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470 Airbus, Boeing Planes for Air India

Context

• Tata Group-owned Air India (AI) placed two mega orders, adding up to a staggering 470 aircraft — for 250 planes with Europe’s Airbus consortium, and 220 with Boeing Co. of the United States.
• This is the largest order placed by an airline in one go anywhere in the world, beating the 2011 order by American Airlines for a combined 460 aircraft. The biggest order by an Indian carrier before this was IndiGo’s 300-aircraft order in 2019.
• In this context, this edition of the Burning Issue will elaborate on the deal and its impact on the Indian aviation sector. The topic will be relevant for the GS3 Mains Paper under the subheading Infrastructure development and Airports.

Details of the Air India order

• The deal includes seventy of the 470 aircraft wide-body or twin-aisle planes for long-haul flights.
• Airbus has got the bigger order, but the Boeing order includes an option for a 70-plane top-up, taking the possible order size to 540 aircraft.
• The mega order cost for Airbus and Boeing aircraft is estimated between $70 billion and $80 billion.
• Ever since Air India returned to the Tata Group, the new owners have been focussed on sprucing up the product offering, while also planning an extensive expansion for the airline.
• A five-year roadmap–Vihaan.AI–was prepared with the objective of substantially growing the airline’s network and fleet in a bid to put it on a “path to sustained growth, profitability, and market leadership”.

About Indian Aviation Industry

• One of the fastest-growing: The Indian aviation industry is one of the fastest-growing aviation markets in the world.
• Undergone a significant transformation: Over the last decade, it has undergone a significant transformation, with the rise of low-cost carriers, increased competition, and modernization of airport infrastructure.
• Growth: The Indian aviation industry has been growing at a rapid pace in recent years. According to the International Air Transport Association (IATA), India is expected to become the third-largest aviation market by 2025.
• Domestic and International Market: The Indian aviation industry has a mix of domestic and international airlines. The domestic market is dominated by low-cost carriers such as IndiGo, SpiceJet, and GoAir, while the international market is dominated by full-service carriers such as Air India and Jet Airways.
• Government Support: The Indian government has been supportive of the aviation industry’s growth and has introduced several initiatives to encourage investment and development in the sector. These include the Regional Connectivity Scheme (RCS) called UDAN, which aims to improve connectivity to remote and underserved regions in the country.
• Infrastructure Development: In recent years, there has been significant investment in airport infrastructure in India. The country has over 100 operational airports, and several new airports are under construction or in the planning stages.
• Skilled Workforce: The Indian aviation industry has a skilled and well-trained workforce, with several world-class aviation training institutions. Indian pilots and cabin crew are in high demand globally.

What is driving Indian Aviation Sector Growth?

• Already third largest domestic market: India is the third largest domestic aviation market after China and the US. The annual domestic air traffic in pre-covid 2019 for India stood at 144 mn passengers.
• Income growth and demographic dividend: Increasing income levels, an aspirational middle class, competition between low-cost carriers and enhanced connectivity and infrastructure.
• Potential to become the 3^rd largest international market: The government and the industry say India could become the third largest international — not just domestic — aviation market given the huge gap between potential and current air travel penetration.

How will Indian aviation shape up?

• A major shift could happen in the market: So far, IndiGo’s been the largest player with strong promoter support but there are visible signs of competition from Air India and Akasa Air. Indian airlines will eye a greater share of outbound international traffic from the current level of around 45%.
• While Air India is expected to cross foreign carriers in flights to US and Europe, IndiGo is eyeing Europe and East Asia by 2024. The government has asked airlines and airports to work towards multiple international hubs in India.
• According to IBEF, India is poised to improve its position from the 7^th largest in civil aviation to the third largest in the next 10 years. Given India’s demography and increasing purchasing power, domestic air traffic will certainly move higher.

