Economy Current Affairs by NextGen IAS – January 2021

Contents

{Economy – 2020/12} Asian Development Bank: ............................................................................................................ 1

{Economy – 2020/12} Commission for Agricultural Costs and Prices (CACP) .............................................................. 2

{Economy – 2020/12} Corporate Bonds: .......................................................................................................................... 4

{Economy – 2020/12} Dip in Coal Imports: ..................................................................................................................... 4

{Economy – 2020/12} Lucknow Municipal Corporation listed at BSE ........................................................................... 4

{Economy – 2020/12} Minimum Support Price (MSP): .................................................................................................. 5

{Economy – 2020/12} National Mineral Development Corporation ............................................................................. 7

{Economy – 2021/01} Cryptocurrency index: .................................................................................................................. 8

{Economy – 2021/01} Deposit Insurance and Credit Guarantee Corporation (DICGC): .............................................. 9
{Economy – 2021/01} Eastern Dedicated Freight Corridor (EDFC): ............................................................................... 9

{Economy – 2021/01} Exports and Imports April-November 2020: .............................................................................. 9

{Economy – 2021/01} External Trade: ............................................................................................................................ 10

{Economy – 2021/01} Fugitive economic offender: ..................................................................................................... 13

{Economy – 2021/01} India lags behind Asian peers in export growth ...................................................................... 13

{Economy – 2021/01} Karad Janata Sahakari Bank: ..................................................................................................... 14

{Economy – 2021/01} Municipal Bonds: ........................................................................................................................ 14

{Economy – 2021/01} Non-Convertible Debentures (NCD): ........................................................................................ 14

{Economy – 2021/01} QRMP Scheme ............................................................................................................................ 15

{Economy – 2021/01} Trends in Rural-Urban Inflation: ............................................................................................... 15

{Economy – Capital Market – 2021/01} Market Infrastructure Institutions (MIIs) .................................................... 16

Some of the Key proposals .............................................................................................................................................................. 16
Stock Exchange ................................................................................................................................................................................ 17
Securities & Exchange Board of India (SEBI) ................................................................................................................................... 17

{Economy – Exports – 2021/01} Duty Drawback Incentive .......................................................................................... 17

{Economy – Taxes – 2021/01} Entertainment Tax – indirect tax subsumed by GST .................................................. 18
Entertainment tax ........................................................................................................................................................................... 18
Impact of GST on Entertainment tax ............................................................................................................................................... 19
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{Economy – 2020/12} Asian Development Bank:

➢ It is a regional development bank
➢ Established on Dec 19, 1966
➢ HQ: Manila, Philippines
➢ Aim: To promote social and economic development in Asia
➢ The bank admits the members of the United Nations Economic and Social Commission for Asia and the
Pacific (UNESCAP) and non-regional developed countries.
➢ ADB is an official United Nations Observer
➢ India was a founding member of the Asian Development Bank (ADB) in 1966
➢ Total members at the time of establishment – 31

UPSC CSE Prelims Previous Question 2008: India is a member of which of the following?

1. Asian Development Bank

2. Asia Pacific Economic Cooperation
3. Colombo Plan
4. Organization for Economic Cooperation and Development (OECD)

Select the correct answer using the code given below:

a) 1 and 3 only
b) 2 and 4 only
c) 1, 2 and 3 only
d) 1, 2, 3 and 4

{Economy – 2020/12} Commission for Agricultural Costs and Prices (CACP)

