Lost In The Spectacle

Questions about economy, GST are drowned in the din on showier issues.

Written by Yoginder K. Alagh | Published:July 12, 2017 12:02 am
GST, goods and services tax, GST regime, indian economy, global economy, national herald, congress, GST benefits, indian express opinion, business news The GST, being a value added tax, is a step in the right direction and in the long run will help the economy. Photo for representational purpose

The global context is changing with political parties having a strong religious identification and conservative economic policies are guiding events in countries like India, the US and to an extent, Britain. On the other hand, liberal regimes are flourishing in France and, for some time now, in Canada.

The New York Times Magazine recently carried an issue on the Constitution of the United States of America. In India, the Congress was remembering the Freedom Movement in the resurrection of the National Herald and their triumvirate of Gandhi, Nehru and the indomitable Sardar Vallabhbhai Patel. The NYT issue on the American constitution made the interesting point that James Madison had pushed through a constitution document, which was not really a reflection of the dominant political mores of the period and that the framers of the constitution and the government “were so conscious of their break with the past that they knew they had to sneak it past the bodies that had authorised their meeting, the states that had sent them as delegate to Philadelphia. The delegates were authorised only to propose reforms to the Articles. But it was clear from the outset that most of them wanted to scrap the Articles together.”

Much of the same was true about our country. It is also true that in addition to the triumvirate, B.R. Ambedkar was also clearly drafting a constitution, which was ahead of the standards of a majority of his countrymen, yet was accepted in the excitement of the early years of Independence.

There is no question that, at present, there is considerable tension including tendencies to violence. But behind the antagonistic sloganeering, there is in actual practice, considerable give and take so that the system continues to function. And yet, when leaders make the point in a very explicit manner — like when the US president says in a sharp tone he will change the structure — there is palpable tension. This is also true of India.

The interesting aspect of all this in our country is that in the rarefied world of idealistic politics the focus is taken away from more mundane aspects like policies for economic growth. It is obvious the newspapers are not going to carry the story of the deceleration in industrial growth and sobering analysis of recent CSO data by people as differently located as me and my friend, Rahul Bajaj. Prime Minister Modi’s discussions with President Trump and Prime Minister Netanyahu take away the urgency of debating falling private and public investments, low manufacturing growth, low EMI declared in early July and the rest of it.

There is also no time to discuss the GST. The GST, being a value added tax, is a step in the right direction and in the long run will help the economy. This happens only if there is a real value added tax with a single rate or maybe one for essentials like food and medicines, and another for the rest as in other countries. The original GST was structured this way. But if you have five rates, a large part of the messiness of the past is brought back. Interested groups will then lobby for transfer from one rate to the other and the elegant simplicity of the GST is lost.

Five rates bring back the sales tax since it is likely that five rates would include a large part of the taxed economy even now. It also happened probably for a more unedifying reason which is the tax officials do not believe in the real argument for the GST — that the lower rate would give them more revenue. Statements by officials at the highest level that if prices don’t behave then the government will not tolerate the market and will use the stick to jail traders took away all the elegance of the GST.

Markets work with supply elasticity, not the danda. It’s still not too late to promise that things will be simplified as soon as possible and we will get a real GST.

The writer, a former Union minister, is chancellor, Central University of Gujarat

For all the latest Opinion News, download Indian Express App

  1. S
    Simon John
    Jul 13, 2017 at 10:08 am
    GST is a simple Tax system, but the one introduced by the Modi Govt is bad and complex. Bad because the taxes are unreasonable and illogical and complex there are too many slabs and no c arite. With concession withdrawn for small industries, leaving them in the Limbo, despite the propaganda there is seething anger and undercurrent of frustration with the people. The Trivarite MODI, Jaitley and Shah are deluded with an illusion that all is well, they seem to live in a cuckoo land, come fair and free elections they will shown their places despite of the communally charged cons uency and polarised country.
    Reply
    1. M
      Murthy
      Jul 13, 2017 at 6:52 am
      Strong Medicines have side effects. India's Tax Quagmire, was the main foundation for Corruption Raj.. A country's Economy, even of smaller countries, like Singapore, is like turning a big ship around in stormy seas. It takes time. The author from the "Status Quo' Party will be critical of the bold Restructuring of the Economy, of course, he would. It is part of Indian Culture to be pusillanimous when restructuring happens. Nay-sayers outnumber the bold doers. On GST, ask Inter-State Lorry Drivers moving goods across India. IE should ask one of them to write about GST, not these ex-Dynasty bhakts...Even better, ask a recently retired Babu from the Excise, Octroi, Service Tax Departments, on condition of anonymity. He or She would give you the full Maths on how much these Babus have lost by way of "income', since the GST.
      Reply
      1. A
        Ajit Shaurya
        Jul 12, 2017 at 7:39 pm
        I totally agree that the current version of the GST with a messy mix of 5 different rates and a large section of the economy not even under GST, is a major opportunity lost. Not saying that this was not a big improvement over the prior mess, but this is certainly not a revolutionary move that it could have been. Such opportunities come once in a lifetime and they messed it up by making it complicated.
        Reply
        1. M
          Murthy
          Jul 13, 2017 at 6:56 am
          Does the term "incremental" mean anything to you, Sir ? Or, the English idiom, "Chew small bites" of strong, mirchy hot, very sour dishes ?
          Reply
          1. M
            Murthy
            Jul 13, 2017 at 7:00 am
            Sir, does the term "incremental" mean much to you? Or, the English idiom, "take small bites" of strongly pungent or mirchy hot dishes ? Cleaning India's Tax Sewer is a complex job...
            Reply
          2. S
            Seshubabu Kilambi
            Jul 12, 2017 at 7:24 pm
            Mere passing of GST in midnight may not help in understanding the tax structure. This system is more complex than what rulers are canvassing it to be
            Reply
            1. S
              Sridhar Rajaraman
              Jul 12, 2017 at 4:53 pm
              The excellent article and the many of the commendable comments below made me to ponder over the impact of GST. Almost all of them are valid and that is the tragedy.
              Reply
              1. D
                drharun
                Jul 12, 2017 at 2:55 pm
                A coffee in Bangalore which was 10 bucks is 12,a vada which was 25 is 28.Now atleast i wish the masses are happy and celebrating.What will happen when the price of product is revised,,just add GST to it and you would have had 30 percent inflation in price.When Masses are happy,why bother.That is if the price is revised to 28 and u add 12 percent GST to it.What was 25 bucks would be 31 bucks a straight 30 percent hike
                Reply
                1. I
                  indian
                  Jul 12, 2017 at 2:19 pm
                  A breakfast at the neighouring udupi restaurant now costs 10 more (gst 12 rounded off) and these are achhe din. Till the time the entire supply chain gears up for GST, the input costs will increase and cause inflation. With local bodies being free to levy their charges, the only benefit of GST is the removal of physical checkposts.
                  Reply
                  1. P
                    Parth Garg
                    Jul 12, 2017 at 2:19 pm
                    Modi listed how the GST will usher in a new economic order that will benefit every Indian.The people hardly seem to gain anything. On the other hand essentials like food grains and textile stands to be taxed. The dealers are in a fix since there is none to tell them the correct rate of tax on the product dealt in by them. There is alround chaos over the so called historic tax reform.
                    Reply
                    1. Load More Comments