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Current Affairs - 20 July 2015

Ahead of Parliament's Monsoon Session, BJP Plans Counterattack on Vyapam, Lalit Modi Issue
  • Ahead of Parliament's Monsoon Session, BJP Plans Counterattack on Vyapam, Lalit Modi IssueNEW DELHI:  Two days before  NEW DELHI:  Two days before Parliament's monsoon session begins, the BJP is holding a strategy session to counter the expected Congress line of offensive on Vyapam scam and the Lalit Modi controversy.

    The meeting, being held at Prime Minister Narendra Modi's residence, is being attended by senior leaders and ministers including Arun Jaitley, Sushma Swaraj, Amit Shah, Rajnath Singh and others. 

    With the Congress sounding increasingly belligerent, senior BJP leaders and Union ministers met this morning at the house of party chief Amit Shah. Ministers who had been targeted by the opposition over links with tainted cricket tycoon Lalit Modi - Rajasthan Chief Minister Vasundhara Raje and External Affairs minister Sushma Swaraj - also attended the session.

    Madhya Pradesh Chief Minister Shivraj Singh Chouhan, who was unable to reach Delhi in the morning on account of bad weather, is expected to meet Mr Shah later this evening.   

    On Monday, PM Modi is also expected to meet senior NDA constituents to present a united front in Parliament. At stake are several crucial legislations -- including the Goods and Services Tax bill and the land bill -- which have to be passed by the Upper House, Rajya Sabha, where the ruling NDA lacks majority.

    Party sources indicated that Sunday's meet is meant to ensure that the government and the party were on the same page. The Chief Ministers had been called in to strengthen the party's defence in terms of facts. The BJP, the sources said, is also planning to focus on the scams during successive Congress-led regimes.

    In the afternoon, senior Congress leader Ghulam Nabi Azad said, "Hope the Prime Minister starts Parliament by announcing the resignation of the scam accused... the minimum we want is the resignation of Rajasthan CM, Madhya Pradesh CM, Union ministers and MPs involved and ministers from Maharashtra."
    Mr Azad's party indicated that if the Prime Minister acts against "scam-tainted ministers" then the passage of bills would be made very easy.

President Pranab Mukherjee Greets Colombia on Independence
  • President Pranab Mukherjee Greets Colombia on Independence DayNEW DELHI:  President Pranab Mukherjee today greeted the government and people of Colombia on the eve of their Independence Day.

    In his message to his Colombian conterpart Juan Manuel Santos, President Mukherjee conveyed Independence Day greetings on behalf of the government, the people of India and on his own behalf.

    He said that India and Colombia enjoy warm and friendly relations which have been strengthened through enhanced bilateral trade and investments and people-to-people contacts. "I am confident that the momentum thus generated will continue to be further enhanced," said President Mukherjee.

    He also conveyed his best wishes for Santos's good health and personal well-being and "for the continued progress and prosperity of the friendly people of Colombia", said a Rashtrapati Bhavan statement.

17 Naxals Surrender in a Month in Gadchiroli
  • 17 Naxals Surrender in a Month in GadchiroliMUMBAI:  Seventeen Naxals, many of them hard core, surrendered before police in the last one month in Maharashtra's Naxal-hit Gadchiroli district, a senior police official said today.

    Of the 17, 13 hail from Kotmi-Kasansur, which has been one of the most difficult Naxal areas for the police for last many years.

    "We have opened a new police post at Kotmi in February and it has proved to be very effective," Gadchiroli Superintendent of Police Sandip Patil told PTI over phone.

    "The surrender operations may gather momentum after first week of August, post 'Shaheed Week' observed from July 28 to August 3," the senior officer said.

    Of the 17 naxals, nine carried a reward of over Rs. 30 lakh on their heads. Of them, Irpa Kujur was involved in 18 violent offences including encounters, blasts, murders and waylaying of a truck carrying explosions.

    During Mr Patil's tenure as district police chief, 37 Naxals surrendered in 2014, and 24 have done so this year so far.

    The new Naxal surrender policy also comes with substantial cash reward and has been propagated across the district as 'Kaun Banega Lakhpati' scheme through posters in affected areas.

    Gadchiroli Police also has a cell for publicity or counter propaganda and it organises peace rallies, has a constant dialogue with locals. Films, street plays and posters are also used to wean away people from joining Naxal movement.

