Editorial 1: Time to be Prepared
Recent Context:
- Recently, parts of North India witnessed heavy rains that triggered flash floods and left a trail of destruction. The rains triggered landslides which caused more damage to human and property.
What caused the downpour?
There are three main factors can trigger such heavy rains in the region and the Himalaya.
- First, an active monsoon with strong winds in the lower air layers,:
- It bringing moisture into the region from the Bay of Bengal or the Arabian Sea.
- Second, a large-scale atmospheric forcing in the form of outflows in the upper layers of the atmosphere moving eastward through mid-latitude troughs.
- These troughs can also direct the flow of moisture towards the Himalaya.
- Third, deep convection triggered by orographic uplift combined with the steep terrain of the Himalaya.
- All these ingredients were present last weekend. The synoptic conditions were conducive to heavy rainfall.
- The monsoon was active with strong moist easterly winds entering the region and an eastward moving mid-latitude trough in the atmosphere’s upper layers. There was also moisture intrusion from the North Arabian Sea.
- The floods in Uttarakhand in 2013 were caused by similar synoptic conditions. Another good example is the 2010 floods in Pakistan.
Understand the basic characteristics of monsoon rainfall in this region.
- India receives its most of its rainfall in Monsoon or rainy season, lasting from June to September.
- In this region, all the seasonal rainfall (about 80-100 cm) falls in 130-150 hours a small part of the season. Half of the seasonal rainfall (40-50 cm) falls in only 30-40 hours. The region experiences light and moderate rainfall in the other half of the season.
- This pattern suggests that periods of heavy rain contribute to the seasonal total. When these heavy rains occur, most of the rainwater drains away as runoff, especially when the soil is wet.
- Along with it, the number of extreme rainfall events (more than 15 cm in 24 hours) has tripled in the region
- The observations also indicate that during the monsoon, the total number of rainy days and rainy hours decreases. This indicates that when it rains, it rains very heavily.
- The Himalayan region, with its complex topography and varied weather patterns, is prone to extreme rainfall events.
Climate is one of the major reasons for intense rainfall:
- Climate change is thought to be one of the main causes of this intense and frequent rainfall. As Warmer temperatures lead to increased evaporation, which, in turn, leads to more moisture in the atmosphere.
- This extra moisture leads to heavy rainfall when weather systems coincide with the unique geography of the region.
- Changes in land use and land cover also appear to be reasons for the increase in extreme monsoon rainfall, especially its intensity.
- The IPCC’s scenarios for climate change indicate that these trends will continue. Multi-day flood events are projected to increase faster than single-day events in the future — this can have severe consequences
- Along with it, Due to human activities, Arctic is warming and sea ice is receding.
- There is growing evidence of the impact of Arctic warming on the monsoon climate through mid-latitude circulation.
- Observations and models suggest that due to Arctic warming, the frequency of occurrence of blocking highs and deep mid-latitude troughs (like the one last weekend) is likely to increase
Steps need to be taken to mitigate flood: To mitigate floods, we need a multi-pronged approach that includes both proactive measures and reactive strategies. These include:
- One, a robust early warning system that alerts people about heavy rains and possible flash floods.
- This system can include meteorological observations including a Doppler weather radar (DWR) and a high-resolution numerical weather prediction model. Advanced methods such as AI/ML could be used to interpret the DWR and model forecast data.
- Two, continuous monitoring of rainfall patterns, river levels and an advanced flood warning system.
- Three, flood risk maps that take into account factors such as topography, historical flood data and hydrological modelling to assess vulnerability, identify high-risk zones and target actions.
- Four, improving and maintaining climate-resilient infrastructure, such as drainage systems and channels to prevent waterlogging.
- Five, proper implementation of land use planning and zoning regulations.
- For example, areas prone to flash floods can be designated as non-residential or restricted areas.
- Six, the protection and restoration of natural ecosystems, such as forests and wetlands. Vegetation acts as a natural buffer, absorbing rainfall and reducing runoff.
- Seven, awareness campaigns can influence people to take the right actions during floods, including arranging evacuation, providing first aid and getting information from reliable sources.
Conclusion:
- Therefore, by recognising the increasing threat of extreme precipitation and implementing proactive measures, India can improve its resilience to extreme weather events.
Editorial 2: Uniform 28 per cent tax on online gaming: What the GST Council’s decision says, its implications
Recent context
- Recently, Goods and Services Tax (GST) Council, decided to levy a uniform 28 per cent tax on full face value for online gaming, casinos and horse-racing.
- The government is now expected to bring in a legal amendment to facilitate this in the monsoon session of Parliament, which will enable inclusion of online gaming and horse racing under actionable claim.
- While the government has maintained that this decision is not intended to end any industry, however online gaming companies have raised concerns about the impact of this move on the industry, as it is likely to affect volumes and thus the viability of gaming companies.
About GST council:
- GST Council is a constitutional body responsible for making recommendations on issues related to the implementation of the Goods and Services Tax (GST) in India.
