The Big Story: Tax conundrum

Politicians are, in general, not given to sharing credit with their opponents. So a week ago, when Prime Minister Narendra Modi claimed that the Congress was an “equal partner” in implementing the Goods and Services Tax regime, it was clear that he wasn’t exactly being generous – he was apportioning blame. The disruptions caused to businesses by GST, it’s evident, are giving the Bharatiya Janata Party cause for concern as it campaigns furiously for the upcoming Gujarat Assembly elections.

Against this backdrop, wasn’t surprising to read an interview on Sunday with Hasmukh Adhia, Revenue Secretary of the Union government, in which he said, “There is need for some rejig in rates.” Adhia mentioned the “big burden on small and medium businesses as a result of the GST”, perhaps because Gujarat has thousands of such enterprises.

GST has been a shock to India’s system, so it is a good first step that the Union government has woken up to the problem. Yet, given the scale of the disruptions, it needs to be doing much more.

The tax regime introduced in July is – by design – harsh on small businesses. Surat’s textile hub, for example, is badly hit. This is a massive problem for India, given that 75% of India’s labour force is employed in small, unorganised firms. Throwing them off balance has struck striking a heavy blow to Indian society as well as the economy. The situation doesn’t seem to be things don’t look like they are on the way up. Three months after GST was introduced, the compliance rate for GST filing for the month of September was less than 50%.

Even as the Union government tweaks the way GST works, the approach till now points to a troubling lack of political will. To put the GST into operation, the Modi government pulled off some admirable political management, convincing India’s many states and parties to pitch for the new tax. It even held a special midnight session of Parliament to inaugurate the tax regime.

Yet, the game of passing the political buck started right there. The Congress and the Trinamool Congress had signed on to the GST and the states they ruled were happy to accept the revenue from it. However, they boycotted the midnight session, wary of the inevitable blowback from citizens once the new tax regime took effect. The Congress is still following this strategy: Karnataka chief minister from the Congress, Siddaramaiah on Friday urged the Union government to exempt handmade products from the GST. This is a win-win for Siddaramaiah. He comes off looking like he is watching out for handmade products, yet his state loses no revenue because of this demand.

The BJP, for its part, enthusiastically took ownership of the GST when it launched. Yet, now it is looking to share blame with the Congress. The fact that a senior bureaucrat has been the first to admit that the GST needs changes is in itself troubling. A major decision such as this should have been announced by a Union minister. The Union government needs to show leadership and assure Indians that their elected leaders are at the helm in this trying time.

The Big Scroll

  • GST is hurting small businesses in Surat’s textile hub – and spurring a black economy, reports M Rakshekhar.
  • “We are not even making rent”: GST has put the brakes on the auto parts trade in Delhi-NCR, writes Mayank Jain.
  • Don’t listen to the politicians. Here’s why the GST might actually end up harming India, argues Shoaib Daniyal

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Punditry

  • Battling pollution will be a long battle, will require multi-pronged solutions, explains Vivekanand Jha in the Indian Express.
  • The Union government’s “Smart Cities” plan is a joke. It’s time we went back to the drawing board on civic governance, argues Raghavan Srinivasan in the Hindu.
  • Imposing GST on handmade goods in line with India’s history of policy bias against artisans, writes Neeta Deshpande in the Wire.

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India has imported millions of tonnes of GM food products in violation of food safety laws, reports Kumar Sambhav Srivastava.

“Importers have got away without having the mandatory approval under the Food Safety and Standards Act because the two ministries passed the buck from one to the other, government records show.

Under the Environment Protection Act, 1986, the environment ministry’s Genetic Engineering Appraisal Committee is entrusted with granting approvals of “activities involving large scale use of hazardous microorganisms”, recombinants – cells with a new combination of genes not found together in either parent cell – “and industrial production from the environmental angle”. The law prohibits the import, sale or use of GM food products without the committee’s approval.

With the passage of the Food Safety and Standards Act in 2006, the environment ministry and the health ministry each began to claim that the other was responsible for clearing imports of food containing GM material. The debate was never settled legally. Eventually, in 2007, the environment ministry began to give clearances for imports, even though it acknowledged that permission was also required under the food safety law before imports could begin. The food safety authority neither put the regulations for such approvals in place nor acted actively to stop the imports.”