India to Build 'Strategic Uranium Reserve' to Counter Shortage of Nuclear Fuel
  • India to Build 'Strategic Uranium Reserve' to Counter Shortage of Nuclear FuelNEW DELHI:  After a record production this year, India is working on creating a 'strategic uranium reserve' to ensure its atomic power reactors do not face shortage of the crucial nuclear fuel.

    "The reserve pool could be anywhere between 5000 MT to 15,000 MT which can last for 5-10 years," said a senior government official.

    A proposal for stocking 5000 MT of uranium has been sent to the Cabinet for approval but the cap is likely to increase in the coming years.

    Over the past one year, India has been pursuing its case to buy uranium from different countries including Australia and Canada. It is also procuring uranium from Russia for its indigenous reactors. During Prime Minister Narendra Modi's visit to Kazakhstan last week, India renewed a contract with the Central Asian country to procure 5000 MT of uranium.

    After Hyderabad another Nuclear Fuel Complex is coming up in Kota in Rajasthan, sources said.

    "For all these years, we could not think of having a reserve like other countries have due to the impending sanctions. But now we can think of working to build a reserve of nuclear fuel. We are mostly depending on the uranium from Australia. Once we start getting it, we can start building the reserve, said the official."

    He further added, "Uranium from Kazakhstan will largely meet the current demand. It is a rare commodity, so one should keep piling it whenever it is available at a cheaper rate in the international market."

    Under the Indo-US nuclear deal, the latter is to support India's initiative for having a nuclear pool. "The United States will support an Indian effort to develop a strategic reserve of nuclear fuel to guard against any disruption of supply over the lifetime of India's reactors," states the agreement.

    Indian reactors had been "under-performing" as they did not get enough fuel from the outside world prior to the historic Indo-US nuclear cooperation agreement due to sanctions. However, since its inception, India has started importing uranium from Russia, Uzbekistan, Kazakhstan and France.

    In a major milestone, India this year registered a record production of over 1,252 MT of uranium, manufacturing close to double the annual fuel requirement of atomic reactors in the country. The production has far exceeded the country's annual fuel requirement of 650 MT for the Pressurised Heavy Water Reactors (PHWRs), which means the country has surplus nuclear fuel that will last several months.

    Every 700 MW of reactor needs 125 MT of uranium every year. However, with the rising number of power reactors in the country, the demand is expected to rise. In the near future, two nuclear reactors of 700 MW each in Rajasthan Atomic Power Station (RAPS) and Kakrapar Atomic Power Station (KAPS) are coming up. Four atomic reactors of 700 MW each are also coming up at the Gorakhpur Haryana Anu Vidyut Pariyojana (GHAVP).

    Fuel for Kudankulam plant in Tamil Nadu and Jaitapur in Maharashtra, coming up in collaboration with Russia and France respectively, will be made available by the foreign players.

National Flags Made Out of Plastic to be Banned Soon
  • National Flags Made Out of Plastic to be Banned SoonNEW DELHI:  The government is set to issue an order banning the sale of national flags made of plastics, officials have said. The order comes after complaints of cheap plastic flags being found thrown away like garbage after events like Republic Day or Independence Day.
    "We will soon issue the order banning national flags made of plastic," a senior Home Ministry official said.
    In March, the Bombay High Court had asked Maharashtra government to come up with a comprehensive policy to ensure a ban on use, sale and purchase of national flags made of plastic.
    The Central government had also informed the court that a proposal to ban manufacture of national flags made of plastic was pending.
    "The government should come up with a comprehensive policy. Create public awareness. Like the national anthem and pledge are printed in school textbooks, a message about national flags can also be printed," the High Court had told the Maharashtra government.

For US Bribe, 2 Ex-Ministers Involved, Alleges Manohar Parrikar
  • For US Bribe, 2 Ex-Ministers Involved, Alleges Manohar Parrikar
    PANAJI:  Defence Minister Manohar Parrikar and Goa Chief Minister Laxmikant Parsekar today sought a CBI probe into the alleged bribery case involving a US firm to win a contract for a water development scheme in the state when the Congress government was in power.
    Mr Parrikar also alleged that two former ministers in the previous Congress-led Digambar Kamat government might be involved in the bribery case but did not name anyone.
    The reactions by the two BJP leaders came in the wake of a New Jersey-based construction management firm Louis Berger being charged with bribing Indian officials with several crores to win two major water developmental projects in Goa and Guwahati.