- 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 Council has been instrumental in deciding key issues related to the GST such as tax rates, exemptions, thresholds, and administrative procedures.
- During its meetings, the GST Council takes decisions through a consensus-based approach every decision of the GST Council shall be taken by a majority of not less than three-fourths of the weighted votes of the members present and voting with a weightage of one-third of the total votes cast to the Centre and a weightage of two-thirds of the total votes cast to the States, promoting the spirit of the co-operative federalism.
What is the decision of the GST Council for online gaming, casinos and horse racing?
- The uniform levy of 28 per cent tax will be applicable on the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/totalisator in the case of horse racing, and on the full value of the bets placed in case of online gaming.
- Earlier, the ministerial panel on online gaming, casinos, horse-racing had discussed the other option of levying tax on gross gaming revenue or platform fee, that is, the charge paid to avail the gaming services but this did not find favour.
- The government will bring in amendments to the GST-related laws to include online gaming and horse racing in Schedule III as taxable actionable claims.
- In the context of GST, an actionable claim is defined as goods under the Central Goods and Services Tax Act, 2017.
- It is a claim to an unsecured debt or a claim to any beneficial interest in movable property that is not in the possession of the claimant
- So far, lottery, betting, and gambling were classified as actionable claims. Now, horse racing and online gaming will be added.
How big is the online gaming market in India?
- The revenue of the Indian mobile gaming industry is expected to exceed $1.5 billion in 2022, and is estimated to reach $5 billion in 2025.
- The industry in the country grew at a CAGR of 38% between 2017-2020, as opposed to 8% in China and 10% in the US.
- It is expected to grow at a CAGR of 15% to reach Rs 153 billion in revenue by 2024. India’s percentage of new paying users (NPUs) in gaming has been the fastest growing in the world for two consecutive years, at 40% in 2020 and reaching 50% in 2021.
Who gets impacted by this decision?
- The decision has been applied indiscriminately to gaming and gambling platforms. This includes companies that have spent years in lobbying efforts to create a distinction between a game of skill and game of chance, essentially trying to distinguish themselves from gambling platforms.
- As such, online gaming is perhaps the only segment of the internet economy that has multiple highly profitable companies.
Government’s stand on including new activities under GST:
- Union Finance Minister Nirmala Sitharaman, who heads the GST Council, said the intent was not to end any industry but rather a “moral question” about taxing both gaming at the same rate as other “essential items”.
- Government agenda is not to end any industry as all types of businesses have to function but there was discussion on the moral question of not giving more incentives to them than essential goods and decision is tken with the active participation of sttes.
What was the decision by the Group of Ministers (GoM)?
- A Group of Ministers (GoM) was constituted to look into the issues related to taxation on casinos, horse racing and online gaming.
- The GoM submitted its first report in June 2022
- In the first report, the GoM had recommended a uniform 28 per cent rate for casinos, race courses and online gaming on the full value of the consideration paid (contest entry fee/bets pooled/ coins purchased etc.).
- It had also recommended that no distinction should be made for levying GST on the basis of an activity being a game of skill or of chance or both.
- After Goa raised reservations on the GoM report in June last year, the Council decided for a review of the report.
- Following this, three meetings of the GoM were conducted last year, and the discussions were around two questions:
- whether the activities of race course and online gaming amount to betting and gambling or not in the context of various High Court and Supreme Court judgments; and
- how should the supplies of casinos, race courses and online gaming be valued — on the full-face value of bets placed or on Gross Gaming Revenue (GGR) (for casinos), totalisator fee (for race courses) and platform fee/GGR (for online gaming).
How will the tax work in real life?
- At present, most gaming companies were paying a tax of 18 per cent applicable on the platform fees, distinguishing based on the factor of these activities being games of skill such as fantasy gaming platforms.
- The Revenue Department, however, has maintained that the tax rate on these categories is 28 per cent and Tuesday’s decision is only a clarification.
- However, under the new structure, a GST of 28% will be applicable on the entire face value of the bet or the consideration paid, and not the platform fee. Meaning that for every Rs 100 deposited, the GST on it will be Rs 28.
How does the tax interplay with the IT Ministry’s rules for online gaming companies?
- In April, the IT Ministry had notified rules for online gaming intermediaries, allowing for the creation of self regulatory bodies that will decide what is a permissible online game.
- Finance minister said the GST Council’s decision focused on the taxation part of online gaming and it will align with the regulation of the Ministry of Electronics and Information Technology (MeitY).
- And tax on online gaming companies would be imposed without making any differentiation based on whether the games required skill or were based on chance, and that there will be an amendment in the GST law to tweak the definition of actionable claim.
Conclusion:
- Decision of GST council to impose uniform 28 per cent tax on full face value for online gaming, casinos and horse-racing is in right direction which shows the balance approach of government for not completely ending these industry on the other hand it creates level playing field for essential goods under GST tax rate vis-i-vis bet or chance based games.