Content

1. GST 2.0 — short-term pain, possible long-term gain
2. Judicial experimentalism’ versus the right to justice

GST 2.0 — short-term pain, possible long-term gain

Basics

• GST (2017): Unified, destination-based indirect tax aimed at eliminating cascading, ensuring credit for input taxes, and creating a common market.
• Problems in original GST design:
  • Multiple rates (0%, 5%, 12%, 18%, 28%) with compensation cess.
  • Inverted duty structures → refunds/ITC delays.
  • High compliance cost → particularly burdensome for MSMEs.

Relevance

• GS-III (Economy):
  • Indian Economy and issues relating to planning, mobilization of resources, growth, development, and employment.
  • Government Budgeting; Taxation reforms.
  • Inclusive growth and issues arising from it.
• GS-II (Polity & Governance):
  • Federalism and GST Council dynamics.

Practice Question : “The 2025 GST reforms aim to simplify the indirect tax system but create new fiscal challenges for both Centre and States.” Critically examine in light of India’s growth and federalism needs. (250 words)

The 2025 GST Reform

• Effective from Sept 22, 2025.
• Revised rate structure:
  • Retained: 0%, 5%, 18%.
  • Removed: 12% & 28%.
  • Introduced: 40% (sin & luxury goods, merging cess).
  • Special sub-5% rates retained for essentials.
• Coverage: 546 goods → 80% rate cuts, 20% hikes.
• Beneficiaries: Textiles, electronics, automobiles, food, health, fertilizers, agri-machinery, renewable energy.

Arguments in Favour

• Simplicity & Transparency: Reducing slabs → more predictable, easier compliance.
• Consumer Welfare: Lower tax burden → lower prices → higher disposable incomes.
• Employment Boost: Labour-intensive sectors (textiles, autos, food) benefit, supporting job creation.
• Agriculture Support: Lower input costs (fertilizers, machinery) → higher farm incomes.
• Demand Stimulation: Rate cuts on essentials raise real purchasing power → can drive growth in higher-taxed luxury goods later.
• Industrial Competitiveness: Lower effective tax rates → boosts domestic manufacturing & export competitiveness.

Counter-Arguments

• Revenue Shock:
  • MoF estimate: ₹48,000 crore annual loss (others higher).
  • At a time of already slowing nominal GDP growth (8.8% vs 10.1% projected).
• Fiscal Deficit Stress: With PIT reforms already costing ₹1 lakh crore, GST losses worsen deficit risks for both Centre & States.
• Exemptions & Cascading: More exemptions = denial of ITC → embedded taxes, reduced transparency.
• State Finances: States reliant on GST compensation will face greater fiscal pressure → borrowing or spending cuts.
• Inequity: Richer households benefit more from tax cuts on consumer durables, automobiles, and electronics than poorer households.
• Revenue Neutrality Question: Past experience shows demand elasticity insufficient to offset rate cuts → long-term buoyancy uncertain.

Counter to Counter-Arguments

• Revenue Shock Temporary: Tax buoyancy may return once demand expands and compliance improves (Laffer curve effect).
• Fiscal Management: RBI’s higher dividends and expenditure prioritisation can cushion short-term revenue stress.
• Consumer Equity: Major cuts are in essentials (5% slab → food, healthcare), ensuring benefits for lower-income groups too.
• Economic Multiplier: Stimulus to job-rich sectors → wider income effects → stronger indirect tax base over time.
• Global Best Practice: Most successful GST/VAT systems (e.g., EU, Australia) operate with fewer slabs → India aligning gradually.

Macro-Fiscal Implications

• Short-Term: Revenue fall, fiscal stress, potential borrowing hikes.
• Medium-Term: Demand-led recovery → buoyancy in higher-rate goods (18%, 40%).
• Long-Term:
  • If compliance improves and cascading is minimised, GST revenues stabilise.
  • Sustained growth will still depend on investment and productivity, not just rate cuts.

