Do you agree that bringing electricity under the ambit of GST could bolster Make in India initiative? Justify your stance. (200 words)
Refer – The Indian Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 6 years
KEY POINTS
· Make in India campaign aims to
a) Facilitate investment
b) Foster innovation
c) Enhance skill development
d) Protect intellectual property and
e) Build best-in-class manufacturing infrastructure in India.
· It seeks to woo domestic and foreign investors by promising a business environment conducive to them.
· Domestically, it aims to identify domestic companies having leadership in innovation and new technology for turning them into global players.
Issues in Electricity
· Costs - The most serious concern is that costs to industrial users of electricity are higher.
· This is because they include the taxes on inputs that have gone into the supply of electricity.
· These include taxes on raw materials (coal, renewables) and other equipment (solar panels and batteries).
· Not being part of GST means that no inputs tax credit can be claimed.
· This certainly results in embedding of the tax in the final price.
· Embedding of taxes - This clearly hurts manufacturers selling to the domestic market.
· In particular, this affects the exporters of electricity-intensive products.
· It is because they are not liable to any duty drawback i.e. relief for taxes embedded in exports.
· Industrial buyers of electricity bear the impact of this in an indirect way.
· Populist politics has long ensured that consumers (and other users in agriculture) pay either nothing for electricity or very little.
· Ultimately, Discoms cross-subsidise and charge higher prices to industrial users to make up for under-charging others.
· But the embedding of taxes adds an extra layer of cross-subsidisation.
· Totalling up all of these effects could lead to increased costs and lower margins for several industries.
· These margins are significant, especially for exporters who face strong international competition.
· GST - Currently, there is a large bias in favour of renewables in GST policy.
· Inputs to renewables generation attract a GST rate of 5% while inputs to thermal generation attract higher rates of 18%.
Benefits of inclusion in to GST
· GST - If electricity is included in GST, there would be no discrimination between renewables and thermal energy.
· This is because all inputs going into both forms of electricity generation would receive tax credits.
· Including electricity in GST would also reduce or eliminate embedded taxes in electricity-using products.
· Reducing the costs for manufacturing
· Improving the competitiveness of exporters
· Reducing the cross-subsidisation of electricity tariffs that further undermines the competitiveness of manufacturers and exporters and
· Eliminating the large biases and hence restoring neutrality of incentives in electricity generation.
· Summing up, the above said all benefits will boost Make in India programme.
Kuzhali 6 years
Thanks for your valuable comments on previous answer.....
Could you pls include comments on other aspects of answer writing along with that on the content.....will be really helpful for freshers in mains
IAS Parliament 6 years
If the answer lags in such areas, we will certainly let you know. Otherwise, we encourage every individual to groom their own way of writing as it would be unique. Good attempt. Keep writing.
