Editorials/Opinions Analyses for UPSC – 21 May 2021

Contents

1. Avoiding breakdown: On GST council meeting
2. The outdated nature of bureaucracy

Avoiding breakdown: On GST council meeting

Context:

After a gap of over seven months, the GST Council will meet in May 2021 as announced by the Union Finance Minister. The GST Council has taken possibly the longest pause in its functioning and since it is expected to meet every quarter, this does not set a good precedent.

Relevance:

GS-II: Polity and Governance (Constitutional Bodies, Government Interventions for Transparency and Accountability in governance)

Dimensions of the Article:

What is GST?

GST Council

Matters on which GST Council makes recommendations

Issues with GST Council through the Pandemic

What is GST?

GST is a destination-based indirect tax and is levied at the final consumption point. Under it, the final consumer of the goods and services bear the tax charged in the supply chain. GST is a transparent and fair system that prevents black money and corruption and promotes new governance culture.

GST Act

• Goods and Services Tax (GST) Act came into effect in 2017.
• Goods and Services Tax (GST) was introduced by the Government of India to boost the economic growth of India. GST is considered to be the biggest taxation reform in the history of the Indian economy.
• The power to make any changes in the GST law is in the hands of the GST Council. GST Council is headed by the Finance Minister. One hundred and first amendment act, 2016 introduced the GST in India in July 2017.

GST Council

• Goods & Services Tax Council is a constitutional body for making recommendations to the Union and State Government on issues related to Goods and Service Tax.
• As per Article 279A (1) of the amended Constitution, the GST Council has to be constituted by the President within 60 days of the commencement of Article 279A.
• The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2016, for the introduction of Goods and Services Tax in the country was introduced in the Parliament and passed by Rajya Sabha on 3rd August 2016 and by Lok Sabha on 8th August 2016.
• GST Council is an apex member committee to modify, reconcile or procure any law or regulation based on the context of goods and services tax in India.
• The GST council is responsible for any revision or enactment of rule or any rate changes of the goods and services in India.
• The council contains the following members:
  1. Union Finance Minister (as chairperson)
  2. Union Minister of States in charge of revenue or finance (as members)
  3. The ministers of states in charge of finance or taxation or other ministers as nominated by each state’s government (as members).

Matters on which GST Council makes recommendations

• Taxes, cesses, and surcharges levied by the Centre, States and local bodies which may be subsumed in the GST;
• Goods and services which may be subjected to or exempted from GST;
• Model GST laws, principles of levy, apportionment of IGST and principles that govern the place of supply;
• Threshold limit of turnover below which goods and services may be exempted from GST;
• Rates including floor rates with bands of GST;
• Special rates to raise additional resources during any natural calamity;
• Special provision with respect to Arunachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
• Any other matter relating to the goods and services tax, as the Council may decide.

Issues with GST Council through the Pandemic

Delay in meeting

• According to the Procedure and Conduct of Business Regulations of the GST council, the council shall meet at least once in every quarter of the financial year. But the gap between the 42nd and 43rd meeting of the council is over 7 months.

Refusing Demands from states to drop GST on COVID supplies

• States are demanding to drop the 12% tax on oxygen concentrators & 5% on vaccines that are being levied. The Centre is refusing this.
• The Centre’s argument for not dropping GST is that if full exemption from GST is given, vaccine manufacturers would not be able to offset their input taxes and would pass them on to the end consumer/ citizen by increasing the price.
• According to the Centre, a 5% GST rate ensures that the manufacturer can utilise ITC (input tax credit) and claim a refund. Hence, an exemption to the vaccines from GST would be counterproductive without benefiting the consumer
• However, experts argue that Zero-rating (instead of exemption) makes the entire value chain of the supply exempt from tax. Not only is the output exempt from tax, but there is also no bar on availing credit of taxes paid on the input side for providing the output supply

Revenue Shortfall and GST compensation

• States are seeking higher compensation fearing revenue shortfall due to COVID 2nd wave.
• In the last meeting of the GST Council, the compensation formula was the main topic of discussion and it created strains in the centre-state fiscal relations. Later Centre borrowed around ₹1.1 lakh crore and passed it as a back-to-back loan to States for GST Compensation shortfall.
• In the 43rd meeting on May 2021, the council should arrive at a proper formula to share GST compensation (keeping in view of the revenue shortfall due to the 2nd wave of Covid-19) to avoid any further strains in the centre-state fiscal relations.

Dispute Resolution Mechanism

• The Constitution says GST Council can set up a mechanism to adjudicate any dispute between the Centre and states or between states on issues arising from the Council’s decisions. Such an adjudication/dispute resolution mechanism is yet to be set up.
• A dispute resolution mechanism can help to solve the differences between centre & states and strengthens fiscal federalism.

-Source: The Hindu

The outdated nature of bureaucracy

Context:

Despite its efforts, bureaucracy has emerged as a major concern for the ineffective response to the COVID-19 crisis.

In the 21st century, democratic countries are still relying on traditional bureaucracies to perform public policy formulation and implementation roles.

