Lecture 18: L2/P9: Vodafone transfer pricing issue, capital gains tax & GAAR

1- Capital Gains Tax How does capital gains tax works on shares?
1- TDS( Tax deduction at source) also called
witholding tax.

- imposed on income, property.

(eg- capital assets)

Biyani sold shares to birla, Birla has to pay

1000cr to him, but actual payment will be
900cr, 100cr will be CGT to govt.

Details of Vodafone deal

1- Vodafone purchased CGP investment located in cayman

island in 55k cr .
2- It has 67% share of hutch india, hence vodafone acquired
hutch india.
3- Govt. demanded vodafone to pay 12k cr as CGT, but
vodafone didnot.
island
1- IT Act Clarification (2012)

What is Evasion or Avoidance?

Vodafone CGT
 GAAR (General anti avoidance rule) : Budget 2012

Corporates revolted against it

Why such ignorance of CGT an issue?

Some of corporates have acquired other corporate 2- Pro-corporate Arguments

via intermediatries. Govt. already imposing lots of tax on corporates

1- Argument by govt to impose some restrictions

on corporates.

Transfer Pricing Issue

- It occurs when shares are transferred between Why transfer pricing issue occur?
subsidiaries of a parent company.
- Due to under-valuation, CGT paid remains less.

eg :

Eg:

Govt. relived this case to boost

investors confidence.
but actual value
paid value
Nokia tax Row Issue between state govt(TamilNadu) & Nokia

1- Royality Payments : Royalties are payments

to an owner for using an asset or property,
such as patents.

Goods

shareHolders

To get royality, generally all foreign

companies get their patent on the name On domestic sale, state
of the parent company only. govt. can ask for 4% VAT

2- Quantitative restrictions on royalities Double taxation avoidance agreement

1-Tax Agreement @Source Model
- Tax taken by source government only

2- Tax agreement @DestinationModel

- Tax taken by the destination govt only.
DTAA : Double taxation avoidance agreement

3- Issue between central govt. & Nokia

inspite of sending
royality to NOKIA
fineland. the tax on
royality was not paid
to govt. by NOKIA
India.

Fiscal Imperialism
Argument of NOKIA
a means by which a country or a group of countries
gain financial dominance over another country or a
group of countries by taking advantage of the debt
situation in those countries
 Lecture 19 : L3/P1: Balance of Payment (BoP) & Current Account Deficit

Balance Of Payment
Annual Financial Statement

1- BOP system Record

Balance of Trade

Check Ranking of trade in

economic survey.

2- BOP Economic transaction b\w residents & Non-

Residents
a) It may be possible that
adnan is citizen of cana Current Account Deficit
-da, but record will be
maintained for residents Visible & invisib
b) c) -le w.r.t current
BOP types

How to reduce CAD

Note: World's Balance of Payment = zero
Balance of Payment --- Types

1- Current b) For 2023, india still at

rank- 1
a)
 2- BOP (2nd part) : Capital Account 5-

6-

7- FEMA => Foreign

exchange management
Act

Hence on conclusion:

When capital(money) coming in => positive

When capital{money} going out(as loan) => -ve
Overall Capital Account shows surplus result
a) Investment : Consists of FDI & FII
FII => FPI => Foreign Portfolio investors
FDI => Foreign direct investment

Finance ministry made commitee (Arvind Mayaram

Panel) for deciding clarity on definition of FDI & FII

Recommendations:
1-

Difference Capital Account Inflow

1- 2-
QFI => Qualified
financial investor
ReFPI => Registered FPI
2-

3-

4-
 Conclusion for BOP
1- 2- If wanted to get $1=50 instead of $1 = 40,

3- Why BOP crisis ?

a) b) c)

d)

4- How BOP crisis happens?

CAD => Current Account Deficit

Whenever there is BOP crisis, help can be taken from International

Monetary fund (IMF)
 Forex Reserve

1- Definition: All the amount/capital as part of RBI's

saving is called forex reserve.

special Drawing Rights

Reserve Tranche
A reserve tranche is a portion of the required quota of
currency each member country must provide to the
International Monetary Fund (IMF) that can be utilized
for its own purposes—without a service fee or economic
reform conditions.
 Lecture-20 : L3/P2: Rupee Devaluation & Exchange rate regimes

1- MSP Mechanism - minimum support price 3- Floating Exchange Rate Regime

1- 2-

eg-> managed floating

1- 2-

If private players do not give minimum price of

commodity as MSP, then farmers can go to govt.
. the govt. will purchase it at MSP. 3-
4- RBI can intervane to
sell dollar from reserve to
2- Fixed Exchange Rate Regime (only upto march 1992: suck up the volatility.
In this central bank will deceide the exchange
rate of its country's currency with other currency

