- Union Cabinet approves Model Tenancy Act
- Split wage payments under MGNREGA scheme
- UNGA President election: India votes for Maldives
- US sets, then suspends tariffs over digital taxes
The Union Cabinet approved the Model Tenancy Act, a move that will help overhaul the legal framework with respect to rental housing across the country.
GS-III: Indian Economy (Growth and Development of Indian Economy)
Dimensions of the Article:
- What is the Model Tenancy Act?
- About the latest approval by the Union Cabinet
What is the Model Tenancy Act?
- Model Tenancy Act, 2019, a tenancy law in India, was designed to rebuild tenancy market seeking to replace archaic rental laws of India and to solve housing availability deficit.
- The Act seeks to penalize recalcitrant tenants for refusing to move out of their rental properties after the agreed-upon rental period expires. The landlord will be able to claim double of the monthly rent for two months and four times of the monthly rent after that as compensation.
- The Act stipulates that a landlord cannot refuse to provide essential utilities and access to common facilities. This has been a fairly common grouse of tenants in the past.
- The landlord will also not be able to increase the rent without giving at least three months’ notice to the tenant, and cannot increase rent in the middle of a rental term.
- In order to bring transparency, fix accountability and promote fairness in the rental housing segment, the policy proposes setting up of a rent authority.
- The Act will help in achieving the target of “Housing for All by 2022”.
About the latest approval by the Union Cabinet
- Approved act will help in rebuilding legal framework on rental housing in India which in turn boost overall growth.
- Act was passed with the aim of creating a vibrant, sustainable and inclusive rental housing market.
- It will help in creating adequate rental housing stock for all income groups and address the issue of homelessness.
- It will enable institutionalisation of rental housing by shifting it towards formal market.
- It seeks to facilitate unlocking of vacant houses for rental housing purposes and give a fillip to private participation in rental housing as a business model. This will help in addressing huge housing shortage.
-Source: The Hindu
The Centre has asked the States to split wage payments under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme into separate categories for Scheduled Castes, Scheduled Tribes and others from this financial year 2021.
GS-II: Social Justice (Health and Poverty related issues, Government Interventions and Policies, Issues arising out of the design and implementation of Government Policies)
Dimensions of the Article:
- Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
- About the recent order to split MGNREGA wages
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
- Mahatma Gandhi National Rural Employment Guarantee Act, MGNREGA, is an Indian labour law and social security measure that aims to guarantee the ‘right to work’. This act was passed in September 2005.
- It aims to enhance livelihood security in rural areas by providing at least 100 days of wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work.
- It covers all districts of India except the ones with 100% urban population.
- MGNREGA is to be implemented mainly by gram panchayats (GPs). The involvement of contractors is banned.
- Apart from providing economic security and creating rural assets, NREGA can help in protecting the environment, empowering rural women, reducing rural-urban migration and fostering social equity, among others.
How MGNREGA came to be?
- In 1991, the P.V Narashima Rao government proposed a pilot scheme for generating employment in rural areas with the following goals:
- Employment Generation for agricultural labour during the lean season.
- Infrastructure Development
- Enhanced Food Security
- This scheme was called the Employment Assurance Scheme which later evolved into the MGNREGA after the merger with the Food for Work Programme in the early 2000s.
Features of MGNREGA
- It gives a significant amount of control to the Gram Panchayats for managing public works, strengthening Panchayati Raj Institutions.
- Gram Sabhas are free to accept or reject recommendations from Intermediate and District Panchayats.
- It incorporates accountability in its operational guidelines and ensures compliance and transparency at all levels.
Objectives of MGNREGA
- Provide 100 days of guaranteed wage employment to rural unskilled labour
- Increase economic security
- Decrease migration of labour from rural to urban areas
About the recent order to split MGNREGA wages
- The Centre has asked the States to split wage payments under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme into separate categories for Scheduled Castes, Scheduled Tribes and others from this financial year.
- Separate budget heads shall also be provided by the Government for SC and ST categories.
- Funds shall be allocated according to job cards provided for SC and ST beneficiaries.
- States were asked to verify if job cards for SC and ST beneficiaries were being properly allocated at the field level.
- There is some inbuilt positive discrimination in the scheme, reflected in the fact that more than 50% of workers are women and almost 40% are SC/ST.
Issues with the order
- This will unnecessarily complicate the payment system,
- It may also lead to a reduction in scheme funding.
-Source: The Hindu
India will vote in support of Maldives’ Foreign Minister at the election for the President of the General Assembly (PGA) in the United Nations next week, a decision which will disappoint another close neighbor.
