1.Reimagining the OBC quota (The Hindu)

2.Questions about the GST cess (The Hindu)

1.Reimagining the OBC quota (The Hindu)

Synoptic line: It throws light on the issue of Sub-categorisation of OBCs, an attempt at caste-based mobilisation. (GS paper II)

Overview

  • The Union Cabinet’s decision to set up a commission to examine the issue of sub-categorisation of the Other Backward Classes speaks to the long years of failure in effectively preventing large sections of the creamy layer from taking advantage of the quota system to the detriment of the poorer sections among their own caste groups.
  • The decision on sub-categorisation came on the same day the Cabinet decided to raise the ceiling for deciding who remains outside the creamy layer to those earning Rs.8 lakh annually, an increase of Rs.2 lakh.
  • Though it will ensure social justice in an efficient manner, but the biggest challenge India faces is that the groups perceived to be disadvantaged consist of a very large segment of Indian society, while public policies are highly limited in scope.

Assessment

  • The decision will ensure a more equitable distribution of reservation benefits by further differentiating caste groups coming under backward classes on the basis of their levels of social and economic backwardness. If the categorisation of the creamy layer had been done consistently and uniformly, there would not have been any felt need to differentiate among the caste groups.
  • The committee has a three-point mandate. One, it has to examine the “extent of inequitable distribution of benefits of reservation” among various castes and communities that come under the Central OBC list.
  • The committee also has to work out the mechanism, criteria and parameters for the actual sub-categorisation. This will be tricky. The actual reservation will continue to be 27% and within this the committee will have to do the re-arranging.
  • The National Sample Survey (NSS) data from 2011-12 show that about 19% of the sample claims to be Dalit, 9% Adivasis, and 44% OBC. While some of these claims may be aspirational rather than real, this totals a whopping 72%.
  • Less than 3% of the whole population is employed in government and public-sector jobs. Among the population aged 25-49, less than 7% have a college degree. Since reservations cover only half the college seats and public-sector jobs, the mismatch is obvious.
  • To make a significant difference in the lives of the marginalised groups, there are only two options. Either the government must drastically increase availability of government jobs and college seats or it must reduce the size of the population eligible for these benefits and the only viable option is to reduce the size of the eligible population, possibly along the lines of sub-categorisation proposed by the government.
  • The benefits of reservation have not been distributed equitably, and large segments of the weaker sections and backward classes continue to have no access to quality education or meaningful employment and the relatively rich and dominant sections among the backward castes have tended to take up a disproportionately larger share of the reservation pie.
  • Though the introduction of the concept of ‘creamy layer’ to isolate the well-off among those eligible for reservation was initially perceived as an attempt to limit the benefits of reservation, and to politically divide the beneficiaries of reservation. But if it was properly implemented, it could have had the effect of allowing a more equitable spread of the benefits of reservation.

No credible data

  • According to the Socio-Economic Caste Census (SECC) of 2011 poverty and deprivation data, it was found that about 4.6 million distinct caste names, including names of gotra, surname and phonetic variations were returned, making the results almost impossible to interpret.  Though in 2015, the then NITI Aayog Vice Chairperson, Arvind Panagariya, was asked to head a committee to chair the caste classification using SECC data but little seems to have come of it.
  • The SECC data have not been able to shed light on socio-economic disadvantages faced by different caste groups and addition of caste information was an ill-conceived graft on what was supposed to be a Below Poverty Line (BPL) survey. In spite of widespread demands to include caste data in the Census of 2001 and 2011, the Office of the Registrar General was reluctant to add this burden to the decennial exercise.
  • There is two-pronged approach that tries to eliminate caste-based disadvantages; the approach focuses on eliminating discrimination and expanding the proportion of population among the disadvantaged groups those benefits from affirmative action policies could be a solution.
  • According to the India Human Development Survey of 2011-12, it has been found that among families where no adult has completed more than Class X, 59% children from the forward castes are able to read a simple paragraph while the proportion is only 48% for OBCs, 41% for Dalits and 35% for Adivasis.
  • Their disadvantage begins in early childhood and grows progressively at higher levels of education, so improving quality of education for all, including those from marginalised groups, must be a first step in addressing caste-based inequalities.
  • Secondly we mustfocus on ensuring that benefits of reservations are widely spread. It makes little sense for a young man to obtain admission to a prestigious college, get admitted to a postgraduate course, get a job, and be promoted using the same caste certificate, so the use of the OBC quota must be limited to once in a person’s lifetime, allowing for a churn in the population benefitting from reservations.

