Daily Current Affairs for 6th October 2020

GST Council fails to reach consensus on compensating States

Paper:

Mains: General Studies- II: Governance, Constitution, Polity, Social Justice and International relations.

Why in news?

The Goods and Services Tax (GST) Council failed to iron out differences between Opposition-ruled States and the Centre over the plan to get States to borrow from the market to meet an estimated ₹2.35 lakh crore shortfall in compensation cess collections this year.

Key details

• According to Centre, Compensation dues to any state will not be denied, however borrowings have to be done and it has to be decided how much.
• The Council did agree to extend the levy of compensation cess under the GST regime, beyond the five-year period up to June 2022 as originally envisaged.
• The cess collections will be used to repay borrowings to be made this year for meeting the compensation shortfall, and will remain “for such period as may be required to meet the revenue gap”.

Immediate funds

• The Centre decided to release ₹45,000 crore of GST dues to States by next week to help them meet immediate spending needs amid the pandemic.
• This includes ₹20,000 crore of GST compensation cess collected so far in 2020-21, which will be disbursed to States immediately.
• The balance ₹25,000 crore pertains to Integrated GST dues from 2017-18 that had to be reconciled between States that got more than they ought to have and those that got less than their dues at the time.

Background

• The Union Finance Minister in a recently held 41st GST Council meeting asserted that the Centre will not be able to compensate the States.
• The Central Government is asserting that GST collections have sharply come down this year due to the Covid-19 pandemic.
• The GST compensation requirement is estimated to be around Rs 3 lakh crore this year, while the cess collection is expected to be around Rs 65,000 crore.
• Thus there is an estimated compensation shortfall of Rs 2.35 lakh crore.

GST (Compensation to States) Act, 2017

• After the introduction of GST States have very limited taxation rights as most of the taxes, barring those on petroleum, alcohol, and stamp duty, were subsumed under GST.
• GST accounts for almost 42% of states’ own tax revenues, and tax revenues account for around 60% of states’ total revenues.
• Under the GST (Compensation to States) Act, 2017, states are guaranteed compensation for loss of revenue on account of implementation of GST for a transition period of five years between 2017 and 2022.
• The compensation is calculated based on the difference between the states’ current GST revenue and the protected revenue after estimating an annualised 14% growth rate from the base year of 2015-16.

The Difference between Cess and Surcharge

• A cess may be in the nature of a tax or a fee but it is imposed for a specific purpose, as identified in the charging legislation.
• Article 270 of the Constitution describes a cess.
• Cesses may be levied by the union or state
• Cesses are named after the identified purpose; the purpose itself must be certain and for public good.
• In the case of a cess which has the attributes of a tax (cess tax), while the taxpayer does not have the right to ask for a reciprocal benefit, the proceeds ought to be spent only for the earmarked purpose.
• In simple words, a cess tax is an earmarked tax.

Who pays Cess? What is meant by Cess in GST?

• In the case of the Cess levied on direct taxes, it is added to the basic tax liability of the taxpayer and is paid as a part of the total tax paid by the taxpayers themselves.
• In the case of the Cess levied on indirect taxes, such as GST, it is paid by the producer of the goods and services. This usually adds to the cost of making goods and services, and eventually, the consumer might end up bearing the higher cost.

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SC questions Centre, RBI on panel report implementation

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in news?

The Supreme Court asked the Union government and the Reserve Bank of India (RBI) about the steps taken to implement the K.V. Kamath Committee report on recommendations to bail out sectors affected by the COVID-19 stress.

Key details

• The court noted that an additional affidavit filed by the government late last week did not address “several issues” raised in writ petitions highlighting the plight of borrowers, small and big, who were being charged compound interest, post the pandemic moratorium, which expired on August 31.

Note: A moratorium period can be understood as a temporary suspension of any financial activity until future events restore normalcy and permit cessation of the suspension.

‘Hand-hold’ small borrowers

• The additional affidavit informed the Supreme Court about the government’s decision to “hand-hold” small and vulnerable borrowers and waive the compound interest (interest on interest) accumulated against their loans during the six-month moratorium period.
• But the waiver of compound interest is only applicable for loans up to ₹2 crore, the Ministry of Finance told the court.
• The waiver will be for MSME, education, housing, consumer durables, credit card, auto, personal and consumption loans, all up to ₹2 crore.
• The court said the government and the RBI had brought nothing on record to show what been done to implement the Kamath panel report.

K.V. Kamath Committee on Restructuring of Loans

• RBI had formed a five member committee under the chairmanship of former ICICI Bank CEO KV Kamath to make recommendations on the financial parameters to be considered for the one-time restructuring of loans impacted by the Covid 19 pandemic.
• The committee will scrutinise restructuring of loans above ₹1500 crore.
• The term of the committee has been extended till June 30 2021.
• The resolution under this framework is applicable only to those borrowers who have been impacted on account of Covid.
• Only those borrowers which were classified as standard and with arrears less than 30 days as at March 1, 2020 are eligible under the Framework.