=> All forex dealers will have to trade on this conversion conclusion: 1- Depreciation => sell forex reserve
rate only, else would be punished under FEMA (Foreign 2- Appreciation => buy forex reserve
exchange management act) .
Some more insights on this:
1- 2-

3-
4-

3- External shock factors in Fixed exchange

- 2-
eg1: 1-

4- NEER (Nominal effective exchange rate)

REER (real effective exchange rate)
2- People demand for forex conversion would increase
due to this scheme. Forex reserve will start decreasing a-

b- c-

solution: Devaluation
d- Overvaluation
Eg of china in case of overvaluation: Other questions of the chapter
a- No Appriciation of Yuan => increased
export coz in international market, goods a-
of china will look cheaper.

b-

question:
a-

b-
Lecture 21: L3/P3: capital account convertibility: Meaning, Implications
1- Convertibility:
b-Capital account convertibility
the ability to exchange one currency for
another at a given conversion rate and in terms of eg: External commercial borrowing
the usability of a currency for foreign transactions
1-
-- Why restrictions on convertibility?

2- 3-

a- Current Account Convertibility

Applicable on:

Restrictions under FEMA

eg-1:

But after that it was liberalized under

Liberalized remittance scheme(2004) (LRS)

a-
Full current Account convertibility
a-
b-

b-

c-

c-

d-

FEMA cannot be made so tight

i.e. not possible to make 0%con
-version, hence LRS tight.
 Hence zooming out the complete discussion Questions
1-

2-

Recommendations of Tarapore commitee

points in favor & against of liberalization

1-

2-

check data of 2023-24

CAL=> capital account liberalization
3-

Crisis?
1- 2-

3-

4-
 Lecture-22: L3/P4: ECB quantitative easing & Greece Anti-Austerity
1- ECB Quantitative easing
b-
a-

hence solution
proposed as OMO

c-
d-
Due to Euro injection
quantitative easing is
performed and defletion
is controlled.

e- Impact of QE:

ECB: QE -> Impact on India When ECB tapering starts

2-
1-
Greece Anti-Austerity Measures

a- Problem b-Reason of ECB not c- Austerity?

helping greece

e-
d-

Lecture 23: L3/P5: IMF, SDR, Quota reform & Gold standard Exchange rate
International Bodies

1- IMF - structure
a- b-

2- IMF Functions
Several functions performed by IMF

a- Gold standard currency exchange system

1.a- Features
1- 2-

- IMF works same as banks- Depositor-borrower system

1- Those who contributed 2-
in IMF SDR, IMF will provide
interest on their deposits.

3-
This fixed regime of gold exchange proved to be exhausting the
gold reserve, hence was stopped & US started adopting floating
exchange regime in 1973 & india in 1992.

What is SDR?
1- 2- 3-

4- IMF Quota
a- c-
b-

wt votes
IMF Criticism Due to extra power USA holds in IMF, new banks were created
as BRICS and AIIB
 Lecture 24: L3/P6: WTO, Bali Package, Food subsidy issue, TFA
1- WTO
b-WTO contribution in upsc
a-

c- WTO Structure

1- 2- 3-

latests member added is Afganistan (2016)

d- WTO Functions
1- 2- Understanding Tariff & non-Tariff barriers
a b

LDC => Least Develope countries

c
Trade Barriers in detail

SPS Agreement eg of SPS Agreement

a- c-

b- d-
e- WTO- Agreements

1- GATT: General Agreement of Tarif & Trade

GATS:General Agreement on Trdae in services
TRIPS: Trade related intellectual property rights

a-

b-

2- Amber Box - subsidy

a- b- Developing country has some issue
1- 2-

3- Peace Clauses
4-Tarif facilitation agreementt

commiee to solve TFA issue

a- b-

c- Read commitee report

 Lecture 25: L3/P7: Money- Evolution, Types and functions
1- Bitcoin
Fungibility of money Functions of Money

2- Barter system : Benefits & problems

a- b-

3- Benefit of money

2-

4- Evolution of money
 a- Commodity money
1- 2- pros & cons

b- Metallic money
1- 2- Pros & cons
a- b-
d-

c-

c- Fiat money

1- Types of fiat money

fixeed exchang

2- 3-

d-Bank Money
2- 3-
1-
Lecture 26:L3/P8: Bitcoins- mechanism, money laundering, RBI’s stand
1- Bitcoin
a- Why Bitcoin b- Ways to earn bitcoin?
Algorithm solving