➔ Commission for Agricultural Cost and Prices (CACP) earlier known as Agricultural Price Commission, came
into existence in 1985.
➔ At present, the CACP comprises of a Chairman, a Member Secretary, one Member (Official) and two
Members (non-official) representing the farming community.
➔ CACP is a statutory body and submits separate reports recommending prices for Kharif and Rabi
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seasons.
➔ In formulating the recommendation for the level of the MSP and other non-price measures,
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Commission takes into account many factors like the cost of production, changes in input-price, crop price
parity, trends in market price, demand and supply, effect on cost of living, international price situation, etc.
➔ CACP considers both ‘A2+FL’ and ‘C2’ costs while recommending MSP.
➔ A2 costs cover all paid-out expenses, both in cash and kind, incurred by farmers on seeds, fertilisers,
chemicals, hired labour, fuel and irrigation, among others. A2+FL covers actual paid-out costs plus an
imputed value of unpaid family labour.
➔ C2 costs account for the rentals and interest forgone on owned land and fixed capital assets respectively,
on top of A2+FL.
➔ CACP reckons only A2+FL cost for return. However, C2 costs are used as a benchmark reference costs to
see if the MSPs recommended by them cover these costs in some of the major producing states.
➔ CACP submits its recommendations to the Government in the form of Price Policy Reports every year,
separately for 5 groups of commodities including Kharif crops, Rabi crops, Sugarcane, Raw Jute and
Copra.
➔ Cabinet Committee on Economic Affairs (CCEA) of the Union Government takes a final decision on the
level of the MSPs and other recommendations made by the CACP.
➔ MSP computed by the CACP, is based on an average cost taken for the whole of the country while there
is a substantial regional variation in the production cost of different crops.
➔ Budget for 2018-19 announced that MSPs would henceforth be fixed at 1½ times of the production
costs for crops as a “pre-determined principle”. Simply put, the CACP’s job now was only to estimate
production costs for a season and recommend the MSPs by applying the 1.5-times formula.
➔ In 2018, then Finance Minister Arun Jaitley’s Budget speech did not specify the cost on which the 1.5-times
formula was to be computed. But the CACP’s ‘Price Policy for Kharif Crops: The Marketing Season 2018-19’
report stated that its MSP recommendation was based on 1.5 times the A2+FL costs.

UPSC CSE Prelims Previous Question 1995: Which of the following are the objectives of the
Commission for Agricultural Costs and Prices (CACP) ?

1. To stabilise agricultural prices.

2. To ensure meaningful real income levels to the farmers.
3. To protect the interest of the consumers by providing essential agricultural commodities at reasonable
rates through public distribution system.
4. To ensure maximum price for the farmer.
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Select the correct answer from the codes given below:

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Codes:
 a) I, II and III
b) I, II and IV
c) I, III and IV
d) II, III and IV
• State PSC Mains Previous Question: What is the difference between support price and procurement
price? What is the role of CACP in this regard?

{Economy – 2020/12} Corporate Bonds:

➢ Corporate bonds are debt securities issued by private and public corporations
➢ Companies issue corporate bonds to raise money for a variety of purposes.
➢ A buyer buys a corporate bond, and lends money to the "issuer," the company that issued the bond.
➢ In exchange, the company promises to return the money ("principal") on a specified maturity date,
and meanwhile, pays the stated rate of interest.
➢ Corporate bond does not involve an ownership interest in the company, unlike when one purchases the
company's equity stock.

{Economy – 2020/12} Dip in Coal Imports:

➢ India’s coal import drops 19% during Apr-Oct 2020

➢ The spurt in demand during the festive season coupled with winter restocking led to increased volumes.

UPSC CSE Prelims Previous Question 2016: Which of the following best describes the term
'import cover', sometimes seen in the news?

a) It is the ratio of value of imports to the Gross Domestic Product of a country

b) It is the total value of imports of a country in a year
c) It is the ratio between the value of exports and that of imports between two countries
d) It is the number of months of imports that could be paid for by a country's international reserves

{Economy – 2020/12} Lucknow Municipal Corporation listed at BSE

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➢ Lucknow is the 9th city in the country to have raised municipal bonds that have cumulatively touched
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around Rs 3,600 crore.

➢ Rs 200 crore municipal bonds issue of the Lucknow Municipal Corporation (LMC) was listed at the Bombay
Stock Exchange (BSE) on December 2, 2020.
➢ Lucknow - first in North India to have raised municipal bonds
➢ The tenure of the Lucknow Municipal Corporation bond is 10 years
➢ It is structured as a ‘strip’ bond with 7 STRRPs (A to G) and principal repayment to happen in 7 equal
annual payments from the 4th year to the 10th year.
➢ Municipal bonds exist in India since the year 1997.
➢ Bangalore Municipal Corporation is the first urban local body to issue municipal bonds in India.

{Economy – 2020/12} Minimum Support Price (MSP):

