Daily Prelims Notes 23 April 2022

April 23, 2022
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Category: DPN

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Daily Prelims Notes

23 April 2022

Table Of Contents

1. Taxing Digital Economy

Subject: Economy

Section: Fiscal Policy

Why in the news?

Over the past four years, 137 countries have engaged intensively with the OECD to find a solution to the tax challenges arising from digitalisation.

Issue?

Inter jurisdiction operation-The unique features of the digital economy—firms can operate seamlessly across borders and users and their data contribute to their profits—made it harder to tax such an economy.

The Global Minimum Tax?

The Organization for Economic Co-operation and Development (OECD) finalized a landmark agreement to subject multinational enterprises (MNEs) to a minimum 15% tax from 2023.

The global minimum tax rate would apply to overseas profits of multinational firms with 750 million euros ($868 million) in sales globally. Governments could still set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could “top up” their taxes to the 15% minimum, eliminating the advantage of shifting profits.
A second track of the overhaul would allow countries where revenues are earned to tax 25% of the largest multinationals’ so-called excess profit – defined as profit in excess of 10% of revenue.

Following years of intensive negotiations to bring the international tax system into the 21st century, 136 jurisdictions (out of the 140 members of the OECD/G20 Inclusive Framework on BEPS) joined the Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy:

Pillar One- taxing rights on more than USD 125 billion of profit are expected to be reallocated to market jurisdictions each year. Developing country revenue gains are expected to be greater than those in more advanced economies, as a proportion of existing revenues.
Pillar Two- introduces a global minimum corporate tax rate set at 15%. The new minimum tax rate will apply to companies with revenue above EUR 750 million and is estimated to generate around USD 150 billion in additional global tax revenues annually. Further benefits will also arise from the stabilisation of the international tax system and the increased tax certainty for taxpayers and tax administrations.

Recent development :

The Pillar Two model rules provide governments a precise template for taking forwards the two-pillar solution to address the tax challenges arising from digitalisation and globalization of the economy agreed in October 2021 by 137 countries and jurisdictions under the OECD/G20 Inclusive Framework on BEPS.

The rules create a “top-up tax” to be applied on profits in any jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum 15% rate.

The new Pillar Two model rules will assist countries to bring the GloBE rules into domestic legislation in 2022. They provide for a coordinated system of interlocking rules that:

define the MNEs within the scope of the minimum tax;
set out a mechanism for calculating an MNE’s effective tax rate on a jurisdictional basis, and for determining the amount of top-up tax payable under the rules; and
impose the top-up tax on a member of the MNE group in accordance with an agreed rule order.

The Pillar Two model rules also address the treatment of acquisitions and disposals of group members and include specific rules to deal with particular holding structures and tax neutrality regimes. Finally, the rules address administrative aspects, including information filing requirements, and provide for transitional rules for MNEs that become subject to the global minimum tax.

Impact?

The OECD, which has steered the negotiations, estimates the minimum tax will generate $150 billion in additional global tax revenues annually.

Taxing rights on more than $125 billion of profit will be additionally shifted to the countries where they are earned from the low tax countries where they are currently booked.

2. National Industrial Corridor Development Programme

Subject: Geography

Section: Economic Geography

Why in the news?

States will have to take ownership and responsibility to fast-track land allotments for projects under the National Industrial Corridor Development Corp. (NICDC), and if they fail to do so in a time-bound manner, the Centre will foreclose the project and offer it to other states, commerce and industry minister Piyush Goyal said during an investor round table on the National Industrial Corridor Development Programme.

About NICDP:

National Industrial Corridor Development Programme is India’s most ambitious infrastructure programme aiming to develop new industrial cities as “Smart Cities” and converging next generation technologies across infrastructure sectors.

It was approved in December 2020 to set up 32 projects in the 11 industrial corridors in four phases by 2026-27. It aims to develop 11 industrial corridors across 18 states with multimodal connectivity to promote domestic manufacturing.