    The alleged bribery of $976,630 for a Goa project by Louis Berger included that to a minister, the details of which have not been disclosed by the US Department of Justice.

    Federal prosecutors, in their 11-page chargesheet, alleged that Louis Berger maintained a detailed diary and account of bribery made to Indian officials.
    "Since it is an international matter, Goa police can't investigate it. That is why the government has decided to write to Prime Minister and Union Home Minister demanding a CBI inquiry into it. Truth should be revealed to the people," Mr Parsekar told reporters.

    "When the contracts were awarded, Congress leader Digambar Kamat was the Chief Minister and Churchill Alemao was Public Works Department Minister. Now it should be revealed which minister took the bribe," Mr Parsekar said.
    Addressing BJP workers in Margao town, Mr Parrikar noted that the incident happened when Digambar Kamat-led government was in power.

    "Since the work was related to JICA (Japan International funding project), then PWD Minister might be involved, but moreover since it is dealing with the financial approval for the project, there is likelihood that one more minister may be involved," Mr Parrikar said without naming anyone.

    An inquiry by CBI into the entire episode will reveal the truth behind the bribery, he added.
    Two days back, Louis Berger agreed to pay $17.1 million criminal fine to resolve charges that it bribed officials in India, Indonesia, Vietnam and Kuwait to secure government construction management contracts.  

    Two of its former executives - Richard Hirsch (61) of Philippines and James McClung (59) of the UAE - pleaded guilty to the charges.

    The Indian government, assisted by Japanese government, initiated the five-year Goa Water Supply and Sewerage Project to expand, rehabilitate and build water and sewerage facilities.

    Louis Berger was part of a consortium for the project in Goa. The consortium included two Japanese firms and an Indian partner.

    The team developed a project management information system and plan, evaluated bids, reviewed design and construction plans, and ensured quality work was done on time and within budget, the company says on its website.

India, Russia to Jointly Build 200 Military Choppers
  • India, Russia to Jointly Build 200 Military ChoppersMOSCOW, RUSSIA:  In a move aimed at boosting India's defence sector, 200 helicopters will be manufactured in the country with Russian collaboration as part of intensification and diversification of their strategic ties.

    The agreement, reached recently, is one of the several new defence projects on which the two countries are working on, including under the ambit of 'Make in India' programme, Indian Ambassador to Russia PS Raghavan told PTI.

    He underlined that the decades-old defence cooperation with Russia remains vibrant despite India purchasing military equipment from other countries, like the recent decision to buy 36 Rafale fighter aircraft from France.

    "This (India-Russia ties) is a huge, broad based relationship, getting broader every day," he said.

    "Recently, we have agreed to joint manufacture of helicopters in India... Joint manufacture of 200 helicopters in India is big bang. If two countries decide to manufacture 200 helicopters in India with transfer of technology, and licence production, this is big bang," he said.

    He said this could possibly be the first defence project under 'Make in India' initiative.

    Mr Raghavan was responding when asked to comment on the perception that the defence relations between India and Russia are getting diluted as New Delhi has been looking at other countries for military purchases.

    Maintaining that India-Russia defence ties remain vibrant, he said, "people notice few things we do which are non-Russian... There are newer and newer products and newer and newer projects which don't get noticed and attention gets diverted to few things that we do outside Russia."

    He said a number of projects are under active discussions and "sooner or later, they will come out in the open." He, however, refused to give details about these, saying there can be no disclosure till the decisions are firmed up.

    While dismissing the perception that the vibrancy of India-Russia ties in defence sector are getting eroded, the Ambassador said, "some impressions get formed on the basis of inaccurate or incomplete information."

    Acknowledging that India is diversifying its defence purchases "as many countries do" to take advantage of opportunities, he said, "But our armed forces are 60-70 per cent dependent on Russian supplies. That is a reality that cannot change overnight."

    Quoting Prime Minister Narendra Modi, Mr Raghavan said Russia continues to remain India's primary defence supplier.