Significance of the deal

• Aspirational Air India: It has put Air India in the league of “aspiring” global airlines. The debt-ridden carrier, which was taken over by the Tata Group in early 2022, plans to turn into “a world-class proposition”. Experts say the bulk order indicates Air India’s intent to reclaim its “pole position” in the domestic aviation market, as well as expand its presence in international routes, BBC reported.
• Reduce Dependence on Foreign Flyers: the large fleet that will be acquired by Air India will help in reducing the dependence of Indian flyers on foreign carriers such as Emirates, Qatar Airways, Etihad and other Middle Eastern airlines. These orders directly synergize Air India’s fleet with Lufthansa and Singapore Airlines – all part of Star Alliance, the world’s largest global airline alliance,
• Help enter markets like the US: The purchase of wide-bodied aircraft like the A350s will allow Air India to enter markets like the US and Australia directly by offering non-stop flights from India to these places.
• Cater to the need of Indian aviation: Air India’s new fleet will help in catering to the needs of India’s growing aviation market. Demand for air travel is again seeing a surge in India and other parts of Asia after the COVID-19 pandemic. As per ICRA, with 986 lakh flyers, domestic air traffic increased 63 per cent year-on-year between April and December 2022 in India.
• May give a boost to Make in India and employment: The deal can also create jobs for Indians. The Tata group chairman has hinted that some of the aircraft parts could be manufactured in India, which will boost domestic manufacturing and create job opportunities.
• Improves India’s global Standing: the deal is “important for the industry because, given the recent turbulence in the China market, the alternative growth market in India,”
• Political signals: “India is also sending a strong political signal that it wants to remain attached to the West at a time when it has appeared ambiguous on Russian sanctions,”

Impacts on bilateral relations

• India-France: At a virtual event attended by the Tata Sons chairman and French president Emmanuel Macron said that the Air India deal reflects deepening ties between India and France, as well as the successes and aspirations of India’s civil aviation sector. This achievement shows that Airbus and all its French partners are fully dedicated to developing new areas of dedication with India.
• India-US: The Indian prime minister and US President Biden acknowledged the Air India and Boeing deal as a “shining example of mutually beneficial cooperation”. The two leaders also expressed a desire to bolster bilateral cooperation in space, semi-conductors, supply chains and defense co-production.
• India-UK: British prime minister Rishi Sunak also said the Airbus-Air India deal would generate employment opportunities around the UK. This is one of the biggest export deals to India in decades and a huge win for the UK’s aerospace sector.

Challenges

• Funding: When the Tatas took over the company, they had absorbed around Rs.15,300 crores of the total debt of Rs. 61,562 crore belonging to the bleeding air carrier. Thus, it will be challenging for AI toraise a loan of US $50-60 billion to fund the deal.
• Mere customer: if the Make-in-India clause is not added to the deal’s final agreement, India could end up being a ‘mere customer’ of goods with the least direct benefit to the Indian economy.
• Operating costs are high: The Indian aviation industry has many difficulties, including high operating costs. This is caused by a multitude of things, including exorbitant fuel costs, airport fees, and taxes. If all these continued, the profit from these new aircraft will remain low.
• Infrastructure Barriers: The Indian aviation industry is further hampered by outdated air traffic control systems, insufficient ground support services, and restricted airport capacity.
• Regulatory Framework: The regulatory framework is a source of difficulties for the Indian aviation industry.

Conclusion

• Overall, the Indian aviation industry has come a long way in recent years and is poised for further growth in the future. There will be a shakeout in India’s aviation sector, with the ‘Maharajah’ once more ascending the throne to reign supreme over India’s skies.
• With a large jump in international air carriers from India, the deal promises to make India an international hub for air travel. The government’s support, investments in infrastructure, and skilled workforce will be critical to ensuring the industry’s success in the years ahead.

Blue Food 

Context

A new study suggests that blue food sourced from aquatic environments can help reduce nutritional deficiencies and contribute to employment and export revenue in India.

What is Blue Food?

