GS 3


  1. Reserved Classes: Sub-Classification


Supreme Court recently held that States can sub-classify the list of Scheduled Castes (SCs), Scheduled Tribes (STs), and Socially and Educationally Backward Classes (SEBCs) to provide preferential treatment to the “weakest out of the weak”.

Main Points

  • This decision overruled a previous decision in E V Chinnaiah v State of Andhra Pradesh and Others (2005), that the state governments had no power to create sub-categories of SCs for the purpose of reservation(a five bench judgement) .
  • Since a Bench of equal strength cannot overrule a previous decision, the court also referred it to a 7-judge Bench.
  • The judgment was on the constitutional validity of Section 4(5) of the Punjab Scheduled Caste and Backward Classes (Reservation in Services) Act, 2006.
  • The act allows 50% of the reserved Scheduled Castes seats in the State to be allotted to Balmikis and Mazhabi Sikhs.


  • Reservation system has created inequalities within the reserved castes There is a “caste struggle” within the reserved class as benefits of reservation are being usurped by a few.
  • Reservation was not contemplated for all the time by the framers of the Constitution. Article 334 of the Constitution had originally required the reservation of elected seats to cease in 1960, but it was extended by various amendments.
  • The latest one being the 104 Amendment extending it to 2030.
  • If sub-classification is denied, it would defeat the right to equality by treating unequal as equal.
  • Article 14 guarantees everyone “equality before law” and “equal protection of law”. Equal protection of the laws means that amongst equals the law should be equal and treating unequals as equals will be violation of law.
  • Among the SCs, there are some that remain grossly under-represented despite reservation in comparison to other SCs. This inequality within the Scheduled Castes is underlined in several reports, and special quotas have been framed to address it.
  • Justice Ramachandra Raju Commission, 1997 recommended subdividing The SCs into four groups and apportioning reservations separately for each. It also recommended that Creamy layer of Scheduled Castes be excluded from receiving any reservation benefits in public appointments and admission to educational institutions.
  • In Andhra Pradesh, Punjab, Tamil Nadu and Bihar, special quotas were introduced for the most vulnerable Dalits. In 2007, Bihar set up the Mahadalit Commission to identify the castes within SCs that were left behind. In Tamil Nadu, a 3% quota within the SC quota is accorded to the Arundhatiyar caste.
  • States have the competence to grant reservation benefits to SCs and STs in terms of Articles 15(4) and 16(4), and Articles 341(1) and 342(1).
  • Article 16 (4) provides that the State can make any provision for the reservation of appointments or posts and in matters of promotion in favour of any backward class of citizens who, in the opinion of the state, are not adequately represented in the services under the State.
  • Article 15(4) empowers the state to create special arrangements for promoting the interests and welfare of socially and educationally backward classes of the society such as SC and STs.
  • As per the Articles 341(1) and 342(1), the President of India, after consultation with the Governor, may specify, the castes, races, tribes or parts of groups within castes or races, which shall be deemed to be Scheduled Castes and Scheduled tribes.


  • In the Indra Sawhney v. Union of India 1992 case, the Supreme Court held that it would be perfectly legal for the state to categorise backward classes as backward and more backward.
  • It also upheld the concept of ‘creamy layer’ within OBC to those who have overcome their backwardness. However, the concept of creamy layer in SCs and STs has been in debate since then.
  • In the E V Chinnaiah v State of Andhra Pradesh and Others 2005 case, the Supreme Court ruled that only the President has the power to notify the inclusion or exclusion of a caste as a Scheduled Caste, and states cannot tinker with the list.
  • In the Nagaraj & Others vs Union Of India, 2006 case, the Supreme Court said that the government had to collect quantifiable data showing backwardness of the class and inadequacy of representation of that class in public employment.
  • However, in Jarnail Singh vs Lachhmi Narain Gupta, 2018 Supreme Court held that the government need not collect quantifiable data to demonstrate backwardness of public employees belonging to the SC/STs to provide reservations for them in
  • It also observed that certain caste groups or subgroups have “come out of untouchability or backwardness by virtue of belonging to the creamy layer”.
  • Recently, the Supreme Court has ruled that reservation in the matter of promotions in public posts is not a fundamental right, and a state cannot be compelled to offer the quota if it chooses not to.

Way Forward

  • Dr B.R. Ambedkar described the Indian society as a gradation of castes forming an ascending scale of reverence and a descending scale of contempt. As is the nature of any hierarchical structure, no two castes are equal.
  • The ones at the bottom of the ladder, those who have been most severely ostracised and subjugated, have not yet received the benefits of reservations as a tool to ensure their representation in society and government. This judgement will help trickle down the benefits of reservation to the most needy and establishment of an equal society.



  1. Meeting of GST Council


41st Goods and Services Tax (GST) council meeting was recently held to discuss the issue of compensating states on account of revenue loss due to implementation of GST and fall in cess collections.

GST Council

  • It is a constitutional body (Article 279A) for making recommendations to the Union and State Government on issues related to Goods and Services Tax.
  • The GST Council is chaired by the Union Finance Minister and other members are the Union State Minister of Revenue or Finance and Ministers in-charge of Finance or Taxation of all the States.
  • It is considered as a federal body where both the centre and the states get due representation.

Main Points

Shortfall in GST and Cess Collection:

  • The economic slowdown had reduced both GST and cess collections in FY 2019-20, resulting in a 40% gap (shortfall) between the compensation paid and cess collected.
  • The central government paid over Rs.1.65 lakh crore in 2019-20 as GST compensation by utilising the excess cess amount collected during 2017-18 and 2018-19.
  • The state’s GST revenue gap in 2020-21 is expected to be about Rs. 3 lakh crore, while cess collections are only projected to reach Rs. 65,000 crore, leaving a shortfall of Rs. 2.35 lakh crore.

Distinction in Shortfall:

  • Only 97,000 crore out of Rs. 2.35 lakh crore of the shortfall is due to GST implementation itself, while the rest is due to the impact of Covid-19.
  • The Centre distinguished the GST shortfall into two types:
  • Due to GST implementation itself.
  • Caused by the impact of Covid-19.
  • The Finance Minister termed the fall of GST revenue due to Covid-19 as an act of God.
  • However, the GST Compensation Act, 2017 did not foresee an act of God. 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.
  • Sin goods are goods which are considered harmful to society and individuals. Example of sin goods: Alcohol and Tobacco, Candies, Drugs, Soft drinks, Fast foods, etc.

Offers Made by the Centre:

  • It offered two options for borrowing by states to meet the shortfall: A special window could be provided, in consultation with the Reserve Bank of India (RBI), so that the states can get Rs. 97,000 crore at a reasonable rate of interest, the amount can be repaid after five years (of GST implementation) ending 2022 from cess collection.
  • Another option is that this entire gap of Rs. 2.35 lakh crore can be met by the borrowing by the states in consultation with RBI.
  • The states have been given seven days to decide which option they want.
  • Also, states choosing the first option would get 0.5% relaxation in states’ borrowing limits under the Fiscal Responsibility and Budget Management Act, 2003.
  • The borrowing plan is valid for FY 2020-21 only and the GST Council would review the revenue position next fiscal to decide on payments for 2021-22.


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