Services

Currency

c- reward mechanism of Bitcoins

d- Requirements for Bitcoin mining e- Bitcoin Powerful system

f- Bitcoin Transfer?
g- No double spending possible

h- Bitcoin vs SBI Netbanking

2- How Bitcoin can be used in illegal activities, money laundering, terrorism, gambling?
a- b- Exchanging bitcoin with currency c- Money laundering
using any existing websites.

d- Buy goods & services

3- About Bitcoin- mains specific

a- b- c-

d- e-

4- Raid- Bitcoin

a-

5- Laxmicoin.com 6- Mt. Gox 7- USA official stand on Bitcoin

8- Interview Questions:
 Lecture 27: L4/P1: Fiscal policy: Budget 2015- Direct Taxes Theory
1- Introduction
Check from Laxmikanth

Question on vote on account & interim budget

2- About Budget
1- Parts of budget:

a- Revenue budget
2- Direct Tax - #Type1
1-
2.a Fringe Benefit Tax 2.b Service Tax

3,4,5 are removed now

but they were part of
direct tax.

3- Direct Tax-#Type2
4- Direct Tax :States 5- Pros of Direct tax

3,4,5,6 removed now

6-Cons of Direct tax

a- b-
 - Difference between Cess & Surcharge
note: deduction, exemptions are given so that citizens can save much which will result in capital formation,
improve social security etc.
a- b-

-- Why wealth tax was removed?

wealth tax replaced by

surcharge

-- What is Good Tax system ?

Good tax system is that which follows 4 canons of Adam Smith

-- Effective Tax Rate

 Lecture 28 : L4/P2: Budget-2015: Indirect Taxes, Subsidies & Capital & Plan
Expenditure
1- Indirect Tax-Union 2- Indirect tax-State

Excise duty on human

consumption - state
on medicinal consumption
- imposed by union.
CST => custom sell tax

-- Merits of Indirect tax --Demerits of Indirect Tax

--Regressive means

2- Service Tax - Theory

a- b- Service tax is not applicable to 2 categories
Negative list & exempted

Note: Excise duty refers to

1- the taxes levied on the
manufacture of goods
within the country.
2- custom duty is levied
c- Negative List on goods coming from
outside the country.

Note: Check about different direct & indirect taxes , how & where applied, check in reference to budget 2024
3-Understanding the ranking of different taxes 4- Gross Tax & Net Tax Revenue
eg:

Ranking will be based on budget release,

hence check for budget 2024 , 2023 & 2022
for comparison.

5- NCCF/NDRF
6- Non-Tax Revenue for Govt.

7- Revenue Expenditure Ranking 8-Subsidies Ranking budget(2024)

(2023-24)

a-General expenses of Union

b-Capital Money
a- Capital Receipts b- Capital Expenditure

c-

Actual representation

Use this for MCQ solving

 Lecture 29: L4/P3: Budget & Economic Survey: Public Debt, Fiscal Deficit, &
FRBM Targets
1- Debt 2- Revenue Deficit

a-

b-
3- FRBM Act 2003

4- Effective Revenue Deficit (ERD) 5- GDP

need to cal. GDP

6- Budgetary Deficit (BD)

b-
a-

c- Why budget deficit = 0?

 7- Fiscal Deficit
Budget deficit + Market Borrowing = fiscal deficit

eg:

8- Primary Deficit

9- Vertical Descending (GDP%)

10 - Why fiscal deficit bad?

a- c-
b-

d-
e-
11- FRBM Act
a- b-Twin Deficit

Lecture 30 : L4/P4: Budget-2015: PDMA, Curbing Black Money in Foreign &

Desi Assets

1- Need of PDMA
a-Financial Repression b-Solution c-

2- Views of Economic survey & 14th FC on Fiscal deficit

a-Increase tax to GDP b-Decrease debt- GDP
3- solution2- to decrease fiscal deficit,
Income has to increase but failing due
to reasons:

a- b-

4- solution3- to decrease fiscal deficit, 5- Govt. reforms to reduce FD 6- Yet to be considered

expense has to decrease but failing due
to reasons: a-

7-14th FC : Salary reforms 8- Accounting norms

9- Conclusion: for lowering Fiscal Deficit

10- Black Money (steps to curb Black Money -Acc. to Budget 2015)

a- Black money Held in foreign assets

1- 2-

b- Black Money held in Desi Assets

1- 2-
 Lecture 31: L4/P5: Budget-2015: GAAR Delay, DTC dropped & BTT Forgotten
1- Black Money- Tax evasion vs Avoidance
a- b-GAAR: For Tax Avoidance cases
1- 2-

eg

c- Prevent cases like vodafone(Budget 2015)