    "In fact, he (PM) has said that Russia has been and will remain primary defence supplier (of India)," he added.

Greece Prepares to Reopen Banks, Apply Tax Hikes
  • Greece Prepares to Reopen Banks, Apply Tax HikesATHENS:  Greece prepared today to restart its struggling economy with a revamped government, a bank reboot and a new round of tax hikes agreed after months of fraught confrontation with its creditors.

    Banks are set to reopen on Monday after a three-week shutdown estimated to have cost the economy some 3.0 billion euros ($3.3 billion) in market shortages and export disruption.

    Crisis-hit Greeks will also have to endure widespread price hikes with a broad batch of goods and services from sugar and cocoa to condoms and funerals now taxed at 23 percent, up from 13 per cent.

    The measures are part of a tough fiscal package Greece had to agree to last week to earn a three-year bailout from its international creditors and avoid crashing out of the eurozone.

    The austerity package caused a mutiny among lawmakers of the ruling radical Syriza party, forcing Prime Minister Alexis Tsipras to carry out a limited reshuffle on Friday.

    Even so, most analysts and even government officials say early elections are now inevitable, and are likely to be held in September.

    Tsipras who barely has time to eat or sleep, according to his mother faces a fresh challenge in parliament on Wednesday to approve a second wave of reforms tied to its economic rescue.

    The leftist government has agreed to raise taxes, overhaul its ailing pension system and commit to privatisations it had previously opposed, in exchange for a bailout of up to 86 billion euros ($94 billion) over the next three years.

    The draconian agreement accepted by a party that came to power in January promising to end austerity came after over 61 percent of Greeks on July 5 rejected further cuts in a referendum called by Tsipras himself.

    His critics accuse the prime minister of kowtowing to blackmail by Greece's creditors, who had threatened to expel the country from the euro.

    "The commission is prepared for everything.We have a Grexit scenario, prepared in detail," European Commission head Jean-Claude Juncker had warned on July 8.

    The Kathimerini newspaper on today said the "Grexit" plan, which also entailed Greece's expulsion from the Schengen Treaty, had been secretly prepared in less than a month by a 15-member European Commission team.

    French Finance Minister Michel Sapin on today insisted that the "real humiliation would have been for Greece to have been kicked out of the euro."

    "There was a real confidence problem now this confidence is being restored," Sapin told the To Vima weekly.

    The Greek crisis exposed a rift between the eurozone's top powers, Germany and France, on how far to apply austerity to meet fiscal goals.

    French President Francois Hollande on today called for the euro's governance to be "strengthened", calling for "the addition of a specific budget and a parliament to ensure democratic control".

    Commentators say the lack of centralised governance over national fiscal policies a jealously-guarded sovereignty area for member governments is a major flaw in the single European currency.

    Greece is also scheduled Monday to repay 4.2 billion euros to the European Central Bank (ECB).

    For this purpose, the EU on Friday approved a short-term loan of 7.16 billion euros, which will also enable Athens to repay debts to the International Monetary Fund outstanding since June.

