing.
- Chiang Kai-shek and what was left of the nationalist party - known as the Kuomintang - fled to Taiwan, where they ruled for the next several decades.
- China points to this history to say that Taiwan was originally a Chinese province. But the Taiwanese point to the same history to argue that they were never part of the modern Chinese state that was first formed after the revolution in 1911 - or the People's Republic of China that was established under Mao in 1949.
- The Kuomintang has been one of Taiwan's most prominent political parties ever since - ruling the island for a significant part of its history.
- Currently, only 13 countries (plus the Vatican) recognise Taiwan as a sovereign country.
- China exerts considerable diplomatic pressure on other countries not to recognise Taiwan, or to do anything which implies recognition.
- Taiwan's defence minister has said relations with China are the worst they have been for 40 years.
5. Military preparedness of Taiwan
- China could attempt to bring about "reunification" by non-military means such as strengthening economic ties.
- But in any military confrontation, China's armed forces would dwarf those of Taiwan.
- China spends more than any country except the US on defence and could draw on a huge range of capabilities, from naval power to missile technology, aircraft and cyber attacks.
- Much of China's military power is focused elsewhere but, in overall terms of active duty personnel, for example, there is a huge imbalance between the two sides.
- In an open conflict, some western experts predict that Taiwan could at best aim to slow a Chinese attack, try to prevent a shore landing by Chinese amphibious forces, and mount guerrilla strikes whilst waiting for outside help.
- That help could come from the US which sells arms to Taiwan.
- Until now, Washington's policy of "strategic ambiguity" has meant the US has been deliberately unclear about whether or how it would defend Taiwan in the event of an attack.
- Diplomatically, the US currently sticks to the "One-China" policy, which recognises only one Chinese government - in Beijing - and has formal ties with China rather than Taiwan.
6. About One-China Policy:
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The One China policy recognizes the long-held position in Beijing that there is only one China, and that Taiwan is a part of that.
7. About the “one country, two systems” approach?
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The principle of “one country, two systems” was first proposed by Deng Xiaoping as a way to restore the relationship between the communist mainland with historically Chinese territories (Taiwan, Hong Kong and Macau)—that had capitalist economies.
8. The unwelcome situations
- In 2021, China appeared to ramp up the pressure by sending military aircraft into Taiwan's Air Defence Zone, a self-declared area where foreign aircraft are identified, monitored, and controlled in the interests of national security.
- Taiwan made data on plane incursions public in 2020.
- The Taiwanese Parliament has passed the Anti-Infiltration Bill which sent the relations between Taiwan and China to a new low. This has been passed in the wake of the news that China has been influencing the media in Taiwan through illicit means, to influence the upcoming political elections.
- Taiwan’s President Tsai Ing-wen has rejected Chinese President Xi Jinping’s call for unification under a “One Country Two Systems” approach and vowed to defend the island nation’s sovereignty. She maintained that the Hong Kong model would not work for Taiwan, as democracy and authoritarianism cannot co-exist in the same country.
- China, however, claims Taiwan as its territory and wants to bring it under Beijing’s control even if it requires the use of force.
9. Importance of Taiwan for India and the world
- Taiwan's economy is hugely important.
- Much of the world's everyday electronic equipment - from phones to laptops, watches and games consoles - is powered by computer chips made in Taiwan.
- By one measure, a single Taiwanese company - the Taiwan Semiconductor Manufacturing Company or TSMC - has over half of the world's market.
- A Chinese takeover in Taiwan could give Beijing some control over one of the world's most important industries.
10. Role of the US in Taiwan
- The US is by far Taiwan's most important friend and its only ally.
- In 1979, the US ended diplomatic recognition of Taiwan to concentrate on burgeoning ties with China.
- However, it later revoked and passed the Taiwan Relations Act, which promises to supply Taiwan with defensive weapons, and stressed that any attack by China would be considered of "grave concern" to the US.
- The Taiwan Travel Act aims to promote greater engagement between US and Taiwan.
- The US has also sought to leverage Taiwan to pressure China in the U.S.’s ongoing trade war.
11. Stand of India on the ongoing issue
- India’s policy on Taiwan is clear and consistent and it is focused on promoting interactions in areas of trade, investment and tourism among others.
- Government facilitates and promotes interactions in areas of trade, investment, tourism, culture, education and other such people-to-people exchanges.
- However, India doesn’t have formal diplomatic relations with Taiwan, but both sides have trade and people-to-people ties.