1- 2-

d- Domestic Transfer Pricing norms e- Steps taken to ease of doing business- In Budge 2015

1-
These reforms were
supporting in favor of
Make in India campaign

2-

2- Why was DTC Dropped ?

a- What DTC Brings b- Reason to drop

answer to Ques.
 b- What is Bank transaction Tax?
1- Features 2-Why Bogus idea?

a- a- b-

c- d-
b-

e-
 Lecture 32: L4/P6: 14th Finance Commission: Tax Devolution, 42% Share
1- Introduction - resouces for 14th FC 2- Functions Of FC
a- b-

2.1- Tax Devolution

Union to states 2.1-a
out of 42% share, FC &
finance commission deceides
in which category money
among states should be transfered.

2.1-b: Vertical Distribution- Taxes in which Union do not have to share with the states

1-
conclusion
4-

hence can't be deceided

by FC

2-

5-

3-
2.1.c- Horizontal Distribution - among states
1- On basis of population 2- Fiscal Capacity Income distance

Parameters considered for Horizontal

Distribution. Comparison wt. assigned by 13th & 14th Fin. commission
Do it for 2023-2024 question

3- 4- Special category states vs general category states

a-

5- Criticism of 14th FC decision check for 2024 FC

a- b- c- Recommendations by Abhijit
sen

Questions:
Lecture 32: L4/P7: 14th Finance Commission: Grant in Aid for PRI & Disaster
Management

1- Panchayati Raj Institution-state FC

a- Local Body-problems b- 14th FC: Helping the local bodies

c- Grant-in Aid for PRI

d- Tax Reforms for local bodies
1-

2-

e- North east-local bodies 3-

f- Municipal bonds
g-other measures & conclusions

Questions
 3- Grant-in-aid for Disaster Management
a- c- NDRF Problem areas
b-

d- NDRF present list e- NDRF -calamity list

f- State Disaster response fund g- Funds- NDMA 2005

Questions
-- Other recommendations of 14th FC

a- Cooperative federalism b-Public utility pricing

1-

2-
 Lecture 34: L4/P8: GST: Goods and services tax- Features,Benefits, Challanges
1- GST Overview- topics to be covered:
initial state of tax system:
sale tax ---- VAT ---- GST

a- Sales tax
1-Eg 2-
3-Issues due to increased Fiscal
Deficit

solution to sales tax problem => VAT

b- VAT

1-Eg:
2-
3-

4- 5- 6-

7- conclusion

To take benefit of this system, each merchant has to have TIN number
& should provide bill to their buyers, this will help in curbing tax evasion
which was happening by selling things without bill.
8-Tax collection in case of Interstate business

exporter state
gets CST

c- MODVAT

1- Issue 2- Solution is MODVAT

MODVAT application only on excise duty

of central govt.

d- CENVAT

1-issue
2-solution is CENVAT 3-

service tax still cascading in MODVAT

Note:
 e- GST
1- why GST? 2- Solution is GST
i
i-

ii-
ii

iii- GST implementation in case of business

within the state

iii

iv iv- GST implementation in case of business

interstate

Integrated GST given to

destination state

3- GST Amendment timeline 4- GST political implementation- GST Council

 5- GST Council structure

6-Functions of GST Council

i- ii-

iii-
iv-

7- List of existing taxes included/excluded

i- ii-

educational cess

iii- iv-
8- Amendments done to implement GST
ii-
i-

iii-

9- Benefits of GST
i-

ii - IGST- Efficient logistics

a- b- c-

d-

e- f- g-
 i- j-
h- j-

k- conclusion of IGST
l-

iii- Ancillarisation (means outsourcing)

1- Issue 2- Solution is GST

iv- Same base computation v- Exports will be Zero rated

1- 2- Eg
 -- Challenges with GST
2- High RNR
1- a- b-

d-
c-

3- Compensation of state
a- b- c-

d- e-
f-

4- Registration Issue
a- b- c-
5- Miscellaneous Issues
b-
a-
 Lecture 35- L5/P1: GDP Calculation Methods, CSO Base-revision, Economic
Survey Data
1- GDP Overview 2- What is GDP?