• About:
  • Blue food is food derived from aquatic animals, plants or algae that are caught or cultivated in freshwater and marine environments.
• Significance:
  • Key Source of Nutrient:
    • Blue foods are important for the economies, livelihoods, nutritional security, and cultures of people in many countries.
    • They supply protein to over 3.2 billion people, are a key source of nutrients in many coastal, rural and indigenous communities, and support the livelihoods of over 800 million people, the majority of whom work in small-scale systems.
  • Low Emission and Tackle Deficiencies:
    • They generate lower emissions compared to terrestrial meat.
    • Aquatic foods can also be used to address B12 and omega-3 deficiencies in India.
      • Over 91% of countries with vitamin B12 deficiencies also show high levels of omega-3 deficiency
  • Reduce Cardiovascular Diseases:
    • Promoting blue foods over red meat overconsumption could address health and environmental concerns for about 82% of the 22 countries suffering from a high cardiovascular disease risk.
  • Revenue Potential for Global South:
    • Blue foods can help improve nutrition, livelihoods or national revenue for the global south and indigenous communities in the global north.
• Issues Associated with Blue Food:
  • Bycatch: This refers to the accidental capture of non-target species in fishing nets, which can lead to the death of these animals.
  • Pollution: The presence of pollutants such as heavy metals, PCBs and microplastics in the ocean can affect the quality and safety of seafood.
  • Mislabeling and Fraud: There have been instances of mislabeling of seafood products, where a cheaper fish is sold as a more expensive one.
    • This can lead to consumer deception and potential health risks.
  • Overexploitation: Almost 90% of global marine fish stocks are now fully exploited or overfished according to the World Bank, which is an issue with overfishing, illegal fishing, and other unsustainable aquatic food production.

Way Forward

• Increasing Awareness: Governments, NGOs, and the private sector should work together to increase awareness about the benefits of blue food and its potential to address malnutrition, poverty, and environmental degradation.
• Promoting Sustainable Fishing Practices: Fishing practices that are unsustainable, such as overfishing, destructive fishing methods, and bycatch, need to be addressed to ensure that fish stocks are not depleted and the marine ecosystem is protected.
• Encouraging Aquaculture: Aquaculture can be a sustainable way of producing blue food if it is done in an environmentally responsible manner.
  • Governments can promote the development of sustainable aquaculture practices by providing technical assistance, training, and incentives.

Sagar Parikrama

Context

• Union Minister Parshottam Rupala launched the sixth phase of ‘Sagar Parikrama' in Andaman and Nicobar Islands.

About Sagar Parikrama

• Sagar Parikrama' is an initiative taken by the central government to conduct a voyage across all coastal states and union territories to support fishermen, traders and other stakeholders related to the sector.

Aim

• The interaction programs being organized during the ‘Sagar Parikrama’ aims to resolve the issues of the fishers and other stakeholders and to facilitate their economic upliftment through various fisheries schemes and programs being implemented by the Government of India.
• Such programs include ‘Pradhan Mantri Matsya Sampada Yojana’ (PMMSY), ‘Fisheries and Aquaculture Infrastructure Development Fund’ (FIDF), extension of Kisan Credit Card (KCC) to fishers and fish farmers.
• In addition to the schemes and programs of fisheries sector, the ‘Sagar Parikrama’ program envisages creation of awareness on various other schemes and programs of the Government of India.

Objectives of the Mission

The main objectives of ‘Sagar Parikrama’ are:

• to facilitate interaction with fishermen, coastal communities and stakeholders so as to disseminate information of various fisheries related schemes and programs being implemented by the Government;
• demonstrating solidarity with all fisher folk, fish farmers and concerned stakeholder as a spirit of Aatmanirbhar Bharat;
• to promote responsible fisheries with focus on sustainable balance between the utilization of marine fisheries resources for food security of nation and livelihoods of coastal fisher communities and
• protection of marine ecosystems.

Its main objective is to address the concerns of fishermen and facilitate their economic development by implementing various schemes of fisheries like Pradhan Mantri Matsya Sampada Yojana (PMMSY).