➔ Based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), the
Department of Agriculture and Co-operation, Government of India, declares Minimum Support Price (MSP)
for 23 crops before the sowing season.
➔ 23 crops comprise 7 cereals (paddy, wheat, maize, sorghum, pearl millet, barley and ragi), 5 pulses (gram,
tur, moong, urad, lentil), 7 oilseeds (groundnut, rapeseed-mustard, soyabean, sesamum, sunflower,
safflower, nigerseed), and 4 commercial crops (copra, sugarcane, cotton and raw jute).
➔ MSP system was started in 1966-67 for wheat and was expanded further to include other essential food
crops, which was then sold to the poor under subsidised rates under the public distribution system (PDS). In
1966, wheat’s MSP was Rs 54 per quintal.
➔ The idea behind MSP is to give guaranteed prices and assured market to the farmers and save them from
the price fluctuations.
➔ It insulates farmers from the unwarranted fluctuation in prices caused by the variation in supply (largely
influenced by the monsoon), lack of market integration, information asymmetry and other elements of
market imperfection plaguing the agricultural markets.
➔ The guaranteed price and assured market are expected to encourage higher investment and in adoption of
modern technologies in agricultural activities.
➔ Further, with globalization resulting in freer trade in agricultural commodities, it is very important to protect
farmers from the unwarranted fluctuation in prices, provoked by the international level price variations.
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➔ In addition to the MSP announced by the Central Government, the State Governments also declare a
bonus, over and above the already declared MSP so as to promote agriculture practices in their
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respective States. The quantum of this bonus varies from State-to-State and from crop-to-crop.
➔ Food Corporation of India (FCI) is a nodal Central agency along with other State agencies which
undertake the procurement of wheat and paddy.
➔ Coarse grains are procured by the State Governments' agencies for central pool while procurement of
oilseeds, pulses, cotton etc., is done by the NAFED, Small Farmers Agribusiness Consortiums (SFAC), Cotton
Commission of India (CCI) and other agencies under Price Support Scheme (PSS).
➔ In case of sugarcane, MSP has been assigned a statutory status and as such the announced price is
termed as statutory minimum price, rechristened as Fair Remunerative Price (FRP).
➔ Farmers have been demanding that MSP should be 1.5 times of C2. The National Commission on Farmers
(NCF) headed by MS Swaminathan also recommended the C2 method to calculate MSP. At present,
MSP is calculated based on the A2+FL method.

MSP @ Last Decade:

• In the last 10 years, the MSP growth rate for most of the crops has declined for both rabi and kharif.
Amid the ongoing protests, the government recently increased MSP for 6 rabi crops.
• With the latest announcement, MSP growth rates for wheat and paddy are reportedly at the lowest in the
last decade, at 2.6 % and 2.9 %, respectively.

Note: Umbrella Scheme “Pradhan Mantri AnnadataAaySanraksHan Abhiyan” (PM-AASHA), comprising

Price Support Scheme (PSS), Price Deficiency Payment Scheme (PDPS), and pilot Scheme of Private
Procurement and Stockist Scheme (PPSS) will aid in procurement of pulses and oilseeds.

UPSC CSE Prelims Previous Question 2009: Consider the following statements:

1. The Commission for Agricultural Costs and Prices recommends the Minimum Support Prices for 32
crops.
2. The Union Ministry of Consumer Affairs. Food and Public: Distribution has launched the National Food
Security Mission.

Which of the statements given above is/ are correct?

a) 1 only
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b) 2 only
c) Both 1 and 2
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d) Neither 1 nor 2
UPSC CSE Prelims Previous Question 2018: Consider the following:

1. Areca nut
2. Barley
3. Coffee
4. Finger millet
5. Groundnut
6. Sesamum
7. Turmeric

The Cabinet Committee on Economic Affairs has announced the Minimum Support Price for which of the
above?

a) 1, 2, 3 and 7 only
b) 2, 4, 5 and 6 only
c) 1, 3, 4, 5 and 6 only
d) 1, 2, 3, 4, 5, 6 and 7

UPSC CSE Prelims Previous Question 2020: Consider the following statements:

1. In the case of all cereals, pulses and oilseeds, the procurement at Minimum Support Price (MSP) is
unlimited in any State/UT of India.
2. In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price
will never rise.

Which of the statements given above is/are correct?

a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2
• State PSC Mains Previous Question: Briefly discuss the importance of Minimum Support Price (MSP)
in India’s agricultural sector. Has it been successful in averting agricultural distress?
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• UPSC Mains Previous Question: What do you mean by Minimum Support Price (MSP)? How will MSP
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rescue the farmers from the low-income trap?

{Economy – 2020/12} National Mineral Development Corporation

➢ Govt. of India’s fully owned public enterprise
➢ It is under the administrative control of Ministry of Steel
➢ Incorporated in 1958
➢ It is India's single largest iron ore producer
➢ It has been categorized by the Department of Public Enterprises as "Navratna" Public Sector Enterprise in
2008.

UPSC CSE Prelims Previous Question 2016: What is/are the purpose/purposes of 'District
Mineral Foundations' in India?