GS-II: International Relations (Important International Institutions, India’s neighbors and foreign policies/developments affecting India’s interests)
Dimensions of the Article:
- United Nations General Assembly (UNGA)
- Functions of UNGA
- India supports Maldives for the Presidency of the UNGA session
- Significance of Maldives from India’s Perspective
United Nations General Assembly (UNGA)
- The United Nations General Assembly (UNGA) is one of the six principal organs of the United Nations (UN), the only one in which all member nations have equal representation, and the main deliberative, policy-making, and representative organ of the UN.
- Popularly known as the parliament of the world, where all the 193 UN member states are represented, the UNGA is the deliberative, policymaking and representative organ of the UN.
- Its powers are to oversee the budget of the UN, appoint the non-permanent members to the Security Council, appoint the Secretary-General of the United Nations, receive reports from other parts of the UN, and make recommendations in the form of General Assembly Resolutions.
- It is headquartered in New York City, U.S.A.
Functions of UNGA
- Takes a decision on important matters such as peace and security, discusses various global issues and budgetary matters.
- Decides on matters such as the admission of new members.
- Decisions are taken through a vote. Admission of new members and budgetary matters require a two-thirds majority, while the decisions on other issues are taken by a simple majority.
- Each sovereign state gets one vote and the votes are not binding on the membership, except in budgetary matters.
- The Assembly has no binding votes or veto powers like the UN Security Council.
- The UNGA can express world opinion, promote international cooperation in various fields and make recommendations to the UNSC and elect the Security Council’s non-permanent members.
India supports Maldives for the Presidency of the UNGA session
- India expressed strong support to the candidature of Maldives Foreign Minister Abdullah Shahid for the President of the 76th session of the UN General Assembly.
- Indian External Affairs Minister said multilateral engagement was “very important” in the contemporary globalised system and maintained that India had always been “supportive” of the “larger participation of the Maldives”.
- By joining the Indian Ocean Regional Association, rejoining the Commonwealth three years after it had quit the Commonwealth over criticism of its human rights records and by playing a greater role in the United Nations, Maldives has demonstrated its value in the comity of nations.
Significance of Maldives from India’s Perspective
- Maldives – the Indian Ocean archipelago assumes geopolitical significance due to its strategic location.
- Located at the southern and northern parts of this island chain lies the two important sea lanes of communication (SLOCs).
- These SLOCs are critical for maritime trade flow between the Gulf of Aden and Gulf of Hormuz in West Asia and the Strait of Malacca in Southeast Asia.
- The SLOCs are of vital importance for India since nearly 50% of India’s external trade and 80% of her energy imports transit these westward SLOCs in the Arabian Sea.
- Maldives plays an integral role in realising the potential of Indian Ocean blue economy as a contributor to the security and sustainable development of sea resources.
- The growing Chinese presence in the archipelago could have serious security implications.
- The crucial oil supply coming from Gulf nations to India pass through this area.
- There are about 25,000 Indian expatriates in Maldives who are engaged in a number of professional pursuits and their security is also of prime concern for India.
-Source: The Hindu
The United States government announced further suspension of punitive tariffs for six months on India, Austria, Italy, Spain, Turkey, and the United Kingdom while it continues to resolve the digital services taxes investigation amid the ongoing multilateral negotiations at the OECD and in the G20 process.
GS-III: Indian Economy (Growth and Development of Indian Economy, Taxation, International Trade), GS-II: International Relations
Dimensions of the Article:
- What is Digital Services Tax (DST)?
- How does India tax Digital Businesses?
- Advantages of Imposing Digital Tax
- Disadvantages of imposing Digital Tax
- Issues with the Existing Taxation systems for taxing Digital Services
- What are the Issues with India’s DST that is taken by the USTR?
- About the recent US move regarding suspension of tarrifs
What is Digital Services Tax (DST)?
- Digital Services Tax (DST) is a tax levied on revenues that certain companies generate from providing certain digital services.
- The digital businesses include both the digital-only brands that focus on virtual commodities and services and the services traditional market players use for transforming their businesses with digital technologies.
- Virtual commodities include downloaded software, website applications and digital assets like eBooks, image files, audio clips/audio files, movies or digital files.
- Digital services include those provided by social media companies, collaborative platforms etc.
How does India tax Digital Businesses?
- India has been making use of an ‘equalisation levy’ to level the playing field for the domestic and the foreign players on the virtual platform.
- While the domestic businesses are subject to the Income Tax Act, their foreign counterparts are exempted from its provisions. Hence they enjoy an advantage over the domestic firms. This is what the levy seeks to equalize.
- Equalisation levy was first introduced in 2016 at the rate of 6%. However, this was only limited to advertisements online.
- It is noted that this is a transaction-based tax, as opposed to a tax on earnings. This is to ensure that India doesn’t violate its international obligations.
- It was introduced based on the recommendations of the Committee on Taxation of E-Commerce.
- In 2018, the Finance Act introduced the Significant Economic Presence concept to IT Act of 1961. It incorporates a digital nexus to tax the profits of foreign businesses, based on its revenues and local user-base. This is yet to come into force.