Areas of Focus

• Sagar Parikrama shall focus on the
  • sustainable balance between the utilization of marine fisheries resources for the food security of the nation,
  • livelihoods of coastal fisher communities and the protection of marine ecosystems to bridge the gaps of fisher communities and their expectations,
  • development of fishing villages,
  • upgradation and creation of infrastructure such as fishing harbors & landing centers to ensure sustainable and responsible development through an ecosystem approach.

Significance

• "Sagar Parikrama" program holds great significance as it symbolizes a journey along the coastal belt in solidarity with fisherfolk and other stakeholders.
• The impact of this Sagar Parikrama will be far reaching on the livelihood and holistic development of fishermen and fisher folks including climate change and sustainable fishing.
• As India continues to make strides in this sector, it is expected to strengthen its position as a global leader in fish production and contribute to the well-being of its citizens.

Trivia

• Fish is an affordable and rich source of healthy animal protein and omega-3 fatty acids, offering immense potential to mitigate hunger and malnutrition.
• India is blessed with rich and diverse fisheries resources, and the fisheries sector has become an important pillar of socio-economic growth, providing livelihood, employment, and entrepreneurship to millions of fishers and fish farmers.
• The importance of fish cannot be emphasized enough in addressing the country's food security, nutrition, and socioeconomic development.

Vital Stats

• Over the past 75 years, India's fisheries sector has undergone a remarkable transformation, evolving from a traditional activity to a commercial enterprise.
• The country's fish production has grown 22-fold since independence, skyrocketing from 7.5 lakh tonne in 1950-51 to an extraordinary 162.48 lakh tonne in 2021-22.
• India's fish output has achieved an all-time high of 162.48 lakh tonne in fiscal year 2021-22.
• This remarkable achievement represents a growth rate of 10.34% compared to the previous year.
• With approximately 8% share in global fish production, India now holds the position of the world's third-largest fish-producing country.
• Inland fish production, primarily driven by aquaculture, has experienced an unprecedented surge. In 2000-01, inland fish production stood at 28.23 lakh tonne, and it soared to an impressive 121.21 lakh tonne in 2021-22, marking a remarkable 400% increase.
• This outstanding growth can be attributed to the combined efforts of fisheries scientists, the central and state governments, as well as the dedication of fishers, fish farmers, and entrepreneurs.

India’s Livestock Sector

Livestock Sector in India

• The Indian Council of Agricultural Research (ICAR) recently completed the Ceremony for the Distribution of Animal Breed Registration Certificates.
• To ensure the success of the agriculture and animal husbandry industries, the Union Agriculture and Farmers Welfare Minister emphasised the necessity of identifying the numerous indigenous livestock breeds present in India.

About the livestock sector

• Selective breeding and keeping livestock are considered to be parts of animal husbandry. The genetic characteristics and behaviour of animals are developed further for economic gain through management and care.
• An significant area of the Indian economy is the livestock industry. India has a tremendous resource of livestock. India is home to 56.7% of the world's buffaloes, 12.5% of cattle, 2.4% of the world's camels, and 3.1% of the world's chickens (2nd largest poultry market in the world).
• The sector of livestock accounts for 4.11% of the GDP and 25.6% of the GDP of all agriculture. Fast expansion in this industry may result in growth that is more inclusive and egalitarian. This is due to the fact that the majority of people involved are small landowners and landless farmers.

Note

• The ICAR recently registered 10 new cattle breeds. As of January 2023, there are now 212 indigenous breeds in existence.
• The ten new breeds of domesticated livestock include the Kathani cattle (Maharashtra), Sanchori cattle (Rajasthan), and Masilum cattle (Meghalaya); the Purnathadi buffalo (Maharashtra); the Sojat goat (Rajasthan), Karauli goat (Rajasthan), and Gujari goat (Rajasthan); the Banda pig (Jharkhand); the Manipuri Black pig (Meghalaya).