Union Budget In The Making

  • The budget process in India, like in most other countries, comprises of
    Four Phases
    1) Budget Formulation– Preparation of estimates of expenditure and receipts for the ensuing financial year;
    2) Budget Enactment– Approval of the proposed Budget by the Legislature through the enactment of Finance Bill and Appropriation Bill;
    3)Budget Execution– Enforcement of the provisions in the Finance Act and Appropriation Act by the government—collection of receipts and making disbursements for various services as approved by the Legislature;
    4) Legislative Review of Budget Implementation– Audits of government’s financial operations on behalf of the Legislature.
    Drafting commences in August- September
    By convention, the Union Budget for next financial year is presented in Lok Sabha by the Finance Minister on the last working day of February. However, the process of budget formulation starts in the last week of August or the first fortnight of September. To get the process started, the Budget Division in the Department of Economic Affairsunder the Ministry of Finance issues the annual budget circular to all the Union government ministries/departments around August- September. The Circular contains detailed instructions for these ministries/ departments on the form and content of the statement of budget estimates to be prepared by them.
    Three kinds of figures in a Budget
    The ministries are required to provide three different kinds of figures relating to their expenditures and receipts during this process of budget preparation.
    These are:
    • Budget Estimates (BE)
    • Revised Estimates (RE)
    • Actual
    Let’s have a look on the whole mechanism in the context of Union budget 2015-16, which was presented, as usual, on 28th of February 2015 by the Finance Minister, ARUN JAITELY within the arena of LokSabha. However, the process of its formulation would have got started in August 2014 through issuance of Budget Circular of the Budget Division and this process would have continued till February 2015.
    The approval of Parliament is sought for the estimated receipts/expenditures for 2015-16, which would be called Budget Estimates (BE).
    At the same time, the Union government, in its budget for 2015-16, would also present Revised Estimates (RE) for the ongoing financial year 2014-15.
    The government would not seek approval from Parliament of revised estimates of 2014-15; but, these revised estimates allow the government to reallocateits funds among various ministries based on theimplementation of the budget for 2014-15 during the first six months of financial year 2014-15.
    Finally, ministries also report their Actual receipts and Expendituresfor the previous financial year 2013-14.
    Hence, the Union budget for 2013-14 consists of——
    • Budget Estimates for 2015-16
    • Revised estimates for 2014-15
    • Actual Expenditures and Receipts of 2013-14.
    Role of Planning Commission– NOW — NITI AAYOG
    The ministries would provide budget estimates for plan expenditure for budget estimates for the next financialyear, only after they have discussed their respective plan schemes with the NITI AAYOG.
    The Nitiaayog  depends on the Finance Ministry to first arrive at the size of the Gross BudgetarySupport, which would be provided in the budget for the next annual plan of the Union government.
    • Inprinciple, the size of each annual plan should be derived from the approved size of the overall Five-YearPlan (12th Five-Year Plan, 2012-13 to 2016-17, in the present instance).
    • However, the size ofthe gross budgetary support for an annual plan also depends on the expected availability of funds with thefinance ministry for the next financial year.
    Reducing Deficit is on Priority
    In the past few years, the Finance Ministry has been vociferously arguing for reduction of Fiscal Deficit and Revenue Deficit of the Union government, citing the targets set by the Fiscal Responsibility and Budget Management Act and its rules.
    Hence, presently, the aspirations of the Planning Commission and Uniongovernment ministries with regard to spending face the legal hurdle of this Act, which has made it mandatoryfor the Union government to show—-
    • Revenue deficit as Nil (total Revenue Expenditure not exceeding totalRevenue Receipts by even a single rupee);
    • Fiscal deficit as less than 3 per cent of GDP by 2016-17.This meansnew borrowing of the government in a financial year cannot exceed 3 per cent of the country’s GDP forthat year.
    Final stages of Budget Formation
    During the final stage of budget formation, the revenue-earning ministries of the Union government providethe estimates for their revenue receipts in the current fiscal year (Revised Estimates) and next fiscal year(Budget Estimates) to the Finance Ministry.
    Subsequently, usually in the month of January, more attentionis paid to finalisation of the estimated receipts. With an idea about the total requirement of resources tomeet expenditures in the next fiscal year, the finance ministry focuses on the revenue receipts for the nextfiscal.
    At this stage of budget preparation, the Finance Minister examines the Budget Proposals prepared by theministry and makes subsequent changes in them, if required. The Finance Minister consults the Prime Minister, and alsobriefs the Union Cabinet, about the Budget at this stage. If there is any conflict between any ministry and theFinance Ministry with regard to the budget, the matter is supposed to be resolved by the Cabinet.