1. Promoting mineral exploration activities in mineral-rich districts

2. Protecting the interests of the persons affected by mining operations
3. Authorizing State Governments to issue licences for mineral exploration

Select the correct answer using the code given below.

a) 1 and 2 only
b) 2 only
c) 1 and 3 only
d) 1, 2 and 3

{Economy – 2021/01} Cryptocurrency index:

➢ S&P Dow Jones Indices will launch a cryptocurrency index in 2021 in association with virtual currency data
solution company, Lakka.
➢ USA is going to allow listing of cryptocurrencies as an asset class on exchanges.

UPSC CSE Prelims Previous Question 2016: With reference to 'Bitcoins', sometimes seen in the
news, which of the following statements is/are correct?

1. Bitcoins are tracked by the Central Banks of the countries.

2. Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address.
3. Online payments can be sent without either side knowing the identity of the other.
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Select the correct answer using the code given below.

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a) 1 and 2 only
 b) 2 and 3 only
c) 3 only
d) 1, 2 and 3

{Economy – 2021/01} Deposit Insurance and Credit Guarantee Corporation

(DICGC):

➢ It is a wholly owned subsidiary of Reserve Bank of India.

➢ It was established on July 15, 1978 under the Deposit Insurance and Credit Guarantee Corporation Act,
1961 for the purpose of providing insurance of deposits and guaranteeing of credit facilities.
➢ DICGC insures all bank deposits, such as saving, fixed, current, recurring deposit for up to the limit of Rs.
5,00,000 of each deposits in a bank

{Economy – 2021/01} Eastern Dedicated Freight Corridor (EDFC):

➔ Prime Minister Narendra Modi inaugurated the 351-km-long ‘New Bhaupur-New Khurja section’ of
Eastern Dedicated Freight Corridor
➔ It enables the railways to cut the costly delays in the transportation of goods and help the industries to
benefit from improved logistical efficiency.
➔ 'New Bhaupur-New Khurja’ stretch is part of EDFC that connects Punjab’s Ludhiana to Dankuni in West
Bengal.
➔ Eastern Dedicated Freight Corridor (EDFC) covers Punjab, Haryana, Uttar Pradesh, Bihar, Jharkhand and
West Bengal.
➔ EDFC Total Route length : 1,875 km
➔ Dedicated Freight Corridor: It is a high speed & high-capacity railway corridor that is exclusively meant
for the transportation of freight (goods & commodities).

{Economy – 2021/01} Exports and Imports April-November 2020:

➢ Exports declined by 17.84 % during April-Nov 2020

➢ Imports contracted by 33.56 % during April-Nov 2020
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➢ Long term goal: Export target of a trillion-dollar by 2025

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➢ Export sectors which did well during the eight months period include pharma, which grew by 15 per cent,
rice (39 per cent), and iron ore (62 per cent)
UPSC CSE Prelims Previous Question 2020: With reference to the international trade of India at
present, which of the following statements is/are correct?

1. India’s merchandise exports are less than its merchandise imports.

2. India’s imports of iron and steel, chemicals, fertilisers and machinery have decreased in recent years.
3. India’s exports of services are more than its imports of services.
4. India suffers from an overall trade/current account deficit.

Select the correct answer using the code given below:

a) 1 and 2 only
b) 2 and 4 only
c) 3 only
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d) 1, 3 and 4 only
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{Economy – 2021/01} External Trade:

➔ Q2 @ 2020: India’s Current Account remained in Surplus → Goods imports contracted sharper than
exports reflecting economic slump
➔ Current account surplus means a country has more exports than imports of goods and services
➔ Current Account: It shows export and import of visibles (also called merchandise or goods - represent
trade balance) and invisibles (also called non-merchandise).
➔ Invisibles include services, transfers and income.

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UPSC CSE Prelims Previous Question 2013: With reference to Balance of Payments, which of the
following constitutes/constitute the Current Account?

1. Balance of trade
2. Foreign assets
3. Balance of invisibles
4. Special Drawing Rights

Select the correct answer using the code given below.

a) 1 only
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b) 2 and 3
c) 1 and 3
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d) 1, 2 and 4
• State PSC Mains Previous Question: Give detailed account of growth, pattern, and direction of foreign
 trade of India in last one decade. What according to you are the main reasons for current account deficit
for Indian economy in last one decade? What measures do you suggest improving the current account
situation?

{Economy – 2021/01} Fugitive economic offender:

➢ A person against whom an arrest warrant has been issued for committing an offence listed in the Act
and the value of the offence is at least Rs. 100 crore.