Role of livestock in the economy

• Employment: Due to their low literacy and lack of skills, a huge portion of India's population relies on agriculture to support themselves. About 8.8% of the population of India is employed by it. For the purpose of employing their labour during the lean agricultural season, the landless and those with little land depend on cattle.
• Food: The livestock owners' family members rely heavily on the milk, meat, and eggs produced by their animals as a source of animal protein. In 2017–18, milk availability per person was approximately 375 g/day, and egg availability was 74 per year.
• Gender equity: Keeping animals fosters gender parity. Women provide more than 75% of the labour needed to produce livestock. In Punjab and Haryana, where dairying is a key activity and animals are fed in stalls, the percentage of women employed in the livestock sector is approximately 90%.
• Livestock is the best form of insurance against calamities like famine, drought, and other natural calamities. The vast majority of cattle operations are in marginal or small-scale properties. Moreover, livestock give significant organic manure to agricultural productions.

Contribution of Livestock to the Indian Economy

• From 2014–15 to 2020–21 (at constant prices), the livestock industry grew at a CAGR of 7.9%, and from 2020–21, it contributed 30.1% more to the country's total agricultural GVA than it did in 2014–15.
• Livestock are not only economically advantageous and a reliable source of food and income for homes, but they also give rural families a job, act as insurance in the event of crop failures, and the quantity of livestock a farmer owns determines his or her social standing in the neighbourhood.
• The largest single agricultural product in India is milk. It directly employs 80 million dairy farmers and has a 5% contribution to the national economy.

Challenges faced by the Livestock sector in India:

• Diseases: Frequent outbreaks of illnesses like Black Quarter infection, influenza, and Foot and Mouth Disease continue to have a negative impact on the health and productivity of livestock.
• Greenhouse Gases: The enormous population of ruminants in India adds to the generation of greenhouse gases. It will be extremely difficult to reduce greenhouse gases through mitigation and adaptation measures.
• Loss of local breeds: Only a small portion of attempts to cross-breed native species with foreign stocks in order to improve the genetic potential of various species have been effective.
• The main obstacles have been the limited availability of artificial insemination services due to a lack of high-quality germplasm, infrastructure, and technical manpower, as well as a low rate of conception after artificial insemination.
• Reduced credit: Compared to its contribution to agricultural GDP, the sector only got roughly 12% of the overall state spending on agriculture and related industries. Financial institutions have ignored the sector.
• Lack of Transparency: The majority of the cattle in the nation is still undeclared. Moreover, the markets for animal products in India are frequently dominated by unofficial market middlemen, are immature, unclear, and lack transparency.

Significant Governmental Initiatives

• Rashtriya Gokul Mission: It attempts to promote and protect native breeds of cattle. This is necessary to increase milk output and increase the farmers' income.
• The National Livestock Mission seeks to strengthen the capacities of all stakeholders while ensuring quantitative and qualitative improvements in livestock production systems.
• The National Artificial Insemination Program's goal is to recommend creative approaches for impregnating female breeds. Moreover, to stop the spread of several genital infections in order to improve the breed's effectiveness.
• National Cattle and Buffalo Breeding Project: Prioritize genetic improvement of significant indigenous breeds with an eye towards development and conservation.
• Great Challenge for Startups in Animal Husbandry: to recognise initiatives from the countryside that would help India's dairy industry grow.
• LH&DC (Livestock Health and Disease Control) Program: It is being adopted to support the State/UT governments' attempts to use vaccination to prevent, control, and contain animal diseases that are significant from an economic and zoonotic standpoint.
• NADCP: National Animal Disease Control Program By totally immunising populations of cattle, buffalo, sheep, goats, and pigs against foot-and-mouth disease and bovine female calves between the ages of 4 and 8 months against brucellosis, it is being applied to manage both diseases.

Measures to promote Livestock sector in India

• Resources: To boost the productivity of livestock husbandry in India's rain-shadow region, it is vital to provide enough fodder and drinking water.
• Marketing: Trade policies like marketing need to be more effective in order to promote a variety of livestock products, such as eggs, fish, and milk, and to give farmers a fair price by limiting the influence of middlemen.
• Training: Farmers who choose to undertake livestock rearing as a secondary source of income must receive the necessary training and subsidies.
• Research and development: The government should concentrate on the livestock industry's R&D to boost livestock productivity and benefit small and marginal farmers more.
• Veterinary Ambulance Service and Mandatory Cattle Vaccination: Ambulance services in veterinary facilities should be increased in order to offer injured animals rapid primary care.
• Moreover, frequent veterinary surveillance should be carried out in a time-bound manner, and primary livestock immunisation should be made mandatory.