Projects:

Delhi-Mumbai Industrial Corridor (DMIC)
Amritsar-Kolkata Industrial Corridor (AKIC)
Chennai-Bengaluru Industrial Corridor (CBIC)
Vizag-Chennai Industrial Corridor (VCIC)
Bengaluru-Mumbai Industrial Corridor (BMIC)
Odisha Economic Corridor (OEC)
Hyderabad Nagpur Industrial Corridor (HNIC)
Hyderabad Warangal Industrial Corridor (HWIC)
Hyderabad Bengaluru Industrial Corridor (HBIC)
Extension of CBIC to Kochi via Coimbatore
Delhi Nagpur Industrial Corridor (DNIC)

Details:

Delhi Mumbai Industrial Corridor (DMIC)

The project aims to create smart, sustainable industrial cities by leveraging the high speed, high capacity connectivity backbone provided by the Western Dedicated Freight Corridor (DFC) to reduce logistic costs in an enabling policy framework. These new cities will come up in the States of Uttar Pradesh, Haryana, Rajasthan, Madhya Pradesh, Gujarat and Maharashtra.

Chennai Bengaluru Industrial Corridor (CBIC)

It proposes to address infrastructure bottlenecks through a holistic approach while benefiting from the inherent strengths and competitiveness of each of the CBIC states. CBIC Region covers parts of three States, referred to as CBIC states, (viz. Tamil Nadu, Karnataka, Andhra Pradesh).

Amritsar Kolkata Industrial Corridor (AKIC)

Amritsar-Kolkata Industrial Corridor (AKIC) is being developed along the alignment of the Eastern Dedicated Freight Corridor (EDFC). AKIC will have an influence area across seven States of Punjab, Haryana, Uttar Pradesh, Uttarakhand, Bihar, Jharkhand and West Bengal.

East Coast Economic Corridorwith phase-1 as Vizag- Chennai Industrial Corridor (VCIC)

East Coast Economic Corridor linking Kolkata- Chennai – Tuticorin has been envisaged with VCIC as phase-1 of the project.

Further, the Odisha Economic Corridor is also being developed as part of East Coast Economic Corridor.

Bengaluru Mumbai Industrial Corridor (BMIC)

The Government of India is also developing Bengaluru Mumbai Industrial corridor between Bengaluru and Mumbai, which would have an Influence Area spread across the states of Karnataka and Maharashtra.

Hyderabad Warangal and Hyderabad Nagpur Industrial Corridor:

The Government of India is also considering Hyderabad Warangal and Hyderabad Nagpur Industrial Corridors, which would have an Influence Area spread across the states of Telangana and Maharashtra.

Hyderabad Bengaluru Industrial Corridor (HBIC):

It will have an Influence Area spread across the states of Telangana, Andhra Pradesh and Karnataka. This corridor will act as an extension of Hyderabad Nagpur Industrial Corridor thereby connecting the central parts of the country with southern parts.

National Industrial Corridor Development Corporation (NICDC) is a Special Purpose Vehicle that envisages to establish, promote and facilitate development of the National Industrial Corridor Development Programme.

It was incorporated by the Government of India on 07 January 2008. It is classified as Non-govt company and is registered at Registrar of Companies, Delhi. Its authorized share capital is Rs. 1,000,000,000 and its paid up capital is Rs. 1,000,000,000.

3. Niti Ayog

Subject: Polity

Section: National Body

Why in the news?

Department of Personnel & Training, the Appointments Committee of the Cabinet appointed Suman K Bery initially as Full-Time Member, NITI Aayog with immediate effect and up to April 30 and afterward as Vice-Chairperson w.e.f. May 1, 2022.