Relevance:

GS-II: Polity and Governance (Role of Civil Services in a Democracy, Government Interventions for Transparency and Accountability in governance)

Mains Questions:

Can it be said that the traditional bureaucracy in India is obsolete in present day public services? Critically examine the Weberian model of bureaucracy. (15 Marks)

Dimensions of the Article:

1. History of the Civil Services in India
2. Weberian bureaucracy
3. Issues with Weberian bureaucracy
4. Limitations of outright privatization
5. Way Forward: Collaborative governance

History of the Civil Services in India

• According to Kautilya’s Arthasastra – The higher bureaucracy consisted of the mantrins and the amatyas. While the mantrins were the highest advisors to the King, the amatyas were the civil servants. The Arthasastra stipulates seven basic elements – Swamin (the ruler), Amatya (the bureaucracy), Janapada (territory), Durga (the fortified capital), Kosa (the treasury), Danda (the army), and Mitra (the ally) – of the administrative apparatus.
• During Mughal era, the bureaucracy was primarily based on the mansabdari system, which was essentially a pool of civil servants available for civil or military deployment.
• The big changes in the civil services in British India came with the implementation of Macaulay’s Report 1835 during the British rule which recommended that only the best and brightest would do for the Indian Civil Service, so as to serve the interest of British empire.
• After independence Indian civil services system retained the elements of the British structure like a unified administrative system such as an open-entry system based on academic achievements, permanency of tenure.

Weberian bureaucracy

• Traditional bureaucracy is still stuck with the leadership of position over leadership of function.
• Leadership of function is when a person has expert knowledge of a particular responsibility in a particular situation. The role of the leader is to explain the situation instead of issuing orders.
• Weberian bureaucracy prefers leadership based on position.

Extras: Follett’s Three types of Leadership

1. Leadership of Position: is almost an automatic means of becoming a leader, position can provide power, with which the leader can produce results. Power may be official (the Mikado, an emperor) or delegated (Poo-Bah, a bureaucrat).
2. Leadership of Function: sets people apart by some performing activities which distinguish them from others. Police, judges, magistrates, barristers and solicitors perform justice functions, doctors and others function in the medical profession.
3. Leadership of Personality: can provide backing for a leader, particularly if the leader has the extreme form of personality, we term charisma, taken up for general use to explain why and how some people seem to be set apart from the mob by those around experiencing a near-divine attraction to the leader.

Issues with Weberian bureaucracy

Generalists over Specialists

• A generalist officer (IAS and State civil service officials) is deemed an expert and as a result, superior, even though the officer can be (and is often) shifted between different departments or ministries reducing experience.
• Specialists in every government department have to remain subordinate to the generalist officers. The COVID-19 pandemic has exposed this weakness. Healthcare professionals who are specialists have been made to work under generalist officers and the policy options have been left to the generalists when they should be in the hands of the specialists.

Leadership of Function

• Since Weberian Bureaucracy is stuck with “Leadership of Position” wherein a large amount of power is granted to the leader based on their title alone rather than experience/knowledge – this acts as a major limitation for decentralized governance which is more effective.
• This has resulted in a situation where the bureaucracy has become an end in itself rather than a means to an end, which is, improved governance and socio-economic development of the society.

Rigid Adherence to Rules

• The rigid adherence to rules in the traditional bureaucratic structure has been an area of major concern.
• The strict adherence to process and rules has resulted in COVID-19 aid getting stuck in cumbersome clearance processes even during the pandemic.
• The rigid emphasis on the following of rules and regulations and the fear of official sanctions have resulted in the rejection of innovation from public officials.

Limitations of outright privatization

• In the light of the lacunae in the existent bureaucratic structure, there have been growing calls for a new public management in India, which promotes privatisation and managerial techniques of the private sector as an effective tool to seek improvements in public service delivery and governance.
• However, it should be noted that outright privatization may not be a viable solution in India where there is social inequality and regional variations in development.
• The private sector is driven by the motive of profits and hence would cater only to people and areas where their operations are financially viable. They would not be able to serve the poor due to his/her inability to pay for the private sector’s work.
• Such an approach renders the state as a mere bystander among the multiple market players with accountability being constantly shifted, especially during a crisis. The COVID-19 crisis has shown that the private sector has failed in public service delivery.

Way Forward: Collaborative governance

• The most appropriate administrative reform to ensure more effective public governance is aiming for collaborative governance in which the public sector, private players and civil society, especially public service organisations (NGOs), work together for effective public service delivery.
• Such a system would ensure that there is no domination of public bureaucracy in policy formulation and implementation. This can help change the behaviour of bureaucracy towards governance and also help initiate public service reforms – relook at the generalist versus specialist debate, openness to reforms such as lateral entry and collaboration with a network of social actors.
• In such a system the existing network of social actors and private players would take responsibility in various aspects of governance with public bureaucracy coordinating the efforts. Such a structure would allow the institutionalization of the critical role being played by civil society. This will help in scaling the impact of effective civil societies.
• The collaboration of public bureaucracy with the private and social society has had a profound impact on public service delivery as seen in Green Revolution (M.S. Swaminathan), the White Revolution (Verghese Kurien), Aadhaar-enabled services (Nandan Nilekani) and the IT revolution (Sam Pitroda).

-Source: The Hindu