49th GST Council Meeting

Context

Recently, the Goods and Services Tax (GST) Council in its 49th Meeting has reached consensus on the constitution of the GST Appellate Tribunal to resolve the rising number of disputes under the old indirect tax regime.

What are the Key Highlights of the GST Meeting?

• GST Appellate Tribunal:
  • The council has approved the creation of a national tribunal mechanism with state benches for the redressal of disputes.
  • The Tribunal will resolve the rising number of disputes under the GST regime that are now clogging High Courts and other judicial fora.
  • This year’s Finance Bill can incorporate the enabling legislative provisions for the Tribunal.
    • The GST Tribunal will have one principal bench in New Delhi and many benches or boards in states. The principal bench and state boards would have two technical and two judicial members each, with equal representation.
    • But all four members would not sit to hear each case, which is likely to be decided based on the threshold or value of dues involved.
• Cleared Pending Compensation Dues:
  • It has cleared the balance of Rs 16,982 crore (for June 2022).
  • It has finalized GST compensation of Rs 16,524 crore to six states/UTs including, Delhi, Karnataka, Odisha, Puducherry, Tamil Nadu, and Telangana
• Lower Penal Charges:
  • It approved lower penal charges for delayed filing of annual returns by businesses with a turnover of up to Rs 20 crore a year.
  • The council has approved an Amnesty Scheme for taxpayers unable to file three statutory returns, that entail conditional waivers or reductions in late fees for such filings.
    • The GST Amnesty Scheme was introduced to encourage non-filers to voluntarily come forward and file their GST returns by providing a one-time relief from late fees.
• Rate Changes:
  • The GST rate on several items has been changed, such as pencil sharpeners, rab (liquid jaggery).
  • The Council also decided to extend the GST exemption to educational institutions and central and state educational boards from conducting entrance examinations through any authority, including the National Testing Agency.
• Plugging Tax Evasion:
  • The Council has decided to switch the compensation cess levied on pan masala and gutkha commodities from an ad valorem basis to a specific tax-based levy.
    • The ad valorem tax is levied according to value.
  • This will boost the first stage collection of the revenue.
  • The Council also mandated that exports only be allowed against letters of undertaking assuring of GST compliance.

What is the GST Council?

• About:
  • It is a joint forum of the Centre and the states.
  • It was set up by the President as per Article 279A (1) of the amended Constitution.
• Members:
  • The members of the Council include the Union Finance Minister (chairperson), the Union Minister of State (Finance) from the Centre.
  • Each state can nominate a minister in-charge of finance or taxation or any other minister as a member.
• Functions:
  • According to Article 279 of the Constitution, the council can make recommendations to the Union and the states on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws”.
    • Article 279 as well as Article 279A of the Indian Constitution deal with the financial provisions of the country.
    • They are specifically related to the calculation of “net proceeds” from Union duties and taxes on goods and the formation of the Goods and Services Tax Council, respectively.
  • It also decides on various rate slabs of GST.
    • For instance, an interim report by a panel of ministers has suggested imposing 28 % GST on casinos, online gaming and horse racing.

What is the Concept of Goods and Services Tax?

• About:
  • GST is a value-added tax system that is levied on the supply of goods and services in an economy.
  • It is a comprehensive indirect tax that was introduced in India on 1^st July 2017, through the 101^st Constitution Amendment Act, 2016, with the slogan of ‘One Nation One Tax’.
  • The GST has subsumed indirect taxes like excise duty, Value Added Tax (VAT), service tax, luxury tax etc.
  • It is essentially a consumption tax and is levied at the final consumption point.
• Tax Structure under GST:
  • Central GST to cover Excise duty, Service tax etc,
  • State GST to cover VAT, luxury tax etc.
  • Integrated GST (IGST) to cover inter-state trade.
    • IGST per se is not a tax but a system to coordinate state and union taxes.
  • Under GST, Goods and services are divided into five different tax slabs for collection of tax: 0%, 5%, 12%, 18% and 28%.