3- GDP vs Inflation
a- Nominal & Real GDP b- GDP Deflator c- Market Price

d- GDP at Market price

e- GNP f- NNP at market price & factor cost

Question

g- National disposible Income

4- Methods to calculate GDP
a- Income Method

b-Expenditure Method
1- considering different Expenditures 2-Consumption Private
for calculating GDP 3- Investment

4-Government 5- Foreign Exchange

a- b-

6- GDP Formula
c- Production : GVA method
1- 2- Another way to calculate 3- GDP at Market Price

calculating value addition at each level

5-Things not covered in GDP

6- CSO Modifications
a- c-
b-

d- Difference between other GDP method cal & CSO cal.

1- 2- 3-
 4- Consumption of Fixed Capital

e- GVA calculation on CSO Modifie

1- 2- 3-

4-
Note: All these data are taken from economic survey 2015, update it
according to economic survey 2024.

f- Other Reforms done

2- 3-
1-

4- 5- CSP-GDP -
Corporates Coverage
g- CSO Modification - criticism

1- 2-

3- 4- Impact of CSO Modofication on GDP

5- CSO-GDP IMF Angle 6- GDP Calculation as per CSO

a-

b-
7- Sectorial contribution in GDP
a- b- Check for year 2023-24

c- New method (rem. ascending-descending for MCQs)

d- Ranking(check for 2023-24 from economic
survey
Lecture 36 : L5/P2: Economic survey: Agriculture reforms & Budget 2015
Announcements

1- Understanding the various issues in Agro ,Mfg & service industries

A- Agriculture Sector
a- Issues b- Solution

Perishable Product

c- Agriculture yield must be improved

to ensure food security
i- ii- Extension Service
a- b-
iii- Seeds
c-
a- b-Eg:

norman Barlaug- Father of Green Rev.

iv- Fertilizer subsidies

Note: Check ranking of subidies(which one is given more) for 2023-24
economic survey
a- why urea over consumption?

b-Overuse of urea
1- 2-

3-
 c- Mridaparikshak

v- Farm Mechanization
a- b- Problem with farm mechanization

v - Irrigation

a- Issue b- Solution by Govt. (check sol w.r.t 2023-24- budget)

vi - Loans
a- Need -- Update it w.r.t budget 2023-24 b-Issues
d- Things to do Post production to improve yield

1- 2-

3- Shanta Kumar- committee reforms check the links provided, also value addition for 2023-24 needed
a- b-

c-
4- Private Selling - APMC Reforms
a- Issues b-Problems & Solution c- Model Act 2003

d- Issues with Model Act e-Solution for Model Act loopholes

f- Question:
Lecture 37: L5/P3: Industrial Sector: Policies, Licenses, MSME Types, Mudra Bank,
AIM,SETU
--Topics to cover
1- Industrial policy
a- b-

c- d- Industries required licenses

2-
1-

e- policies

1- Manufacturing policy 2011

2- IT Policy 2012

--conclusion

2- MSME
a- Small Industries 2- Cottage & Village industries
1-

3- Organised sector 4- Unorganised Industries

5- MSME
a- MSME Classification

6- SSI-Small scale industries

some products are reseerved for the production
in SSI
a- b- SSI items reserved

b- MSME Tax benefits

2- Why Mudra Bank?

a- Issues b-Solution

c-Features of Mudra Bank

 d- Functions of mudra bank

e- From where Mudra Bank will get money?

f- Mudra Bank Criticism

3- Atal Innovation Mission

4- SETU Startup
5- public procurement

6- Conclusion for MSME

Lecture 38: L5/P4: Factory-Labour reforms and Companies Act
3- Corporates
a- Labor reforms
1- Why needed?

2- Solution

a- Factories Act b- Factories Act-2

c- Factories Bill- Women

Empowerment

d- Factories bill- workers Facilities

 e- Factories Bill- overtime

f- Conclusion on Factory reform

-- Apprentice Act

b- Companies Act
1- Meaning

2- Corporate Governance in India

3- Types of companies

a- Companies Act
Eg of How a company established

b- Holding vs subsidiary companies

c- Special Purpose Vehicle

d- Government owned

1- Departmental Undertakings

2- Govt. companies vs public cor.

 3- About SBI

e- 4 new bodies Created in companies ACT 2013

1- 2- 3-Board of Directors

4-Minimum Directors Allowed 5- Who can be Independent Directors

for different types of companies
a-

b-

6- Corporate Social Responsibility(CSR) c-

a- b-
 7-Statutory Bodies
a- b- NCLT- Tribunal

c- NFRA - Reporting d-Education

e-Fraud
previous tasks New Addition

--Conclusion for companies ACT 2013

a- Pros
b-Cons
b-Cons