- Currently, India too is involved in the talks to bring in a revamped framework for taxing digital businesses as the international taxation principles being used in the present are outdated (formulated in the 1920s).
Advantages of Imposing Digital Tax
- Tech giants like Google, Facebook, Amazon etc., which have a huge consumer base in developing countries like India will not be able to avoid taxation by shifting their offices to low-tax regimes.
- If the law prevents profit shifts, the countries from which the cross-border digital companies’ profit will be able to stop losing corporate tax revenue.
- Digital tax will ensure a level playing field for both domestic and foreign players. In the absence of such a law, the goods and services provided by firms based in a foreign country would get taxed less and hence have a significant competitive advantage over the domestic firms.
- It seeks to create a clear international tax system with improved transparency and certainty for businesses and security for national tax revenues.
Disadvantages of imposing Digital Tax
- Taxing the gross revenues instead of the firm’s profits is problematic.
- The move to bring in digital tax would hurt trade ties with the US.
- It may harm start-ups– especially during their initial expansion stages.
- There is a risk of ‘double taxation’ when shifting from a ‘country-of-establishment’ principle to a ‘country-of-destination’ principle.
- These platforms and broker service providers would pass on the burden of tax to the end consumers or the sellers. This will affect their affordability and popularity.
- The government had opted for low taxation on digital businesses to promote innovation. Increasing taxes may impede global economic and technological advancement.
- Compliance with the transparency guidelines would bring in additional cost burdens on the businesses.
Issues with the Existing Taxation systems for taxing Digital Services
- The sine qua non for taxing any person in India is either he should be resident of India, or the income should accrue or arise in India or deemed to accrue or arise in India i.e., the source of income should be from India.
- Residence-based and source-based are the two criteria to tax a person. Residence-based is largely followed by the developed nations whereas the source-based principle is largely followed by the developing nations.
- India is following basically residence-based taxation; however, foreign companies are taxed in accordance with source taxation and domestic companies are taxed on residence principle.
- The rules of the Income-tax Act 1961 are very clear for taxation of domestic companies, but the rules to tax MNCs having only digital presence are not as clear as that of domestic companies.
Permanent Establishment (PE) determination issue
- To tax foreign or any entity, there needs to be two essential things: one is the jurisdiction over the entity to be taxed and the second is taxable income. Jurisdiction is established through the Permanent Establishment (PE) and taxable income is as per the tax slabs under the Income-tax act 1961.
- With the advent of digital markets/ digital economy the concept of PE has undergone drastic change.
- With the rise of digital economic activities, the conventional PE definition (brick & mortar definition) has blurred and now, the companies have significant economic presence without even having a single asset in the source state.
- Digital businesses have three unique characteristics which are not considered by the current Tax regimes:
- They offer services by having limited or no physical presence. Example: Facebook, Twitter etc.
- They are highly dependent on intellectual property assets that are typically located in or can be shifted to a low-tax jurisdiction
- They can increase the value to their goods and services through highly engaged ‘user participation’ from other countries.
What are the Issues with India’s DST that is taken by the USTR?
- The US is probing the 2% Digital Services Tax (DST) that India adopted in 2020.
- The tax applies only to non-resident companies with annual revenues over $267,000, and covers online sales of goods & services to persons in India.
- Further, equalisation levy at 6% has been in force since 2016 on payment exceeding Rs. 1 lakh a year to a non-resident service provider for online advertisements.
- This is applicable for e-commerce companies that are sourcing revenue from Indian customers without having significant presence in the particular country.
- It is argued that India’s equalisation levy is complex and ambiguous which includes the possibility of double taxation.
- Further, India continues to be on the ‘Priority Watch List’ of USTR for lack of adequate Intellectual Property (IP) rights protection and enforcement.
- In India’s case, the probe could potentially affect the outcome of a bilateral trade deal that India has been looking to forge with the US.
About the recent US move regarding suspension of tarrifs
- The US is focused on finding a multilateral solution to a range of key issues related to international taxation, including the US’s concerns with digital services taxes.
- The suspension came after the conclusion of a year-long investigation into taxes which the US has stated are against tech companies like Apple, Amazon, Google and Facebook.
- In January 2021, following investigations, the USTR determined that the digital services taxes adopted by Austria, India, Italy, Spain, Turkey, and the UK discriminated against US digital firms.
- The US announced 25 per cent tariffs on over $2-billion imports from these six countries, but then immediately suspended the duties to allow time for international negotiations.
- In case of India, USTR’s proposed course of action includes additional tariffs of up to 25 per cent ad valorem on an aggregate level of trade that would collect duties on goods of India in the range of the amount of DST that India is expected to collect from US firms.
-Source: The Hindu, Indian Express