COMMON TAX CODE

Upset by GST provisions, will small traders finally lose their ardour for the BJP?

The new tax regime presupposes that small businessmen are thieves. ‘We have been stigmatised,’ said one man.

Pity the small traders! Steadfast supporters of the Bharatiya Janata Party, small traders have been bitten twice by its government in quick succession. Bleeding economically and apprehensive about the future, it would seem logical for them to desert the party of their choice.

In November, demonetisation sent small traders scurrying around to exchange their invalidated currency notes for new ones at a hefty discount. This loss was aggravated as the market, starved of liquidity, has remained sluggish since then.

Eight months later, small traders are agitated about the Goods and Services Tax, which came into effect on July 1. Apart from its complex mechanism to file returns, and several slabs of taxes, they are frothing with rage because GST has now criminalised economic offences.

Unlike in the past, anyone who is deemed to have evaded taxes between Rs 2 crore and Rs 5 crore will be held guilty of having committed a non-cognisable offence. Tax evasion above Rs 5 crore will be considered a cognisable offence – traders accused of this can be arrested without a warrant. Similarly, a person convicted once for either a cognisable or non-cognisable offence can be arrested for evading tax of any amount. Such stringent provisions could ensure tax compliance and swell the state’s revenue.

But then, as so many traders point out, they depend on chartered accountants to file their returns, either because they lack the requisite skills or are pressed for time, more so now as GST requires filing of tax returns three times a month.

This means that a trader is liable to be punished for their chartered accountant’s mistakes, and a genuine difference in the interpretation of a GST provision between the trader and the tax authority can also be criminalised – and punished.

Arun Singhania, president, Delhi Hindustani Mercantile Association, which was formed in 1893, said, “Traders feel that GST presupposes that they are thieves. We have been stigmatised.”

Stigmatisation often justifies excesses based on suspicion. The GST Act indeed puts a legal imprimatur on suspicion – its provision allows officers of the rank of joint commissioner and above to order an arrest if they “believe” taxes are being evaded. The word “believes” could well become a cover for the officer’s whims or vindictiveness.

Demonising traders

Small traders are hurt that Prime Minister Narender Modi has used GST to portray them as tax evaders, because of whom the nation wallows in poverty. Such an argument could have the poor blame their woes on traders, turning them into an object of hate.

“Modi has triggered a spurious class war exactly in the manner Indira Gandhi did through her 1971 slogan of Garibi Hatao and a slew of anti-rich measures,” said a trade organisation head. “As it was in 1971 so it will be now, the poor will languish in their squalid jhuggi-jhopris.”

This galls small traders as they have been inveterate supporters of the Rashtriya Swayamsevak Sangh and its political wings – the Bharatiya Jana Sangh, and its later avatar the BJP – assisting these groups with money if not with votes in the decades before the BJP rose to power. They loved the Sangh because of its pro-business, anti-Left outlook and Hindutva ideology. Now traders feel that instead of the Sangh redeeming its debt to small traders, Modi has chosen to criminalise them. They would indeed readily endorse what German philosopher Friedrich Nietzsche wrote, “Great obligations don’t make people grateful, but revengeful.”

But Modi’s BJP can turn against small traders because they may have wealth in comparison to others around them, but do not have the numbers to constitute a substantial voting group. For instance, the Vaishyas, who dominate the trading group, were just 2.7% of the country’s population in the 1931 census, the last census in which caste data was collected and made public.

With the BJP expanding rapidly, traders now constitute a fraction of those who vote for the party. So will they continue to stick with the BJP, which has not reciprocated their ardour? To get an answer, let us turn to Surat, which has become the hotbed of the agitation against GST.

Surat traders protest

In Surat, Jaylal, the president of the Surat Vividh Vyapari Mahamandal, is busy organising traders to demand the withdrawal of 5% GST on textiles. “This is the first time in the history of post-Independence India that tax has been imposed on us,” Jaylal said.