NITI Aayog Composition:

The NITI Aayog will comprise the following:

Chairperson– the Prime Minister of India
Governing Council consists of the Chief Ministers of all the States and Lt. Governors of Union Territories in India.
Regional Councils-to address particular issues and possibilities affecting more than one state. These will be formed for a fixed term. It will be summoned by the Prime Minister. It will consist of the Chief Ministers of States and Lt. Governors of Union Territories. These will be chaired by the Chairperson of the NITI Aayog or his nominee.
Special invitees: Eminent experts, specialists with relevant domain knowledge, which will be nominated by the Prime Minister.
The full-time organizational framework will include, in addition to the Prime Minister as the Chairperson:
- Vice-Chairperson (appointed by the Prime Minister)
- Members:
  - Full-time
  - Part-time members: Maximum of 2 members from foremost universities, leading research organizations, and other innovative organizations in an ex-officio capacity. Part-time members will be on a rotational basis.
- Ex Officio members: Maximum of 4 members of the Council of Ministers which is to be nominated by the Prime Minister.
- Chief Executive Officer: CEO will be appointed by the Prime Minister for a fixed tenure. He will be in the rank of Secretary to the Government of India.

4. NSE IFSC-NSE International Exchange

Subject: Economy

Section: Capital Market

NSE IFSC is launching an international sustainability platform, a first-of-its-kind ESG platform in India, at GIFT IFSC.

Details:

The platform will facilitate the listing and trading of a variety of sustainability products including green bonds, voluntary carbon, sustainable bonds, green RE-ITs and green equity, and channelise the flow of sustainable finance to India and other markets.

Locating it in GIFT City will facilitate international investors to participate in environment, social and governance (ESG) transitions in India and other markets.

The platform will use distributed ledger technology (DLT) or blockchain to ensure integrity, speed, tracking and traceability of transactions.

NSE IFSC-NSE International Exchange

NSE IFSC Limited (NSE International Exchange) incorporated on November 29, 2016 by the Registrar of Companies, Gujarat. It is a fully owned subsidiary company of National Stock Exchange of India Limited (NSE) and has received approval from Securities and Exchange Board of India (SEBI) to establish an international exchange in Gujarat International Finance Tech City (GIFT) – International Financial Service Centre (IFSC) Gandhinagar. GIFT city.

Benefits:

Exchange and Financial Services units located in GIFT IFSC are offered competitive tax structure and facilitative regulatory framework. The benefits include exemptions from security transaction tax, commodity transaction tax, dividend distribution tax, capital gain tax waivers and no income tax.

Stock exchanges operating in the GIFT IFSC are permitted to offer trading in securities in any currency other than the Indian rupee. Subject to SEBI/IFSCA approval, trading is permitted in equity shares of companies incorporated outside of India, depository receipts, debt securities of eligible issuers, currency, index, interest rate and non-agriculture commodity derivatives and all categories of exchange traded products that are available for trading in stock exchanges in FATF/ IOSCO complaint jurisdiction.

What Is Blockchain Technology?

Blockchain technology is a structure that stores transactional records, also known as the block, of the public in several databases, known as the “chain,” in a network connected through peer-to-peer nodes. Typically, this storage is referred to as a ‘digital ledger.’ Every transaction in this ledger is authorized by the digital signature of the owner, which authenticates the transaction and safeguards it from tampering. Hence, the information the digital ledger contains is highly secure.

In simpler words, the digital ledger is like a Google spreadsheet shared among numerous computers in a network, in which the transactional records are stored based on actual purchases.

Blockchain is a combination of three leading technologies:

Cryptographic keys-It consist of two keys – Private key and Public key. These keys help in performing successful transactions between two parties. Each individual has these two keys, which they use to produce a secure digital identity reference. This secured identity is the most important aspect of Blockchain technology. In the world of cryptocurrency, this identity is referred to as ‘digital signature’ and is used for authorizing and controlling transactions.
A peer-to-peer network containing a shared ledger-The digital signature is merged with the peer-to-peer network; a large number of individuals who act as authorities use the digital signature in order to reach a consensus on transactions, among other issues. When they authorize a deal, it is certified by a mathematical verification, which results in a successful secured transaction between the two network-connected parties. So to sum it up, Blockchain users employ cryptography keys to perform different types of digital interactions over the peer-to-peer network.
A means of computing, to store the transactions and records of the network

5. IT Rules changes

Subject: Economy

Section: Fiscal Policy

Why in the news?