What are the Issues Related to GST?

• Complexity:
  • The GST system in India is quite complex, with multiple tax rates, exemptions, and compliance requirements.
  • It hampers the progress of a single indirect tax rate for all the goods and services in the country.
• High Tax Rates:
  • Some industries and goods are subject to high GST rates, which can make them unaffordable for many consumers.
    • For example, the tax rate on luxury goods and services is 28%, which is quite high.
  • Though rates are rationalized, 50% of items are under the 18% bracket.
• Compliance Burden:
  • The GST regime has a lot of compliance requirements, including filing of returns, maintaining records, and regular audits. This can be a burden for businesses, especially small and medium enterprises.
• Technical Issues:
  • There have been reports of technical glitches in the GST network, leading to delays in filing returns and claiming input tax credits.
• Impact on the Unorganized Sector:
  • The unorganized sector, which forms a significant part of the Indian economy, has been adversely affected by the GST.
  • Many small businesses and traders have found it challenging to comply with the new tax regime.
• Lack of Clarity:
  • There is still a lack of clarity on some aspects of the GST regime, such as the classification of goods and services and the applicability of tax rates. This lack of clarity can create confusion and disputes.

Way Forward

• Simplifying the compliance process, providing easier access to information, and increasing support for taxpayers can help address this issue.
• Technical issues such as system downtimes, portal errors, and other glitches can cause significant disruptions for businesses. Addressing these technical issues can help businesses comply with GST requirements more effectively.
• Many small businesses and traders are not fully aware of the GST system and its implications. Increasing awareness and education about the GST system can help improve compliance and reduce errors.
• GST is a collaborative effort between the central and state governments, and coordination between them is crucial to its success. Improving communication and coordination can help ensure a smooth implementation of the GST system.

Inter-State Variations in Central Tax Distribution 

Context

Critics argue that the 15^th Finance Commission formula is skewed in favour of some states, resulting in wide inter-state variations.

• Tamil Nadu gets back only 29 paise for every one rupee it gives to the Centre, while Uttar Pradesh gets Rs. 2.73 and Bihar gets back Rs. 7.06.

How Taxes are Distributed Among States?

• About:
  • The Centre collects taxes from states and distributes it among them based on the Finance Commission's (XVFC) formula.
• XVFC Formula:
  • The XVFC formula is based on each state's needs (population, area and forest and ecology), equity (per capita income difference), and performance (own tax revenue and lower fertility rate).
• Weightage:
  • Needs are given 40% weightage, equity 45%, and performance 15%.
  • The XVFC introduced the fertility rate component to reward states that have reduced fertility levels, but this has a lower weightage than equity and needs.
• Arguments:
  • Critics argue that this formula favours some northern states, as the population is given higher weightage.
    • The southern states' share has consistently declined in successive Finance Commissions.
  • Some argue that transfers enable a state to provide comparable levels of services and ensure horizontal equity.
    • However, others contend that the formula should not adversely impact a state's efficiency and progress.

What is the 15^th Finance Commission?

• About:
  • The Finance Commission (FC) is a constitutional body that determines the method and formula for distributing the tax proceeds between the Centre and states, and among the states as per the constitutional arrangement and present requirements.
• Constitutionality:
  • Under Article 280 of the Constitution, the President of India is required to constitute a Finance Commission at an interval of five years or earlier.
• 15^th Finance Commission
  • The 15^th Finance Commission was constituted by the President of India in November 2017, under the chairmanship of NK Singh.
  • Its recommendations will cover a period of five years from the year 2021-22 to 2025-26.
    • The government accepted the 15^th Finance Commission’s recommendation to maintain the States’ share in the divisible pool of taxes to 41% for the five-year period starting 2021-22.