Conclusion

• The 2025 GST reform marks a decisive move towards simplification, with fewer slabs and lower rates aimed at boosting consumption, employment, and competitiveness.
• While short-term revenue losses and fiscal stress are unavoidable, the reform has the potential to stimulate demand and expand the tax base over time.
• However, unresolved issues — cascading due to exemptions, state revenue stress, and compliance bottlenecks — limit the efficiency of the reform.
• For sustainable benefits, the reform must be accompanied by:
  • Tighter expenditure management to offset revenue losses.
  • Enhanced compliance and ITC efficiency to reduce leakages.
  • Centre-State coordination to manage fiscal pressures.
• Ultimately, GST cannot be a one-time growth stimulus; long-term growth will depend on investment, productivity, and structural reforms, with GST simplification serving as an enabler rather than a substitute.

Value Additions

Data & Trends

• GST Collections (Aug 2025): ₹1.69 lakh crore (YoY growth ~10%).
• GST’s Share in Total Tax Revenues: ~30% of gross tax revenues (Union Budget 2025–26).
• Tax Buoyancy: Declined from 1.5 (FY 2021–22) to ~1.1 (FY 2024–25).
• GST Compliance Cost: World Bank’s “Ease of Paying Taxes” index (2020) placed India at 115/190, with GST cited for complexity.

Comparative Perspective

• International Best Practices:
  • New Zealand: Single rate GST (15%) → lowest compliance costs globally.
  • Singapore: Two rates (standard 9% + zero) → efficient, broad-based.
  • India: Still multiple slabs (0%, 5%, 18%, 40%) → higher classification disputes.

Expert Committees & Reports

• Arvind Subramanian Committee (2015): Recommended a standard rate ~18% to balance revenue needs and efficiency.
• 15th Finance Commission Report (2021): Warned against excessive exemptions & urged GST simplification.
• RBI Annual Report 2024–25: Highlighted GST rate rationalisation as key to reducing inflation volatility.

Constitutional/Legal Angle

• 101st Constitutional Amendment (2016): Created GST framework.
• Article 279A: GST Council as a cooperative federal body.
• Recent Debate: Tensions over Centre-State compensation cess and fiscal autonomy.

Economic Implications

• Revenue Foregone (2025 reform): Estimated ₹48,000 crore annually (MoF).
• Elasticity Argument: Lower rates → immediate revenue dip, but higher demand may expand tax base over time.
• Employment Angle: Beneficiary sectors (textiles, electronics, automobiles, food) are labour-intensive.

‘Judicial experimentalism’ versus the right to justice

Basics

• Context: Supreme Court (July 2025, Shivangi Bansal vs Sahib Bansal) endorsed Allahabad HC guidelines (2022, Mukesh Bansal vs State of U.P.) introducing a two-month cooling period before coercive action in cases under Section 498A IPC (now Section 85 of BNS).
• Provision background: Section 498A was enacted to protect women from cruelty in marriage. However, misuse claims led to safeguards (CrPC 2008 amendment, Arnesh Kumar 2014, Satender Kumar Antil 2022).
• Why it matters: Balances two competing concerns—protecting women from domestic cruelty vs. preventing harassment of men/families through false cases. Raises questions on victim’s timely access to justice and judicial overreach.

Relevance

• GS-II (Polity & Governance):
  • Structure, organization, and functioning of judiciary and law enforcement.
  • Separation of powers, judicial activism vs. judicial restraint.
  • Mechanisms for protection and enforcement of fundamental rights.
• GS-I (Society):
  • Role of women and issues related to women’s safety and empowerment.

Practice Question : “Judicial experimentalism to curb misuse of criminal law provisions must not undermine a victim’s right to timely access to justice.” Discuss with reference to Section 498A of the IPC (now Section 85 of BNS). (250 words)

Author’s Core Argument

• The Supreme Court’s endorsement of the cooling period and referral to Family Welfare Committees (FWCs) undermines:
  • Victim’s right to prompt access to justice.
  • Functional autonomy of police and magistrates.
• Safeguards against misuse already exist (preliminary inquiry, arrest restrictions).
• NCRB data shows arrests under 498A declined after reforms, indicating balance without need for new curbs.
• The idea of FWCs/cooling period is extra-legal, similar to Rajesh Sharma (2017) directions which were struck down in Social Action Forum for Manav Adhikar (2018) as regressive.
• Supreme Court should revisit this ruling as it exceeds legislative intent and harms victims.