{Economy – 2021/01} India lags behind Asian peers in export growth

➢ India has emerged as the worst performer among key developing economies in Asia in merchandise exports in
the aftermath of Covid-19
➢ Between March and October, India’s exports grew year-on-year, in only one month (September)
➢ India’s exports, on an average, contracted in excess of 20% a month in the March-October period from a
year before, China and Vietnam, in fact, saw a rise of about 4% each.
➢ A domestic demand compression battered its imports much harder than its exports. Consequently,
import-sensitive export segments, too, saw a sharp drop.
➢ Major Challenge ➔ Spike in shipping costs

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UPSC CSE Prelims Previous Question 2020: With reference to the international trade of India at
present, which of the following statements is/are correct?
 1. India’s merchandise exports are less than its merchandise imports.
2. India’s imports of iron and steel, chemicals, fertilisers and machinery have decreased in recent years.
3. India’s exports of services are more than its imports of services.
4. India suffers from an overall trade/current account deficit.

Select the correct answer using the code given below:

a) 1 and 2 only
b) 2 and 4 only
c) 3 only
d) 1, 3 and 4 only

{Economy – 2021/01} Karad Janata Sahakari Bank:

➢ Reserve Bank of India cancelled license of Maharashtra's Karad Janata Sahakari Bank as it does not have
adequate capital and earning prospects.
➢ Depositors of the bank will get full payment of their deposits from Deposit Insurance and Credit Guarantee
Corporation (DICGC).
➢ On liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling
of Rs 5 lakh only from DICGC.

{Economy – 2021/01} Municipal Bonds:

➢ Also referred as “Muni Bonds”

➢ Urban local government and agencies issue these bonds.
➢ Municipal bonds are bonds issued by urban local bodies to raise money for financing specific projects such
as infrastructure projects.
➢ SEBI circulated detailed guidelines in 2015 for the urban local bodies to raise funds by issuing municipal
bonds.
1) Not have negative net worth in any of the 3 preceding financial years.
2) Not have defaulted in any loan repayments in the last 1 year.
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{Economy – 2021/01} Non-Convertible Debentures (NCD):

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➢ Debentures are long-term financial instruments which acknowledge a debt obligation towards the
issuer.
➢ Some debentures have a feature of convertibility into shares after a certain point of time at the discretion of
the owner.
➢ The debentures which can't be converted into shares or equities are called non-convertible
debentures (or NCDs).
➢ Non-convertible debentures are used as tools to raise long-term funds by companies through a public
issue. To compensate for this drawback of non-convertibility, lenders are usually given a higher rate of
return compared to convertible debentures.
➢ NCDs offer other benefits to the owner such as high liquidity through stock market listing and tax
exemptions at source.
➢ Currently, listing of NCDs of 200 cr or above in a year is possible only if such issuance is through the
electronic book mechanism.

UPSC CSE Prelims Previous Question 2003: Debenture holder of a company are its

a) Shareholders
b) Creditors
c) Debtors
d) Directors

{Economy – 2021/01} QRMP Scheme

➢ Launched on Dec 5, 2020

➢ Govt. has launched the Quarterly Return filing & Monthly Payment of Taxes (QRMP) scheme for small
taxpayers under GST system.
➢ Taxpayers with aggregate annual turnover of up to Rs 5 crore in the preceding financial year and have filed
their October GSTR-3B (sales) return by November 30, 2020, are eligible for this scheme.
➢ Registered person having aggregate turnover up to Rs 5 crore may be allowed to furnish return on
quarterly basis along with monthly payment of tax, with effect from January 1, 2021.

{Economy – 2021/01} Trends in Rural-Urban Inflation:

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➔ Both rural and urban inflation exhibited a similar trend with the only difference that urban inflation
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started rising from 2018-19.

➔ Annual average urban inflation which was ruling below rural inflation till 2017-18, moved above it during
2018-19 and 2019-20.
➔ Both food and non-food inflation contributed to the divergence between urban and rural inflation.

{Economy – Capital Market – 2021/01} Market Infrastructure Institutions (MIIs)

TH | Prelims | GS3 > Economy > Capital Market

• Context: SEBI proposed norms to facilitate new entrants to set up market infrastructure institutions
(MIIs).
• Market infrastructure institutions (MIIs) are institutions like stock exchanges & depositories
(banks/institutions that hold & assist trading of securities like bonds, equity shares, etc.).

Some of the Key proposals

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• A resident promoter setting up an MII may hold up to 100% shareholding.