Between July 1 and July 5, traders in this city will open their shops but will not transact business. Thereafter, the traders will observe an indefinite strike until their demand is met. It would seem that the small traders are exploiting the vulnerability of the BJP in Gujarat, which is due for Assembly elections in December.

With candour remarkable for a trader, Jaylal said: “Let us face it, traders have always voted BJP for communal reasons. Though we appreciate Manmohan Singh from the core of our hearts, people see the Congress as a party of Muslims. Since they [Muslims] are less than 10% of the state’s population, the Congress loses.”

This is undoubtedly a gross simplification of Gujarat’s political reality. Yet alienated traders and angry Patels, who are demanding caste-based reservations for their community, could together put the skids under the BJP in the state. As such, in the 2012 Assembly elections, the Congress had a marginal lead over the BJP in rural constituencies. “If Shankersinh Vaghela leads the Congress or does not join the BJP, Modi’s party will have a fight on hand,” Jaylal said.

Jaylal’s calculations also tell you a thing about traders – they are just not numerous enough to matter on their own electorally. True, even a large social group cannot swing an election on its own.

But to end up on the losing side matters more to traders than any other occupational group. Jaylal is pragmatic enough to admit: “If we are convinced in advance that the BJP will return to power, most traders will vote for it. After all, any government can make our lives miserable.”

What Jaylal means is that should the BJP return to power, trade leaders and GST naysayers could undergo harassment, such as tax raids and entanglement in tax evasion cases. This is why Gaurang Bhagat, president, New Cloth Market and Maskati Mahajan, Ahmedabad, said: “Traders are angry but only time will tell whether it would lead to their deserting the BJP.”

Traders protest against GST in Lucknow, Uttar Pradesh. (Photo credit: HT).
Traders protest against GST in Lucknow, Uttar Pradesh. (Photo credit: HT).

Tied to the saffron party

But, it is clear that the knot tying traders to the BJP has loosened. An exporter in Varanasi, the Prime Minister’s constituency, estimated that between 20% and 30% of traders did not vote for the BJP in the Uttar Pradesh Assembly elections held earlier in the year. He added, “GST will drive more of them away from the BJP. There is no doubt that traders are unhappy and restless and believe the Modi government is anti-traders.”

But there are two reasons why the palpable unhappiness of traders might not lead to them irrevocably breaking from the BJP.

For one, Opposition parties have not courted traders believing that they are too bound to the BJP to desert the party en masse. “During the UPA days, BJP leaders would accompany traders to make representations to the government,” said the exporter. “Have you seen Opposition leaders do the same now? Every movement needs a charismatic leader to lead it. Traders have none.”

The second reason is that traders will not openly express their anger until they are sure a united Opposition or a leader from its ranks can vanquish Modi. Thus, despite their unhappiness, a large chunk of them will vote for the BJP to protect their wealth – codeword to avoid tax raids and cases being foisted upon them.

In other words, the BJP is not too sensitive to the interests of traders because it thinks they cannot go anywhere. And the Opposition does not come to them because it feels they will remain on the BJP’s side.

“Traders built the BJP and Modi,” said Gaurav Kapoor, an entrepreneur in Varanasi. “But they [the BJP] now have the support of corporate magnates awash with funds and media tycoons who plug them. Now that the BJP is wooing Dalits and lower OBCs [Other Backward Castes], small traders are just not needed to cobble together a winning electoral arithmetic.”

Their worth for the BJP, which was once labeled as “the party of shopkeepers”, is now just the opposite – hold traders responsible for India’s woes, and punish them, rightly or wrongly, to convey to subaltern groups the saffron party’s intent to radically transform India.

Therein lies an irony – Muslims in India have been politically marginalised despite their relatively large numbers, and now traders are being pushed to the sidelines despite being relatively wealthy. In many ways, the story of small traders over the last three years shows that majoritarianism can come to bite those who constitute the majority.

Ajaz Ashraf is a journalist in Delhi. His novel, The Hour Before Dawn, has as its backdrop the demolition of the Babri Masjid.

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