ISSUE: THE DIRECT TAX VIVAAD SE VISHWAS BILL
WHY IN NEWS?
On Wednesday, when the government introduced The Direct Tax Vivad se Vishwas Bill, 2020, it led to an uproar in Parliament.
What is The Direct Tax Vivad se Vishwas Bill, 2020?
In essence, the Bill is aimed at resolving direct tax related disputes in a speedy manner. In her Budget speech on February 1, Finance Minister Nirmala Sitharaman had said that “in the past our Government has taken several measures to reduce tax litigations. In the last budget, Sabka Vishwas Scheme was brought in to reduce litigation in indirect taxes. It resulted in settling over 1,89,000 cases”.
What are the specifics of the scheme?
The Finance Minister had clarified that“under the proposed Vivad Se Vishwas scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided he pays by 31st March, 2020. Those who avail this scheme after 31st March, 2020 will have to pay some additional amount”. However, the scheme will remain open only till June 30, 2020. The scheme also applies to all case appeals that are pending at any level.
How much money is at stake?
According to reports, over Rs 9 lakh crore worth of direct tax disputes are pending in the courts. The government hopes to recover a big chunk of this in a swift and simple way, while offering the taxpayers the relief of not having to fight the case endlessly. For a government that is staring at a big shortfall in revenues, especially tax revenues, the scheme makes a lot of sense.
What was the response to the Sabka Vishwas scheme?
At last count, the government expected to have raised Rs 39,500 crore from the Sabka Vishwas scheme, which was only about indirect tax disputes. The amnesty window for Sabka Vishwas closed on January 15 and close to 1.90 lakh crore applications, in relation to taxes worth Rs 90,000 crore were received.
One of the standout successes of this scheme was Mondelez India Foods Pvt Ltd (which was earlier known as Cadbury India) settled one of its most controversial tax disputes, pertaining to its alleged plant in Baddi, Himachal Pradesh, with the government under this scheme. The firm was accused of evading taxes to the tune of Rs 580 crore (excluding taxes and penalties). In the end, Mondelez paid Rs 439 crore on January 20 under the amnesty scheme.
ISSUE: BAN ON CFL IN KERALA
Kerala Finance Minister TM Thomas Isaac Friday made a bold announcement that the state will impose a ban on the sale of compact fluorescent lamps (CFL) and incandescent (filament) bulbs starting November this year as part of sustainable energy policy. He also added that streetlights and bulbs in government offices across the state will be converted to light-emitting diode (LED) bulbs.
In his budget speech, the finance minister said nearly 2.5 crore LED bulbs have been produced on a mass scale in the state for public consumption.
Isaac’s announcement is in line with the government project of ‘Filament-free Kerala’ envisaged in 2018 as part of the state’s Urja Kerala mission. LED bulbs are energy-efficient than filament or CFL bulbs and will, therefore, generate less waste. Also, filament bulbs contain the mercury element which, when broken, is polluting in nature.
The project is also part of the long-term sustainable energy policy of the Left government to reduce the dependence on conventional energy sources and instead maximise potential on renewable sources like solar and hydel power. The project to install solar panels on rooftops of households and residential complexes, being implemented by the KSEB, is a step in that direction.
The finance minister today, in his budget, allocated Rs 1,765 crores for the energy sector and hoped to create 500MW from solar energy installations. He promised financial assistance for initiatives like the one Peelikodu panchayat took to conserve energy. He also said the problems of power deficiency and interruptions in existing lines can be solved through transmission lines and the Rs 10,000 crore Transgrid-2 project, work on which has begun.
ISSUE: MONETARY POLICY OF RBI
With inflation surging above the upper band of the RBI’s monetary framework, and expected to remain elevated in the coming quarters well, the Monetary Policy Committee (MPC) has chosen to maintain the status quo on rates along expected lines
Even though the outlook for inflation remains highly uncertain, governor Shaktikanta Das repeatedly emphasised that there was scope for further rate cuts down the line.
Higher inflation has restricted the policy space for the MPC, but not the RBI. The central bank has taken recourse to credit policy and other tools available to it to stimulate the economy. These measures signal its unequivocal intention to boost growth.
The strategy broadly operates at two levels — first, hasten the transmission of interest rate cuts to the broader economy, and second, boost credit flow to select sectors. The first leg has been operationalised through tweaking the liquidity framework, and conducting Rs 1 trillion long-term repo operations. This will enable banks to fund at a lower rate, and also bring down the term premium at the short end of the yield curve.
Short-term G-sec yields should now gravitate towards the benchmark rate. This strategy is a continuation of its existing programme — dubbed operation twist — where the RBI has sought to bring down long-term yields through open market operations.
The second leg of the strategy aims to boost credit flow to select sectors. The RBI has provided relief to banks for incremental loans extended to auto, real estate and MSMSEs, by reducing the cost of lending by waiving off the requirement of cash reserve ratio. This outcome-based cost intervention, which seeks to direct credit to select sectors will presumably have high multiplier effects, and could stimulate a recovery in the broader economy.