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October 20, 2020
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October 22, 2020
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21st October Current Affairs

What is”Enhanced Follow-up” list?

In News:

Noting that Pakistan’s measures against money laundering and terror financing “is not yet sufficient to justify a re-rating”, the Asia Pacific Group of FATF has retained the country on its ‘Enhanced Follow-up’ list.

Details:

This was the first Follow-Up Report on Mutual Evaluation of Pakistan released by the Asia-Pacific Group (APG).

Why Pakistan was retained in this list?

Pakistan’s progress on the 40 FATF recommendations on the effectiveness of anti-money laundering and combating financing terror (AML/CFT) system largely remained unchanged — non-compliant on four counts, partially compliant on 25 counts and largely compliant on nine recommendations.

What is a Mutual Evaluation Report?

The APG Mutual Evaluations is a peer-review system to determine whether countries meet the compliance standards for money laundering and terror financing.

After a country submits a Mutual Evaluation report, APG members can decide to place a member either through regular or enhanced follow-up.

A regular follow-up means just biennial reports.

A country put under enhanced follow-up has to send four reports of compliance the following year.

Background:

FATF had placed Pakistan on its grey list in June 2018 and asked Islamabad to implement a plan of action to curb money laundering and terror financing by the end of 2019 but the deadline was extended later on due to COVID-19 pandemic.

About APG:

The Asia/Pacific Group on Money Laundering (APG) is a FATF style regional inter-governmental (international) body, the members of which are committed to implement international standards against money laundering (AML), the financing of terrorism (CTF) and financing the proliferation of weapons of mass destruction.

APG was founded in 1997 in Bangkok, Thailand, and currently consists of 41 member jurisdictions in the Asia-Pacific region and a number of observer jurisdictions and international/regional observer organisations.

Jurisdictions that join the APG, either as members or as observers, commit to the Recommendations of the Financial Action Task Force (FATF).

What was the iran nuclear deal?

In News:

China backs Iran nuclear deal, calls for new West Asia forum.

Details:

The forum would “enhance mutual understanding through dialogue and explore political and diplomatic solutions to security issues in the West Asia”.

Background:

Iran has been locked in an acrimonious relationship with Saudi Arabia, the other major West Asian power, over the war in Yemen, Iranian influence in Iraq and Saudi support for Washington’s sanctions on Tehran.

What was the Nuclear deal all about?

Iran agreed to rein in its nuclear programme in a 2015 deal struck with the US, UK, Russia, China, France and Germany.

Under the Joint Comprehensive Plan of Action (JCPoA) Tehran agreed to significantly cut its stores of centrifuges, enriched uranium and heavy-water, all key components for nuclear weapons.

The JCPOA established the Joint Commission, with the negotiating parties all represented, to monitor implementation of the agreement.

Why has US pulled out of the deal?

Trump and opponents to the deal say it is flawed because it gives Iran access to billions of dollars but does not address Iran’s support for groups the U.S. considers terrorists, like Hamas and Hezbollah. They note it also doesn’t curb Iran’s development of ballistic missiles and that the deal phases out by 2030. They say Iran has lied about its nuclear program in the past.

GST Compensation

In News:

The Goods and Services Tax (GST) Council has failed again to reach an agreement on the contentious issue of borrowings to meet shortfalls in cess collections used to recompense the States for revenue losses from the indirect tax implementation.

Details:

This was the third meeting in a row that discussed compensation shortfall without a decision.

What’s the main point of contention between the Centre and states now?

The Centre says it is ready to help the States who have decided to borrow to bridge the cess shortfall.

But, few states have been demanding that the Centre must borrow instead of its push for the States to do so.

Why should the Centre pay states for GST loss?

The GST Compensation Act, 2017 guaranteed States that they would be compensated for any loss of revenue in the first five years of GST implementation, until 2022, using a cess levied on sin and luxury goods.

However, the economic slowdown has pushed both GST and cess collections down over the last year, resulting in a 40% gap last year between the compensation paid and cess collected.

States are likely to face a GST revenue gap of ₹3 lakh crore this year, as the economy may contract due to COVID-19, which Finance Minister Nirmala Sitharaman termed an unforeseen “act of God”.

What is compensation cess?

The modalities of the compensation cess were specified by the GST (Compensation to States) Act, 2017.

This Act assumed that the GST revenue of each State would grow at 14% every year, from the amount collected in 2015-16, through all taxes subsumed by the GST.

A State that had collected tax less than this amount in any year would be compensated for the shortfall. The amount would be paid every two months based on provisional accounts, and adjusted every year after the State’s accounts were audited by the Comptroller and Auditor General.

This scheme is valid for five years, i.e., till June 2022.

Compensation cess fund:

A compensation cess fund was created from which States would be paid for any shortfall. An additional cess would be imposed on certain items and this cess would be used to pay compensation.

The items are pan masala, cigarettes and tobacco products, aerated water, caffeinated beverages, coal and certain passenger motor vehicles.

The GST Act states that the cess collected and “such other amounts as may be recommended by the [GST] Council” would be credited to the fund.