GS Analyst: Daily Current Affairs

Context: The mid-term appraisal of the Semiconductor Design-Linked Incentive (DLI) scheme prompts a reassessment to fortify India's semiconductor industry and global standing.

1. Goals of Semicon India Program:

   - Reduce Semiconductor Imports: Aim to decrease reliance on semiconductor imports, particularly from China, in strategic sectors like defense and Artificial Intelligence.

   - Build Supply Chain Resilience: Integrate into the semiconductor global value chain (GVC) for enhanced supply chain resilience.

   - Leverage Comparative Advantage: Capitalize on India's comparative advantage, hosting design houses of major global semiconductor players and skilled chip design engineers.

2. Challenges and Priorities:

   - Limited Resources: Recognizing resource constraints, industrial policy priorities should ensure maximum benefits, focusing on stimulating the less capital-intensive design ecosystem. Semiconductor R&D's long-term payoff and challenges       in the hardware product start-up funding ecosystem contribute to reduced domestic investors' risk appetite.

   - Lack of Scrutiny: Despite Production-Linked Incentive schemes for foundries and assembly stages receiving quick revisions, the DLI scheme's lack of results has not undergone adequate policy scrutiny.

   - Uptake Challenges: Despite its focus on providing design infrastructure access and financial subsidies, the DLI scheme faces lacklustre uptake. Beneficiary start-ups face barriers, such as maintaining domestic status and limited foreign           direct investment (FDI), hindering access to capital.

3. Refocusing DLI Scheme:

   - Broader Design Objectives and Financial Support: Revise the DLI scheme to focus on cultivating semiconductor design capabilities within India, emphasizing India-designed chips. Enhance the scheme's financial outlay substantially to         support the shift in policy and encourage the development of indigenous companies.

   - Conflict of Interest: Reevaluate the role of the Centre for Development of Advanced Computing as the nodal agency, considering potential conflicts of interest as a market player in the chip design sector.

   - Karnataka's Model: Consider the Semiconductor Fabless Accelerator Lab (SFAL) under the Karnataka government as a blueprint for an implementing agency, fostering partnerships and providing access to mentors and financial institutions.

Context:

The Republic of South Africa's proceedings against Israel in the International Court of Justice (ICJ) over the Gaza war serve as a crucial test for the 'rules-based international order.'

1. Legal Context and Genocide Allegations:

   - South Africa's Application and Erga Omnes Obligation : Filed on December 29, 2023, alleging that Israel's military operations in Gaza violate the international Convention on the Prevention and Punishment of the Crime of Genocide.           Every state has an obligation to prevent genocide, providing the basis for South Africa's standing in the case.

   - ICJ Hearing: Held on January 11-12, 2024, to determine "provisional measures" while awaiting a ruling. Provisional measures require a plausible case for genocide, with a lower threshold of proof compared to a final hearing.

   -  Potential Provisional Measures: South Africa seeks an immediate end to military hostilities, awaiting the ICJ's decision on tailored provisional measures. Suggestions include ensuring entry of resources into Gaza, a humanitarian                    ceasefire, and restraining Israeli leaders from genocidal statements.

2. Debate and International Response:

   - Intervening Countries: Bangladesh and Jordan support South Africa, while Germany supports Israel. The U.S., U.K., and France express opposition, with France threatening non-compliance if the ICJ finds genocide.

   - South Africa's Case: Highlights Palestinian dispossession, Gaza war casualties, destruction of infrastructure, and genocidal statements by Israeli leaders.

   - Israel's Defense: Denies dispute, argues open interpretation of statements, and justifies military operation as response to Hamas attacks.

3. ICJ vs. ICC:

   - Non-State Actors: Hamas cannot be brought to the ICJ, but both Hamas and Israeli officials can face proceedings at the International Criminal Court (ICC).

   - ICC Referral: The situation in Palestine/Israel has been referred to the ICC, but no further steps have been taken.

   - Colonial Powers' Influence: Debate reflects a split between former colonial powers and others, raising questions about the legitimacy of international law.

Context:  

The GST regime, now approaching its seventh year, faces challenges related to a surge in show-cause notices, recovery proceedings, and disputes.

The absence of a functioning GST Appellate Tribunal further complicates the resolution process.

1. Increased Disputes and Lack of Appellate Tribunal:

   -The rise and Complexcities: A substantial rise in show-cause notices and recovery proceedings. Timelines for order passing have been extended, leading to a rush of orders before expiration. The complexities include reconciliation issues,         return mismatches, and disputes over input tax credit (ITC).

   - Lack of tribunal: Absence of a GST Appellate Tribunal hampers the resolution of disputes. Further - challenges arising from classification disputes and multiple tax rates.

   - Ineffective Process: Disputes referred to the Authority for Advance Ruling with doubtful efficacy. Adverse rulings often create uncertainty for assesses.

2. Proposal for a GST Dispute Settlement Scheme:

   - Need for Settlement Scheme and success criteria: Considering the challenges, proposing a GST settlement scheme. Examining the success factors of previous settlement schemes.

   - Sabka Vishwas Scheme Comparison: Drawing parallels with the successful Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.

   - Challenges of Retrospective Amendments: Highlighting challenges posed by retrospective amendments. Proposing a 25% settlement option for disputes arising from retrospective liabilities.

3. Recommendations for the GST Dispute Settlement Scheme:

   - Percentage of Tax Payment and waivers: Suggesting a flat payment of 33% of the disputed tax amount. Advocating for a complete waiver of interest and penalty.

   - Inclusivity and immunity: Extending the scheme's coverage to pre-show cause notice stage demands. Ensuring immunity from penalty and prosecution for participants.

   - Simple and easy:   Simplified payment structure and comprehensive waiver, will streamline the resolution process, reduce pending disputes, and potentially alleviate the burden on the proposed GST Tribunal.