Source: The Hindu
GST COMPLIANCE MEASURES
1. Context
Gross Goods and Services Tax (GST) collections in May (for sales in April) rose 11.5 per cent year-on-year to Rs 1,57,090 crore, data released Thursday by the Finance Ministry showed. GST revenues gained support from an increase in economic activity, higher generation of e-way bills and compliance measures by the tax authorities.
2. What is the automated return scrutiny model?
- It aims to enhance tax compliance, reduce manual intervention and increase tax administration efficiency by using data analytics.
- The Automated Return Scrutiny Module, integrated into the ACES-GST backend application, leverages data analytics to identify risks and discrepancies in GST returns.
- Tax officers can scrutinize GST returns of Centre Administered Taxpayers selected based on data analytics and risks detected by the system. The module automatically generates alerts in cases of non-compliance.
- The Automated Return Scrutiny Module’s implementation has begun with the scrutiny of GST returns for the financial year 2019-20
- It was implemented by The Central Board of Indirect Taxes and Customs (CBIC).
3. What are the changes for e-invoicing?
- The government has also lowered the threshold for businesses to generate e-invoices for business-to-business (B2B) transactions to Rs 5 crore from Rs 10 crore under GST.
- The changes will come into effect from August 1.
- In a notification dated May 10, the Finance Ministry announced a lowering of the threshold for e-invoicing. At present, businesses with a turnover of Rs 10 crore and above are required to generate e-invoices for all B2B transactions.
4. What does e-invoicing envisage?
- The GST Council in its 37th meeting in September 2019 approved the standard of e-invoice with the primary objective to enable interoperability across the entire GST ecosystem.
- Under this, a phased implementation was proposed to ensure a common standard for all invoices, that is, an e-invoice generated by one software should be capable of being read by any other software, and through machine readability, an invoice can then be uniformly interpreted.
- With a uniform invoicing system, the tax authorities can pre-populate the return and reduce reconciliation issues.
- With a high number of cases involving fake invoices and fraud availing of the input tax credit, GST authorities have pushed for the implementation of this e-invoicing system which is expected to help to curb the actions of tax evaders and reduce the number of frauds as the tax authorities will have access to data in real-time.
- E-invoicing was initially implemented for large companies with turnover of over Rs 500 crore, and within three years the threshold has now been lowered to Rs 5 crore.
- E-invoicing for B2B transactions was made mandatory for businesses with a turnover of over Rs 500 crore from October 1, 2020.
- Then it was extended to businesses with a turnover of over Rs 100 crore from January 1, 2021, after which it was extended to businesses with a turnover of over Rs 50 crore from April 1, 2021, and then the threshold was lowered to Rs 20 crore from April 1, 2022.
- It was further reduced to Rs 10 crore from October 1, 2022.
5. Goods and Service Tax
- The GST aims to streamline the taxation structure in the country and replace a gamut of indirect taxes with a singular GST to simplify the taxation procedure.
- It has been established by the 101st Constitutional Amendment Act.
- It is an indirect tax for the whole country on the lines of "one nation one tax to make India a unified market.
- The Goods and service tax (GST), rolled out in July 2017, marked a major shift from the traditional production-linked tax to a consumption-based tax.
- The new regime subsumed state levies such as VAT, sales tax, and Octroi/entry tax together with central levies such as central excise and service tax.
- States gave up some of their taxation rights instead of the Centre passing on their revenue share under GST and also compensating them for potential revenue losses in the first five years.
- It is levied on the value addition and provides set-offs. As a result, it avoids the cascading effect of tax on tax which increases the tax burden on the end consumer.
| For Prelims: Goods and Service Tax (GST), business-to-business (B2B) transactions, The Central Board of Indirect Taxes and Customs (CBIC), e-invoicing, Value added tax( VAT). |
Previous year questions
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1. Consider the following items: (UPSC 2018)
1. Cereal grains hulled
2. Chicken eggs cooked
3. Fish processed and canned
4. Newspapers containing advertising material
Which of the above items is/are exempted under GST (Goods and Services Tax)?
A. 1 only
B. 2 and 3 only
C. 1, 2, and 4 only
D. 1, 2, 3 and 4
Answer: C
2. What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)'? (UPSC 2017)
1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
2. It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves.
3. It will enormously increase the growth and size of the economy of India and will enable it to overtake China shortly.
Select the correct answer using the code given below:
A. 1 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: A
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Source: The Indian Express