Recommendations of the committee

• The committee recommended a graded approach to restructuring of stressed accounts based on severity of the impact on the borrowers.
• The committee has allowed banks to classify the accounts into mild, moderate and severe as recommended by the committee.
• In line with the mandate given by the RBI, Kamath committee has identified four financial parameters including –

1. Total outside liabilities to adjusted tangible net worth
2. Total debt to EBITDA
3. Debt service coverage ratio (DSCR)( In the context of corporate finance, the debt-service coverage ratio (DSCR) is a measurement of a firm’s available cash flow to pay current debt obligations.)
4. Average debt service coverage ratio (ADSCR)

• The sector-specific thresholds (ceilings or floors, as the case may be) for each of the above key ratios that should be considered by the lending institutions in the resolution assumptions with respect to an eligible borrower.
• The committee has therefore identified 26 sectors and also recommended sector specific thresholds for these sectors.
• Power, construction, iron and steel, roads, real estate, wholesale trading, textiles, consumer durables, aviation, logistics, hotels, restaurants and tourism, mining are among the sectors that will need restructuring.

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Shouldn’t let AI become weapon of non-state actors, says Modi

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in news?

Vowing to make India a global hub for artificial intelligence (AI), Prime Minister Narendra Modi stressed the need for transparency and accountability to protect against weaponisation of the technology by non-state actors.

PM’s statements

• It remains our collective responsibility to ensure trust in how AI is used. Algorithm transparency is key to establishing this trust.
• Equally important is accountability. We must protect the world against weaponisation of AI by non-state actors

RAISE 2020

• PM launched a virtual Summit- RAISE 2020 conference.
• AI has a big role to play in sectors like agriculture, creating next generation urban infrastructure and making disaster management systems stronger.
• Technology has transformed our workplaces and has improved connectivity.
• It is hoped the merger between social responsibility and AI would enrich AI with human touch. The teamwork of AI with humans can do wonders for our planet.
• The Prime Minister wished India to become a global hub for Artificial Intelligence and hoped many more Indians would start working on this in the times to come. He said the approach towards this goal is powered by core principles of: Teamwork, Trust, Collaboration, Responsibility and Inclusivity.

What is Artificial intelligence (AI)?

• AI is the ability of a digital computeror computer-controlled robot to perform tasks commonly associated with intelligent beings.
• The term is frequently applied to the project of developing systems endowed with the intellectualprocesses characteristic of humans, such as the ability to reason, discover meaning, generalize, or learn from past experience.

India and AI

• According to a Canada based company’s report, Global AI Report 2019, India stood at the ninth position in terms of the number of the AI specialists working in the field. The US, China and the UK topped the list.
• The top ranked countries in this report have many academic institutes with programs on AI. They have therefore a much greater number of people skilled to do research in the field.
• India, on the contrary, lacks the opportunities in formal education in data science but is slowly trying to encourage the adoption of AI in educational institutes.
• There are many startups in the country which are doing great work in image analytics, data analytics, predictive intelligence etc.
• It is estimated that AI will add 957 billion dollars to India’s GDP by the year 2035 boosting India’s annual growth by 1.3% points.

Recent Initiatives by India in the Field of AI

• India has recently launched National AI Strategy and National AI Portal and have also started leveraging AI across various sectors such as education, agriculture, healthcare, e-commerce, finance, telecommunications, etc.
• The National AI strategy was released in 2018 by NITI Aayog. It is termed ‘AIForAll’ as it is focused on leveraging AI for inclusive growth in line with the Government policy of Sabka Saath Sabka Vikas.
• Role of the Government has been clearly delineated to develop the research ecosystem, promote adoption and address skilling challenges.
• The strategy also flags important issues like ethics, bias and privacy issues relating to AI and envisions Government promoting research in technology to address these concerns.
• The focus is on sectors like agriculture, health and education where public investment and lead would be necessary.
• National AI Portal: It has been developed jointly by the National e-Governance Division of the Ministry of Electronics and Information Technology (MeitY) and the National Association of Software and Service Companies (Nasscom).
• The portal is meant to work as a “one stop digital platform” for all AI related developments in India.

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DRDO successfully tests anti-submarine warfare missile system

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in news?

The Defence Research and Development Organisation (DRDO) successfully test-fired a missile assisted release of lightweight anti-submarine torpedo system for Anti-Submarine Warfare (ASW), Missile Assisted Release of Torpedo (SMART).