Counter Arguments

• Misuse remains a real concern: Though arrests declined, false complaints can still damage reputation and family life.
• Cooling-off periods exist in other contexts (divorce, mediation) to encourage reconciliation and reduce litigation burden.
• FWCs could play a mediation role, easing pressure on courts/police and encouraging settlement in non-severe cases.
• Judicial innovation is not new—courts have often issued guidelines when legislative gaps exist (e.g., Vishaka guidelines on sexual harassment).
• Data trend: Rising number of registered cases (2015–2022) shows issue remains complex—balancing liberty and justice is necessary.

Multi-Dimensional Overview

Polity/Legal

• Raises question of judicial overreach vs. judicial creativity.
• Undermines criminal justice hierarchy: police/magistrates sidelined by FWCs.
• Possible conflict with Article 21 (right to speedy justice) for victims.

Governance/Administrative

• FWCs lack clear statutory authority, funding, or training.
• Could create parallel structures leading to confusion and delays.
• May weaken trust in police and judiciary.

Economy

• Domestic disputes turning into prolonged litigation impose economic costs on families and judicial system.
• FWCs, if poorly designed, add administrative expenditure without effectiveness.

Society

• Section 498A remains vital for women’s safety in patriarchal society.
• Risk of victim-blaming narratives gaining strength under misuse discourse.
• Cooling period may intensify suffering of women in abusive households.

Environment/Science & Tech

• Not directly relevant here.

International

• UN conventions (CEDAW) emphasize timely access to justice for women.
• Cooling period may be viewed as non-compliance with global gender justice norms.

Challenges

• Balancing genuine complaints vs. false cases.
• Absence of statutory basis for FWCs.
• Potential delay in justice delivery.
• Resistance from women’s rights groups vs. men’s rights advocates.
• Need for proper training of police/judiciary in handling sensitive cases.
• Risk of conflicting judicial precedents (Rajesh Sharma 2017 vs Social Action Forum 2018).

Way Forward

• Strengthen existing safeguards (Arnesh Kumar, Satender Kumar Antil) instead of creating parallel systems.
• Police sensitization and use of gender desks (as suggested by Bureau of Police Research & Development).
• Mediation cells may function, but only post-registration of FIR and under court supervision.
• Adopt best practices from other jurisdictions (UK’s domestic violence protection orders, US restraining orders ensuring immediate protection).
• Legislative clarity: If committees like FWCs are needed, Parliament—not courts—should provide framework.
• Align reforms with SDG 5 (Gender Equality) and SDG 16 (Access to Justice).

Conclusion

The SC ruling seeks to check misuse of Section 498A but risks undermining women’s timely access to justice and the autonomy of criminal justice institutions. A balanced approach—strengthening safeguards without creating extra-legal barriers—is the way forward.

Value additions

Constitutional & Legal Anchors

• Article 14 & 15(3): Special provisions for women.
• Article 21: Right to life includes right to speedy justice.
• Article 39A (DPSP): Equal access to justice.
• Supreme Court precedents:
  • Lalita Kumari (2013) – mandatory FIR registration, but preliminary inquiry allowed in matrimonial disputes.
  • Arnesh Kumar (2014) – safeguards against arbitrary arrests.
  • Rajesh Sharma (2017) – Family Welfare Committees (later struck down).
  • Social Action Forum for Manav Adhikar (2018) – restored victim’s right to prompt justice.

Data Points

• NCRB data:
  • Registered cases under 498A: rose from 1.13 lakh (2015) → 1.40 lakh (2022).
  • Arrests declined from 1.87 lakh (2015) → 1.45 lakh (2022).
• Conviction rate: Around 15% under 498A cases (NCRB 2022), showing challenges in evidence collection.
• Backlog: Family disputes constitute ~6–7% of pending cases in lower judiciary (NJDG 2023).

Committees & Reports

• Law Commission (243rd Report, 2012): Recommended safeguards against arbitrary arrests, not dilution of 498A.
• Malimath Committee (2003): Suggested making 498A a bailable and compoundable offence, but widely criticized.
• Justice Verma Committee (2013): Opposed dilution of women-protective laws.

International Standards

• CEDAW (Convention on Elimination of All Forms of Discrimination Against Women): India is a signatory; requires effective and timely legal remedies for women facing violence.
• UN Declaration on Elimination of Violence Against Women (1993): Urges States to ensure speedy justice and survivor-centric procedures.
• Best practices:
  • UK: Domestic Violence Protection Notices (DVPOs) give immediate protection.
  • US: Temporary restraining orders issued swiftly, often within 24–48 hours.