Civil Services Examination - GoT / Game of Chance Update

A year ago, I had likened the Civil Services Examination, one of the most selective examinations in the world (success rate of a measly 0.23%), as a "Game of Chance". This was in my blog post, Civil Services Examination - Game of Thrones or Game of Chance?

I had come to this conclusion based on the following insights gleaned from an analysis of the CSE Exam results for the three years, 2013, 2014 and 2015, 

1) The interview score of the candidates has an effective weight of 40 % in determining the final rank of the candidate (and not 14 % as may appear prima facie by a simple computation of 275/2025). This is on account of the higher variability in the Interview (Personality Test) scores vis-a-vis the written scores. and 

2) The UPSC Interview had low "Reliability",  as there was little or no relation between the score obtained by the same candidate in two different years. The R-Squared value was in the region of  0.10, ie the interview score of a given year had less than 10% predictive power in explaining the interview score in the next year.

3) There is little or no relation between the Written and Interview marks scored by any candidate. Whatever ability (IAS-ness?) was being assessed by UPSC through these two proxies, it surely did not show up in the correlation between the proxies. 

The scatter plot below (taken from my last year's analysis) shows this weak (lack of?) relation between the interview scores of the same candidate in two successive years.

I had thereafter concluded that the UPSC interview is statistically seen to be of low Reliability, and by implication, of low Validity, as there can be no Validity without Reliability.

The only viable strategy available to the Civil Services aspirant was to acknowledge that this is a game of chance, and therefore to maximise the probability of success by taking as many attempts as possible, till such time that he gets the service of his/her choice (or exhausts his/her attempts).

This was a painful recommendation to make - it is bad enough that the youth of India spend (waste?) many years of their life trying to clear this exam, and here I was exhorting them to reappear, and spend another year or more till they get the service of their choice. 

I get to meet a fresh batch of young Officer Trainees of various Accounts and Finance Service (ICAS, IDAS, IP&TAFS, IRAS, IA&AS), every year at NIFM (where I am on deputation as Professor), where they undergo a part of their probationary training. Most Officer Trainees with attempts left reappear for the Civil Services Exam, but true to the game of chance analogy, only a few end up significantly improving their rank, they are as likely of failing to clear any of the three hurdles - Prelims, Mains and Interview.

Without any shadow or doubt, we can say that the Civil Services Examination as a Civil Services Capability/Aptitude assessment tool has very low Reliability (hence very low validity).

I conducted a similar analysis for the Civil Services Exam 2016 results, just to make sure that the earlier years were not an aberration. Here is what I found - once again:

1) A very weak relation between marks obtained in Personality Test (Interview) for the same candidate across two successive years ie CSE 2015 and CSE 2016. (A total of 188 candidates were identified who managed to clear the exam on both occasions, and it is their marks that are shown on the scatter plot)

2) No relation between the marks obtained by any candidate in Written Test and Personality Test. (The scatter plot is shown for the top 25 % of the candidates by marks secured in the Written Test)

So, nothing has changed in a year.

Let me make this clear - each and every person who clears the Civil Services Exam, any stage, is highly meritorious. Clearing the prelims itself puts you in the top 3 % of the applicants - that sure is something. My point is, from this stage on, it is luck (for want of a better word) that may be the key factor. So don't lose heart if you don't get the service of your choice, nor take pride in your ability for having "aced" this exam with a top-50 or top-100 rank.

I hope that UPSC will one day review the way it conducts its interviews, and find a way to increase its Reliability. Maybe they can learn from Google, which changed its interview process a few years ago, transitioning to "Structured Interview", or the US Office of Personnel Management, which also encourages government agencies to use structured interviews in hiring.  

Impact of GST on Small e-comm vendors - Why what you are reading in the papers is probably wrong

The Economic Times ran this story on its front page today with the title - "Small e-comm vendors will have to pay GST upfront".
There are factual inaccuracies in this article, which makes me realise that GST awareness is way below what it should be, given the fact that the GST rollout is hardly two months away.
So here is a quick lowdown on GST - and the error of understanding in the impact of GST on small e-Commerce vendors.

About GST: GST, or Goods and Services Tax, is undoubtedly the most ambitious and remarkable tax reform in the independent history of India. It is an Indirect Tax - a destination based consumption tax. For the first time, Goods and Services are being taxed at the same time, and by two different levels of the Government, the Centre and States, simultaneously. It is in the form of Dual Tax - both Centre and States would be levying GST on every transaction dealing with the Supply of Goods or Services. The Constitution had to be amended to allow both Centre and States to have joint powers in taxing Goods and Services. For the first time, we will see, One Tax One Nation principle in operation for most Goods and Services, with roughly the same rates of tax across India.
GST and small e-Commerce vendors: Among the various GST provisions is that of Tax Collection at Source (TCS) by electronic commerce operator (Section 52 of the CGST Act). As per this section, vendors selling goods on the various-Commerce sites would have upto 2 % of the sale proceeds collected by the e-Commerce operator for depositing with the Government,  1% on behalf of the Central Govt. (Central GST) and 1 % on behalf of the State Government (State GST). In case the sale is classified as an Inter-state sale, the tax collected at source would be upto 2 % under the Integrated GST Act (IGST). As per news report, the Revenue Secretary Hasmukh Adhia has informed that the GST council in its recent meeting in Srinagar has decided a 1 per cent Tax Collected at Source (TCS)).

Image Courtesy - Economic Times (22/05/2017). Image edited with X superimposed on image

The first error in interpretation of the GST Acts is that deduction of 1 % will impact all vendors registered on e-Commerce sites. As per the CGST Act, only those e-Commerce operators will have to make the deduction where the consideration with respect to such supplies is to be collected by the operator.  So, if you are a small e-Commerce operator, and you are only using the e-Commerce operator to showcase your product, you make your own shipment and collect the proceeds of sale directly from the customer, then the operator need not collect tax at source - the  money does not flow through him to collect it at source.
The second error in interpretation is that if your sale through an e-Commerce operator is liable for Tax Collection at Source of 1 %, and such tax amount gets deducted, then you can claim refund if your aggregate turnover in a year is below Rs 20 Lakh. This too is wrong - and for a very fundamental error in understanding regarding Indirect Tax, and the exemption limit. GST is a tax on consumption - not on supply.Though the seller or provider of Goods and Services is identified by the GST Act as a "Taxable Person", he is in effect a tax collection agent for the Government as on payment of tax on goods or services supplied by him "he is deemed to have passed on the full incidence of such tax to the recipient". It is the consumption which is taxed - not the supply. The exemptions are provided not on consumption, but on certain category of "Taxable Persons" who need to collect and pay tax, primarily to ease the compliance cost for small suppliers of goods and services. The definition of a Taxable person is given in the GST Act as: “taxable person” means a person who is registered or liable to be registered under section 22 or section 24". In case your aggregate turnover in a year is less than Rs 20 lakh, then you do not fit the definition of Taxable Person under Section 22, but you are a Taxable Person under Section 24 of the Act (24(ix)), which states that "persons who supply goods or services or both, ..through such electronic commerce operator who is required to collect tax at source under section 52". So, if you supply through an e-Commerce operator who is required to Collect tax at source under Section-52, then you are a Taxable Person, and you are liable to pay tax.
It is however to be noted that in case the vendor is making inter-state supplies, then again he is a Taxable person, irrespective of the turnover, and nature of e-Commerce operator.

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NIFM - (National Institute of Financial Management - www.nifm.ac.in) , is an autonomous body under Ministry of Finance, is an accredited GST Training Partner of NACEN. We conduct regular GST Awareness program of 3 days duration for officer of GoI, and for trade and industry.