Way ahead

  • As the reservation pie is limited, and no group, whether rich or poor, dominant or subservient, can hope to gain except at the expense of another socio-economic category. The present move by the government to rethink OBC quota creates a wedge that could potentially be used to ensure that we have better data on caste-based disadvantages for future discourse.

Question– it is disheartening that even after 70 years of Independence, we still rely on a colonial Census to tell us about the condition of various castes in India.  Examine the government decision of sub-categorization of the Other Backward Classes (OBC) and how it will address the inequitable distribution of benefits of reservation.

2.Questions about the GST cess (The Hindu)

Synoptic line: It throws light on the issue of proposed a new levy called the ‘GST Compensation Cess’. (GS paper III)

Overview

  • The Goods and Services Tax (GST) reforms have been implemented in the country; the new act also proposes a new levy called the GST Compensation Cess; it has been introduced to make good apprehended losses to States in the first five years of GST implementation.

The GST cess

  • A cess is a levy for a specific purpose which may bear the characteristics of a tax or a fee. Under Article 270 of the Constitution, a cess tax has special privilege as the proceeds can be retained exclusively by the Union and need not be shared with States.  It is evident from the Fourth Finance Commission Report that the cess has special status, which is to ensure expenditure for a specific purpose.
  • The GST cess is a compensation cess imposed under section 8 of Goods and Services Tax (Compensation to State) Act, 2017. It would be imposed for a period of 5 years from GST implementation.
  • GST cess is imposed on the supply of goods or services to provide compensation to the States for loss of revenue due to the implementation of GST in India. If any funds are unutilised, then at the end of the transition period, it would be shared equally by the Central and State Government.
  • It is levied on inter- and intra-State supply of notified goods such as aerated drinks, coal, tobacco, automobiles and the ambiguous category of ‘other supplies’. The proceeds of the cess will be distributed to loss-incurring States on the basis of a prescribed formula.

Recent issues

  • There have been frequent changes in the rates of the cess, as there is increase in the rate of luxury, mid-sized cars and sport utility vehicles. While the policy flip-flop on the tax rates reveals the ad hoc implementation of the cess, there is much to say about the legal validity of the Act in terms of legislative competence and conformity with the Constitution.
  • A cess must have an earmarked purpose, if compensating State governments is considered to be a specific purpose, any general revenue raising measure can be considered to be backed by an earmarked purpose.
  • The transferred fund can be used for any scheme and may even be used merely to adjust the respective State government’s fiscal deficit. Hence, there is no relation between the persons contributing to the cess and the recipients, the State governments. All these factors make the cess look more like an additional tax or surcharge which becomes problematic as surcharge on the GST is prohibited under Article 271.
  • It has been proposed under Section 18 of the 122nd Constitution Amendment Bill, 2014, for 1% additional tax to compensate States but this was withdrawn while enacting the Amendment Act. The version of Section 18 adopted in the Amendment Act, 2016 merely says that Parliament shall, on the GST Council’s recommendations, provide for compensation to States for a period of five years. There is no provision for an additional tax.
  • As per Article 279A (4) (f), the GST Council’s power to recommend a special rate is confined to raising additional resources during any natural calamity or disaster. Hence the cess cannot be justified under such power.
  • Moreover, pursuant to the 101st Constitution Amendment Act, 2016, Article 271 has been amended to state that an additional tax, surcharge cannot be imposed over and above the GST tax rates. Thus it appears that by enacting the cess, Parliament is seeking to do indirectly that which cannot be done directly, which amounts to it being a colourable piece of legislation.

Way ahead

  • The goods identified in the Act, such as aerated drinks, coal, tobacco, automobiles and the ambiguous category of “other supplies”, do not form a distinct category or class deserving the liability to pay the cess so as to compensate States, and it is doubtful it will succeed if tested under the anvil of the right to equality under Article 14. So, the cess reflects the same lack of coherence as the GST regime in general, the appeasement measures being weighed down by the legal entanglements created therein.

Question– What is GST compensation cess? Why it has been proposed?  Discuss whether the cess relates to the legal validity and conformity with the Constitution or not along with your reasons.