Four new criteria added by the I-T Department to the rules for filing ITR.

Details:

If an individual’s total sales, turnover or gross receipts in the business exceeds Rs 60 lakh during the previous year, or
If an individual’s total gross receipts in profession exceeds Rs 10 lakh, or
If an individual’s aggregate of TDS and TCS is Rs 25,000 or more, or
If the person’s deposit in one or more savings bank accounts is Rs 50 lakh or more during the previous year,

Given any of the four conditions – the individual has to file returns as per the new rule

Benefits:

Such norms will capture all assessees incurring high value transactions but not filing returns because their taxable income is less than the basic exemption limit.
Reduce tax non compliance and tax evasion.
Increased transparency
Increase tax base

Tax Deducted at Source and Tax Collected at Source

Both are incurred at the source of income. However:

TDS-Tax Deducted at Source
- TDS is the tax which is deducted on a payment made by a company to an individual, in case the amount exceeds a certain limit.
- TDS deduction is applicable on payments such as salaries, rent, professional fee, brokerage, commission, etc.
- TDS is applicable only on payments that exceed a certain amount.
- Example-Let’s say Mr.X works at a company. His company deducts a tax on monthly salary at the applicable rate before they make him the final payout. The amount that is deducted in this manner is TDS.
TCS –Tax Collected at Source
- TCS is the tax which is collected by sellers while selling something to buyers.
- TCS deduction is applicable on sales of goods like timber, scrap, mineral wood, and so on.
- TCS is applicable on sales of specific goods which don’t include production or manufacturing material.
- Example-Mr.Y is a mineral wood trader. He sells some mineral wood to Mr.Z. While making the sale, Mr.Y collects 5 percent tax; this sum collected by Mr.Y from the customer is called TCS.

6. Ethanol Blending

Subject: Economy

Section: Fiscal Policy

Why in the news?

The Centre has invited fresh applications from those who have acquired land for ethanol project and obtained environmental clearance to avail interest subvention in setting up new distilleries or expansion of existing distilleries to produce ethanol out of cereals (rice, wheat, barley, maize and sorghum), sugarcane (including sugar, sugar syrup, sugarcane juice, B-heavy molasses, Chevy molasses) and sugar beet.

Details

Interest Subvention Scheme: For ethanol production, expanding the scheme to include grain-based distilleries and not just molasses-based ones.

The scheme would boost production and distillation capacity to 1,000 crore litres and help in meeting the goal of 20% ethanol blending with petrol by 2030.
The government has been extending financial assistance in the form of interest subvention at six per cent per annum or 50 per cent of rate of interest charged by banks, whichever is lower, on the loans to be extended by banks for five years including one-year moratorium.

Interest Subvention Scheme for farmers

The interest subvention scheme was introduced in 2006-07 with the view of providing concessional credit to farmers.
This will help farmers getting short term crop loans up to Rs. 3 lakh payable within one year at only 4% per annum.
The Interest Subvention Scheme will continue for one year and it will be implemented by NABARD and RBI
The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative Banks.

The Ethanol Blending Programme (EBP) seeks to achieve blending of Ethanol with motor spirit with a view to reducing pollution, conserving foreign exchange and increasing value addition in the sugar industry enabling them to clear cane price arrears of farmers.

The Union government has fixed a target of 10 per cent blending of fuel grade ethanol with petrol by 2021-22 and 20 per cent by 2024-25.

7. Open Market Sale Scheme

Subject: Economy

Section: Food Security

Why in the news?

The Food Ministry is believed to have informed the Prime Minister’s Office (PMO) that wheat procurement could be around 25 mt against the 44 mt target set for it.

Details:

Field level staff have informed higher officials in the Food Corporation of India (FCI) that many farmers are either selling to private traders or holding on to the crops expecting to get better rates on account of rising wheat prices post Ukraine crisis.