    Consultations with various stakeholders is crucial
    In the run-up to Union Budget each year, the Finance Minister holds Pre-Budget Consultations with relevantstakeholders. The Finance Minister also holds consultations with Finance Ministers of States/Union Territories as wellas Trade and Industry representatives. This has great significance for the process of Budget formulation asit helps the Finance Minister takes decisions on suitable fiscal policy changes to be announced during the budget.
    For this year’s budget, representatives from the agriculture sector, various trade unions, economists, bankingand financial institutions and also social sector groups participated in these consultations in January 2015.
    Among others, a delegation of People’s Budget Initiative also met Finance Ministry officials and shared the People’s Charter of Demands in the month of January 2015. But this year too, like in previous years, theprocess started late. Desired changes in expenditure programmes and policies can be influenced only if theconsultations are begun earlier, preferably in October.
    Consolidation of Budget data
    At the final step, the Budget Division in the Finance Ministry consolidates all figures to be presented in thebudget and prepares the final budget documents. The National Informatics Centre (NIC) helps the budget division in the process of consolidation of the budget data, which has been fully computerised. At the endof this process, the Finance Minister takes the permission of the President of India for presenting the UnionBudget to Parliament.
    It would be useful to point out that while the second and the third stage in the budget cycle of our countryare reasonably transparent, the First stage of actual budget preparation cannot be said to be open. The processis rather carried out behind closed channels.
    Understanding the Budget: Concept And Terminologies
    Union Budget is a comprehensive statement of government finances relating to a particular financial year.
    Every Budget broadly consists of two parts-
    • (a) Expenditure Budget;
    • (b) Receipts Budget;
    Expenditure Budget
    • The amounts of intended expenditure by the Government in the next financial year are expressed in the Expenditure Budget.
    The entire Expenditure Budget can be divided into two distinct categories, viz.
    (a) Capital Expenditure:
    • Those expenditures by the government that lead to anIncrease in the assets or a Reduction in the liabilities of the government. It is however not necessary that the assets created should be productive or they should even be revenue generating. Only the charges towards the construction of the asset are counted as Capital expenditure.
    • The subsequent charges for its maintenance are considered as Revenue expenditure.
    • Most capital expenditure is Non Recurring.
    Examples of Capital Expenditure causing ‘Increase in Assets’:
    • Construction of a new Flyover;
    • Union Govt. giving a Loan to a State Govt.
    Examples of Capital Expenditure causing ‘Reduction of a Liability’:
    • Union Govt. repays the principal amountof a loan it had taken in thepast.
    (b) Revenue Expenditure:
    • Those expenditures by the government that do not affect its asset-liability position.
    • Most kinds of revenue expenditures are seen as Recurring Expenditures.
    • Theentire amount of Grants given by the Union Government to States is reported in theUnion Budget as Revenue Expenditure, even though a part of those Grants getutilized by States for buildingSchools, Hospitals etc. Thisis so because the ownershipof the schools or hospitals built from the Central grantswould not be with the UnionGovernment.
    Examples of Revenue Expenditure are:
    • Expenditure on Food Subsidy;
    • Salary of staff;
    • Procurement of medicines;
    • Procurement of text books;
    • Payment ofinterest, etc.
    Total government expenditure can also be divided into another set of categories, viz.
    (A) Plan Expenditure:
    • Plan expenditure refers to government expenditure, which is meant for financing  the programmes/schemes formulated under the ongoing/ previous five year Plan.
    (B) Non-Plan Expenditure:
    • Those Expenditures of the government, which are not included under the PlanExpenditure are called as Non Plan Expenditure.
    • It includessome of the important types ofgovernment expenditure, like:
    interest payments; pension, defence expenditure, disbursement on law and order, disbursement on legislature, subsidies, and salary of regular cadre teachers, doctors and other government officials.
    The Receipts Budget
    It presents the information on how much the Government intends to collect asits financial resources for meeting its expenditure requirements and from which sources, in the next fiscal year.
    This can also be dividedinto two categories:
    (a) Capital Receipts:
    • Those receipts that lead to a reduction in the assets or an increase in the liabilities of the government.
    Capital Receipts that lead to a ‘reduction in assets’:
    • Recoveries of Loans given by the government and Earnings from Disinvestment;
    Capital Receipts that lead toan ‘increase in liabilities’:
    1.REVENUE RECIPTS — contribute 84% as per highest priority–
    1. corporate tax
    2. personal IT
    3. service