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• It will be brought down to not more than (either 51% or 26%) in 10 years.
• Foreign individuals may acquire or hold up to 10% in an MII.
• Any person other than the promoter may acquire or hold less than 25% shareholding.
• At least 50% of ownership of the MII may be represented by individuals with experience of five years or
more in the areas of capital markets or technology related to financial services.

Stock Exchange

• It is an organisation which facilitates buying & selling of shares of listed companies.

• Listed companies are those companies which are registered with the stock exchange.
• Only old shares are bought & sold because it is a secondary market. (IPO is done in a primary market)
• Shares are auctioned: demand & supply of shares are constructed on the bidding of people.
• Bombay Stock Exchange (BSE) & National Stock Exchange (NSE) are the major stock exchanges in
India.
 Primary market (new issues market): deals with new securities being issued for the first time (IPO).
 After IPO, the company's shares are listed & traded in an open market (stock exchange).
 Secondary market (stock market or stock exchange): existing securities are bought & sold.

Securities & Exchange Board of India (SEBI)

• It is an autonomous statutory regulator of the securities & commodity market in India.

• It was established in 1988 & given Statutory Powers through the SEBI Act, 1992.
• Headquarters: Mumbai; it has four other regional offices.
• SEBI is responsive to the needs of three groups, which constitute the market:
1. issuers of securities (companies)
2. investors
3. market intermediaries (stock & commodity exchanges)

{Economy – Exports – 2021/01} Duty Drawback Incentive

TH | Prelims + Mains | GS3 > Economy > LPG Reforms > Measures introduced to promote exports

• Context: CBI books six for duty drawback incentive fraud.

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• They were booked for allegedly claiming duty drawback incentives without eligibility.
• Duty drawback (DBK) incentive schemes are issued by the Directorate of Drawback.
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• Directorate of Drawback functions under Central Board of Indirect Taxes & Customs (CBIC).
• DBK is the rebate (a partial refund) of any duty that is chargeable on imported (excisable) materials
that are used to manufacture goods in India & then the finished goods are exported from India.
• Duty drawback is the sum of the following amounts:
1. Customs duty (taxes on imported goods) that is paid on imported input goods. This includes Special
Addition Duty (SAD — additional custom duty leviable on imported goods).
2. Excise duty (taxes levied on the manufacture of goods within the country) that is paid on
indigenous input goods
3. Duty that is paid on packing material
• Input goods that are obtained without paying customs or excise duty are not eligible for DBK.

{Economy – Taxes – 2021/01} Entertainment Tax – indirect tax subsumed by GST

TH | | Prelims | GS3 > Economy > Taxes > Indirect Taxes > GST

• Context: More than 24 years! after a concert in Mumbai by Michael Jackson, Maharashtra cabinet
retrospectively upheld the entertainment tax waiver granted for it.
• A consumer rights organisation had moved the HC in 1996 challenging the entertainment tax waiver.
• In 2011, the HC had ruled that the state government has a right to extend waiver under the state’s
laws.
• The cabinet’s decision will allow the organiser to get back the profit deposited with the govt decades ago!

Entertainment tax

• Entertainment tax (amusement tax) is any tax levied on any form of commercial entertainment, such as
movie tickets, exhibitions, circus, large festive celebrations, sport events, etc.
• The entertainment tax is an indirect tax, which is levied by the state government on the buyer.
• There is a demand to levy such a tax on online services like Netflix, Spotify, & others.

Laws that govern Entertainment tax

• Entertainment tax is different for different states as it falls under the purview of the state
governments.
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• Rules pertaining to entertainment tax are listed in the 7th Schedule, under Article 246 of the Constitution.
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• The 7th Schedule under Article 246 deals with the division of power between the Union & the States.
• It demarcated the powers into 3 lists — Union List, State List, & the Concurrent List.
• In 2017, the entertainment tax was subsumed by Goods & Services Tax.
Impact of GST on Entertainment tax

• Prior to GST, municipal bodies had no share in entertainment taxes collected by states.
• 101st Constitution Amendment (introduced GST) permitted levy & collection of ET by local bodies.
• In the absence of a state law, it suggested that the State may compensate local bodies for the revenue
loss & compensation may be made equal to 90% of the State GST collected on entertainment.
• Some states have made provisions that require local bodies to charge entertainment tax.
• In such states, entertainment tax is levied by local bodies over & above GST.
• Overall, GST has a mixed effect on the entertainment industry, depending on the states.
• For states where the entertainment tax was higher than GST rates, there is a shortfall in revenue & vice
versa.

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