Key details

• All the mission objectives including missile flight up to the range and altitude, separation of the nose cone, release of torpedo and deployment of velocity reduction mechanism have been met perfectly.
• The test was conducted at 11.45 a.m. from Wheeler Island off the coast of Odisha.
• SMART is a game changer technology demonstration in ASW. SMART gives capability for ASW operations far beyond torpedo range.
• The tracking stations — radars, electro optical systems — along the coast and the telemetry stations including down range ships monitored all the events.

Torpedoes

• Torpedoes are self propelled weapons with a warhead and can be used under or on the water surface. They are one of the mainstay of sea-warfare attack systems.
• Modern torpedoes can be divided into lightweight and heavyweight classes; and into straight-running, autonomous homers, and wire-guided. They can be launched from a variety of platforms.
• Torpedoes used by Indian Navy:

1. Takshak (heavy weight torpedo)
2. Varunastra (heavyweight torpedo)
3. Advanced Light Torpedo Shyena

Anti- submarine warfare

• Anti-submarine warfare (ASW) is a branch of underwater warfare that uses surface warships, aircraft, submarines, or other platforms, to find, track, and deter, damage, and/or destroy enemy submarines.
• Such operations are typically carried out to protecting friendly shipping and coastal facilities from submarine attacks and to overcome blockades.
• Successful ASW operations typically involved a combination of sensor and weapon technologies, along with effective deployment strategies and sufficiently trained personnel.

Anti-submarine missile

• An anti-submarine missile is a standoff anti-submarine weapon. Often a variant of anti-ship missile designs an anti-submarine systems typically use a jet or rocket engine, to deliver: an explosive warhead aimed directly at a submarine; a depth charge, or; a homing torpedo that is carried from a launch ship, or other platform, to the vicinity of a target.
• The advantage of an anti-submarine missile is the attack stand-off range.
• Today anti-submarine rockets have been phased out in most western navies, replaced by the Homing ASW Torpedo.

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Virus researchers get Nobel for medicine

Paper:

Mains: General Studies-III: Technology, Economic Development, Bio diversity, Environment, Security and Disaster Management

Why in news?

Americans Harvey J Alter and Charles M Rice, and British scientist Michael Houghton were awarded the Nobel Prize for Medicine or Physiology on Monday for the discovery of the hepatitis C virus.

Key details

• Announcing the prize in Stockholm on Monday, the Nobel Committee noted that the trio’s work helped explain a major source of blood-borne hepatitis that couldn’t be explained by the hepatitis A and B viruses.
• Their work makes possible blood tests and new medicines that have saved millions of lives.
• Thanks to their discovery, highly sensitive blood tests for the virus are now available and these have essentially eliminated post-transfusion hepatitis in many parts of the world, greatly improving global health.
• For the first time in history, hepatitis C can now be cured, raising hopes of eradicating hepatitis C virus from the world population.

Hepatitis C

• It’s mainly passed on through contaminated needles, either from injecting drugs or from needle stick injuries in healthcare settings.
• It can also be transmitted sexually, especially during anal sex or other types of sex that may involve blood.
• Some groups are more at risk of getting hepatitis C than others, including people who use drugs, people in prisons, men who have sex with men, health workers and people living with HIV.
• Chronic hepatitis C can be serious and without appropriate treatment and care, can cause liver disease and liver cancer leading to death. Treatment, where available, can cure hepatitis C in most cases.
• The World Health Organisation estimates there are over 70 million cases of hepatitis worldwide and 400,000 deaths each year.

Hepatitis B

• Hepatitis B is a potentially life-threatening liver infection caused by the hepatitis B virus (HBV).
• It is a major global health problem. It can cause chronic infection and puts people at high risk of death from cirrhosis and liver cancer.
• A safe and effective vaccine that offers a 98-100% protection against hepatitis B is available. Preventing hepatitis B infection averts the development of complications including the development of chronic disease and liver cancer.

Hepatitis A

• Hepatitis A is a viral liver disease that can cause mild to severe illness.
• The hepatitis A virus (HAV) is transmitted through ingestion of contaminated food and water or through direct contact with an infectious person.
• Almost everyone recovers fully from hepatitis A with a lifelong immunity. However, a very small proportion of people infected with hepatitis A could die from fulminant hepatitis.
• The risk of hepatitis A infection is associated with a lack of safe water, and poor sanitation and hygiene (such as dirty hands).

Nobel prize

• The Nobel Prize is a set of annual international awards bestowed in several categories by Swedish and Norwegian institutions in recognition of academic, cultural, or scientific advances.
• The will of the Swedish chemist, engineer and industrialist Alfred Nobel established the five Nobel prizes in 1895.
• The prizes in Chemistry, Literature, Peace, Physics, and Physiology or Medicine were first awarded in 1901
• The prize is not awarded posthumously; however, if a person is awarded a prize and dies before receiving it, the prize may still be presented.
• A prize may not be shared among more than three individuals, although the Nobel Peace Prize can be awarded to organizations of more than three people