    4. excise wealth
    5. customers tax etc
    b.non tax –income– contibutes –16%
    1. PSU profits
    2. grants
    3. loans
    4. fees & fines
    • WAGES
    • SOCIAL SERVICE(education ,helath , sanitation)
    2. return loans
    3. provident funds
    4. disinvestments
    2.debt payments loans
    4.development expenditure
    note always ___ CR >> CE
    (b) Revenue Receipts:
    • Thosereceipts that don’t affect theasset-liability position of the government.
    • RevenueReceipts comprise proceeds of Taxes (like, Income Tax, Corporation Tax, Customs, Excise, Service Tax, etc.)
    • Non-tax revenue of the government (like, Interest receipts, Fees/ User Charges, and Dividend & Profits from PSUs).
    Government Revenue through Taxation:
    • It can be divided into Direct Taxes and Indirect Taxes.
    Direct Taxes:
    • Those taxes forwhich the tax-burden cannot beshifted are called Direct Taxes.
    Examples of Direct Taxes are:
    (A)Corporation Tax:
    • This is a tax levied on the income of registered companies in thecountry, whether national or foreign, under the Income Tax Act, 1961.
    (B) Personal Income tax:
    • This is a tax on the income of individuals, firms etc. Other than Companies, under theIncome Tax Act, 1961. This head also includes other Taxes, mainly the ‘SecuritiesTransaction Tax’, which is levied on transaction in listed securities undertaken on stock exchanges and in units of mutual funds.
    (C) Wealth Tax- This is a tax leviedon the benefits derived fromthe ownership of property,
    under the Wealth Tax Act,1957. Wealth tax has virtuallybeen abolished in India.
    Indirect Taxes:
    • Those taxes for which the tax-burden can be shifted are called Indirect Taxes. Any person, who directly pays this kind of a tax to the Government, need not bear the burden of that particular tax; he/she can ultimately shift the tax burden to other persons laterthrough business transactions of goods/ services.
    • Indirect tax on any good or service affects the rich and the poor alike!
    • Unlike indirect taxes, direct taxes are linked to the tax-payee’s ability to pay and hence are considered to be progressive.
    Examples of Indirect Taxes are:
    • Customs Duties: In this,the taxable component isimport into or export from thecountry.
    • Excise Duties: It is a typeof tax levied on those goods,which are manufactured in the country and are meant for domestic consumption. It is a tax on manufacturing, which is paid by the manufacturer, but he passes this burden on to the consumers.
    • Sales Tax: It is levied onthe sale of a commodity,which is produced/importand being sold for the first time. If the product is soldsubsequently without beingprocessed further, it is exempt from sales tax.
    Before theintroduction of VAT (Value Added Tax), salestax used to be levied under the authority of both CentralLegislation (Central SalesTax) and State Government’s Legislation (Sales Tax).
    • Service Tax: It is a tax leviedon services provided by aperson and the responsibilityof payment of the tax iscast on the service provider.However this tax can berecovered by the serviceprovider from the servicereceiver in course of his/herbusiness transactions.
    • Value Added Tax (VAT): VATis a multi-stage tax, intendedto tax every stage of sale ofa good where some valuehas been added to the rawmaterials; but taxpayers doreceive credit for tax alreadypaid on the raw materials inearlier stages.
    Debt and Deficit:
    • Debt is a kind of receipt that necessarily leads to an increase of the government’s liabilities.
    • The government incurs a Debt only for meeting the gap created by excess of its expenditure over its receipts for that year, which is called Deficit.
    Fiscal Deficit:
    • It is the gap between thegovernment’s total Expenditure(including loans net of repayments)and its Total Receipts (excludingnew debt to be taken). Thus FiscalDeficit for a year indicates the borrowing to be made by thegovernment that year.
    Revenue Deficit:
    • The gap between Total RevenueExpenditure of the Governmentand its Total Revenue Receipts iscalled the Revenue Deficit.
    Distribution of financial resources between the Centre and the States:
    • A Finance Commission is setup every five years to recommend measures for sharing of resources between the Centre and the States, mainly pertaining to the Tax Revenue collected by the Central Government.
    • Presently the recommendations made by the 14th Finance Commission are in effect (from 2014-14 to 2019-2020), whereby 42 percent of the shareable/divisible pool of Central tax revenue is transferred to States every year and the Centre retains the remaining amount for the Union Budget.
    Tax-GDP Ratio:
    • Gross Domestic Product (GDP) is an indicator of the size of a country’s economy. In order to assess the extent of government’s policy interventions in the economy, some of the important fiscal parameters, like, total expenditure by the government, tax revenue, deficit etc. are expressed as a proportion of the GDP.
    • Accordingly, a country’s Tax to GDP ratio helps us understand how much tax revenue is being collected by the government as compared to the overall size of the economy.
    • A higher tax to GDP ratio in a country is a positive sign meaning that the government is collecting a decent amount of tax revenue as compared to the size of its economy.

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