GST cut a bait for 2019 elections: But will it work?


Narendra Modi when he was the Chief Minister of Gujarat opposed the Goods and Service Tax (GST) on the ground that infrastructure was incomplete but when he took over the reins of the central government in his own hands, as the Prime Minister, he forgot his words and  introduced the tax haphazardly without proper ground work ignoring the stiff opposition by political parties including the Congress that contemplated it during its regime. Under ‘one tax, one nation’ argument, the BJP defended it. Sale tax, entertainment tax, vat and other fourteen taxes were merged to put to an end to a cumbersome variety of taxes. However, rates were high and procedure was complicated for businessmen and therefore there was a wave of protests that led to the government to cut this tax from time to time. Whenever faced with political outcry and public outrage, the rates were cut. The system is also complicated provoking the World Bank to remark that India has one of the most complex tax systems in the world. It also has second highest rates in the world that is 28 per cent. Keeping these rates in view, the Congress criticized it and Rahul Gandhi called it the ‘Gabbar Singh tax’.

When the BJP faced defeat in the assembly elections in the Hindi heartland of Chhattisgarh, Madhya Pradesh and Rajasthan, the alarm bells shocked the BJP and it read the writing on the wall. There was a dire need to soothe the enraged feelings of the people. Wisdom prevailed on the Prime Minister and Finance Minister Arun Jaitley. The meeting of the GST council was called on December 22 and it announced to cut the GST on a number of items. The reduced rates would be applicable from January 1 next year. On December 24 in a Facebook post Arun Jaitley said out of the 1,216 consumer items which are broadly used by people, 183 are taxed at zero rate, 308 at 5 per cent , 178 at 12 per cent and 517 at 18 per cent. He said 28 per cent will be restricted to only luxury and sin goods. Not only rates but present four slabs will also be cut and that is under consideration. 28 per cent slab will be gradually phased out. Most items will be adjusted in the 12-18 brackets. The government should also consider the bracket of consumer items with great care. Pan masala has been bracketed with cement attracting 28 per cent tax. Tobacco can be but pan masala cannot be considered a sin commodity. Then the procedure of filing returns is also very complicated and most businessmen have to take help from expert accountants. It is a burden on a small businessman. On this rationalization of GST, Rahul Gandhi rightly remarked that the Congress party jolted Prime Minister out of his slumber and he adopted ‘grand stupid thought’ of Congress.

It is not the sincerity and interest of people that forced the government to rationalize the GST but current defeat in the Hindi heartland that compelled it to woo the people. The opposition parties have been demanding to slash the GST but the Prime Minister was adamant. He was in a deep delusion that the people will support him irrespective of his action and performance. Now he realized that people who can give him a long rope may not be taken for granted. At a time when the government is seeking to dip into the cash reserve of the Reserve Bank of India, it is ready to cut in its revenue. After being hit by demonetization, the most unwanted and irresponsible decision, the small traders and small and medium industries were harassed by the GST. Neither rates nor slabs were given deep consideration and they were introduced haphazardly. The government estimated to collect an amount of over Rs one lakh crore per  annum but after one year of the GST regime, it failed to achieve the goal. No doubt GST created heartburns among the people especially small traders but the wave of anger and dismay among the youth and minorities due to joblessness and communal activities of the Sangh Parivar needs a lot more attention from the government. Now only four months are away from the elections. Hardly any course correction can be done.


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