Open Market Sale Scheme

Food Corporation of India sells surplus stocks of wheat and rice under Open Market Sale Scheme (Domestic) at predetermined prices through e-auction in the open market from time to time to enhance the supply of food grains, especially wheat during the lean season and thereby moderate the open market prices especially in the deficit regions.

The FCI conducts a weekly auction to conduct this scheme in the open market using the platform of commodity exchange NCDEX (National Commodity and Derivatives Exchange Limited).For transparency in operations, the Corporation has switched over to e- auction for sale under Open Market Sale Scheme (Domestic).

The State Governments/ Union Territory Administrations are also allowed to participate in the e-auction, if they require wheat and rice outside TPDS & OWS.

The present form of OMSS comprises 3 schemes as under:

Sale of wheat to bulk consumers/private traders through e-auction.
Sale of wheat to bulk consumers/private traders through e-auction by dedicated movement.
Sale of Raw Rice Grade ‘A’ to bulk consumers/private traders through e-auction.

8. Amit Shah attends Veer Kunwar Singh’s ‘Vijayotsav’ in Bhojpur

Subject : History

Section : 1857 revolt

Context: Amit Shah attends Veer Kunwar Singh’s ‘Vijayotsav’ in Bhojpur

Concept :

Kunwar Singh was a leader during the Indian Rebellion of 1857. He belonged to a family of the Ujjainiya clan of the Parmar Rajputs of Jagdispur, currently a part of Bhojpur district, Bihar, India. At the age of 80, he led a selected band of armed soldiers against the troops under the command of the British East India Company. He was the chief organiser of the fight against the British in Bihar. He is popularly known as Veer Kunwar Singh.

Singh led the Indian Rebellion of 1857 in Bihar. He was nearly eighty and in failing health when he was called upon to take up arms. He was assisted by both his brother, Babu Amar Singh and his commander-in-chief, Hare Krishna Singh. Some argue that the latter was the real reason behind Kunwar Singh’s initial military success. He gave a good fight and harried British forces for nearly a year and remained invincible until the end. He was an expert in the art of guerilla warfare. His tactics left the British puzzled.

To honour his contribution to India’s freedom movement, the Republic of India issued a commemorative stamp on 23 April 1966. The Government of Bihar established the Veer Kunwar Singh University, Arrah in 1992.

In 2017, the Veer Kunwar Singh Setu, also known as the Arrah–Chhapra Bridge, was inaugurated to connect north and south Bihar. In 2018, to celebrate 160th anniversary of Kunwar Singh’s death, the government of Bihar relocated a statue of him to Hardinge Park. The park was also officially renamed as ‘Veer Kunwar Singh Azadi Park‘.

9. Government Order (GO) 111

Subject : Environment

Section :Pollution

Historical background:

On March 8, 1996, the government of erstwhile (undivided) Andhra Pradesh had issued ‘Government Order (GO) 111’ prohibiting development or construction works in the catchment area of the Osman Sagar and Himayat Sagar lakes up to a radius of 10 km.

The GO prohibited the setting up of industries, residential colonies, hotels, etc. which cause pollution. The total catchment area covers around 1.30 lakh acres, spread over 84 villages. The aim of the restrictions was to protect the catchment area, and to keep the reservoirs pollution-free. The lakes had been supplying water to Hyderabad for nearly 70 years, and were the main source of drinking water for the city at the time.

Himayat Sagar and Osman Sagar reservoirs:

The reservoirs were created by building dams on the Musi (also known as Moosa or Muchkunda) river, a major tributary of the Krishna, to protect Hyderabad from floods. The proposal to build the dams came after a major flood during the reign of the sixth nizam Mahbub Ali Khan (1869-1911) in 1908, in which more than 15,000 people were killed.

The lakes came into being during the reign of the last nizam Osman Ali Khan (1911-48). Osman Sagar was completed in 1921, and Himayat Sagar in 1927. The nizam’s guesthouse at Osman Sagar is now a heritage building.