Granted, the GST is not like demonetisation. If done right, immense good can flow. It can help make honest the entire citizenry, especially producers and sellers. It can boost the abysmally low tax-to-GDP ratio. At 16.6%, it is low for a lower- middle-income group country. It is a travesty that barely 3% people in a country of 125 crore pay taxes. The $2 trillion economy has a huge number of millionaires who remain outside the tax net. One clear gain from GST is that it will widen the tax base.
To illustrate, for decades Delhi has been the distribution hub for much of the northern region. Punjab, Haryana, UP, Himachal Pradesh, etc., rely on Sadar Bazaar and the adjoining wholesale markets to source general merchandise, auto parts, paper products, etc. Now, Delhi hardly produces anything of its own. Yet, if it is the biggest wholesale market in the wider region, it is because traders rarely pay any taxes. The amount of tax stolen actually constitutes their income-profit.
Following GST, it is the trader in Sadar Bazaar who is bound to feel the pinch. He will have to go legit. For, from the manufacturing stage to the last distribution point, a digital trail will be available. Default at the last point-of-sale in tax payment will be easy to detect. Indeed, post-GST Delhi is in danger of losing its position as a major wholesale distribution centre for the entire northern region, because the new tax regime makes for free, borderless movement of goods without additional taxes.
This columnist can cite his own experience. Building a house in Gurgaon required sending hardware and sanitary goods from Delhi. At a popular market, Bhogal, which caters to a wide area, I was asked if a kachcha or a pucca bill was needed. It had to be pucca, of course. What surprised me was that even cheque payments were no guarantee of the tax charged reaching the government treasury. I found it by accident.
While still at the tiles and sanitary-ware store, I received a call from an Opposition leader. Hearing that I was to meet him in Parliament soon, the trader asked for the bill he had handed me only moments ago. His reason: Thoda entry galat ho gaya (A wrong entry was made). And soon he furnished a new bill from another bill book. This kind of loot is likely to be minimised if the tax trail is maintained from production to final sale. And this is a huge advance on the way we have paid our taxes since Independence.
Of course, this column is not about the intricacies of GST. Suffice to say it is going to be a huge challenge implementing it. Initially, it will have a disruptive impact, especially on the very constituency of small-and mid-level traders, who generally root for the BJP. Now the common criticism of Modi is that he hasn’t created any jobs. The implementation of GST is certain to find lucrative employment for tens of thousands of data-fillers, accountants, lawyers, etc. Even the small businesses outside the GST net will have to maintain accounts to establish that they are below the exemption limit. The terror of tax bureaucracy is unlikely to diminish a wee bit, post-GST.
Meanwhile, the boycott of the launch razzmatazz in Parliament on the night of 30 June-1 July, underlines the cussedness of the Opposition. Fear of Modi milking the event for self-promotion could at least be partially countered if the leading lights of the Congress had attended the event, and, thus, broadcast a share in the birth of the transformative tax. GST had been on the anvil for nearly three decades. The BJP in Opposition had created hurdles. But credit the Modi government for exercising tact and tenacity and due accommodation in bringing about a national consensus. Nothing prevented the UPA to achieve the same, but it failed. This was because the scam-a-month regime was so denuded of moral and political authority that it was in no position to negotiate a reasonable compromise with the Opposition. Besides, Manmohan Singh was a nominated, not elected, Prime Minister, who mattered little within and outside his own party.
Admittedly, even Modi has had to bend a lot to ensure that GST is a reality. To transform the entire indirect tax system, especially when vested interests stand to lose their hold on the underground economy, entailed huge compromises. That is why the GST in its current form is highly flawed, leaving out nearly half of the GDP from its ambit. Major drivers of the economy, such as real estate, petrol and petroleum products, alcohol, etc., remain out because the states were determined to play around with taxes on these high-yield items for ulterior motives. It is common knowledge how some UP regional politicians had fiddled with taxes on alcohol at the say-so of a notorious liquor contractor, who had monopolised thekas not only in UP but in various other states by paying off politicians. Unfortunately, that window of corruption and tax-theft will remain open even after GST.
ONE FOOT IN DELHI, ANOTHER IN SRINAGAR
Why blame politicians for wanting to cling to power when you have seemingly well-respected professionals brazenly holding on to vestiges of influence and authority? The case in point is the recent return of N.N. Vohra, the long-serving Governor of Jammu and Kashmir, as the head of the India International Centre. It is surprising that he should assert his right to become the IIC president by rotation—the five life trustees take turns holding the post—when he has his hands full in Kashmir. How is he expected to do justice to the arduous task in Kashmir and simultaneously steer the affairs of the IIC?
In fact, Vohra wears another hat, that is, of a permanent trustee of a Chandigarh-based group of newspapers, which, of late, has acquired a viscerally anti-Modi character. But why blame Vohra? It is the Modi government, which, even after three years in power has failed to fill a number of gubernatorial posts with its own nominees. Vohra is now into his 10th year in Kashmir. If he had any fresh ideas about restoring a semblance of normalcy, by now it would have shown results in the valley.
HYPOCRITICAL MEIRA KUMAR
Strange the Opposition candidate for President, Meira Kumar, should be so dismissive of her Dalit identity, given that she had got where she has exploiting her caste, including getting into the once-elite Indian Foreign Service. Besides, her father enjoyed a long and very profitable ministerial stint in successive governments since Independence by dint of his Dalit caste. Maybe the reason she wants to de-emphasise her Dalit-ness is because the NDA candidate Ram Nath Kovind too is a Dalit.
Which brings us to the spiel about the presidential contest being an ideological fight. Come on, who are you kidding? She was desperate to join the BJP when A.B. Vajpayee was Prime Minster, though her real objective was to retain control of 6 Krishna Menon Marg. The sprawling bungalow, which at a conservative estimate would sell for over Rs 300 crore, has been in her possession since the death of her father in 1986. Jagmohan, the Urban Welfare Minister in the Vajpayee government, served the eviction notice. And when the Supreme Court barred the allocation of bungalows for memorials, overnight the Jagjivan Ram Memorial turned into a Jagjivan Ram Foundation. Besides, she is engaged in a bitter fight with the heirs of her brother Suresh Ram, over the division of vast lands and buildings.