Name calling: Dirty politics
by G B Reddy on 13 Nov 2017 1 Comment

Name-calling or censure by rival political leaders during election campaigning is most heinous from the national unity and integrity point of view. Unfortunately, political leaders without exception are indulging in denunciation of each other’s policies and strategies with utter disregard to the damage to their reputations and credibility: Ham Sab Chor Hai seems to be the underlying motto.


Congress leader Rahul Gandhi first drubbed the Goods and Services Tax (GST) as “Gabbar Singh Tax”. Not to be left behind, West Bengal Chief Minister Mamata Banerjee gave it another twist, “Great Selfish Tax”.


Prime Minister Narendra Modi has been hitting back: corruption is the only identity of the Congress Party; corruption, dynastic politics and casteism (bhrashtachar, parivarwad, jatiwaad); and, Himachal Pradesh needs to get rid of five monsters: mining mafia, forest mafia, drug mafia, tender mafia and transfer mafia; and so on.


Former Prime Minister Manmohan Singh has come out in unexpected form: Modi must accept demonetisation as the most catastrophic blunder and apologise to the nation; the bullet train is an exercise in vanity; and, demonetisation was organized loot. The good doctor seems oblivious of his regime’s track record of mega-scams which have contributed to the dismal state of the economy.


The Congress vice president castigated the Modi government for failure to create jobs, claiming that China is creating jobs for 50,000 persons every day. If China’s data is taken at face value (7.35 million jobs created in 2017 alone), there should be zero unemployment in China. But China has a higher rate of unemployment than India. From 1983 till 2016, unemployment rates in India averaged 9 per cent, reaching an all-time high of 9.4 per cent in 2010 and a record low of 3.4 per cent in 2016. In contrast, it was 3.9 per cent in June 2017.


In India, the unemployment rate counts the number of people actively looking for a job as a percentage of the labour force. Such statistics do not represent the truth, with China being no exception.


The record of the Congress-led UPA during its first term was: 2009 (12.56 lakh); 2010 (8.65 lakh); 2011 (9.30 lakh); 2012 (3.22 lakh); and 2013 (4.10 lakh). What was Rahul Gandhi doing then? More pertinently, China began modernising its economy under Deng Xiaoping in 1978, a policy ruthlessly pursued by his successors from Jiang Zemin, Hu Jintao and Xi Jinping.


Rahul Gandhi hopes to exploit demonetisation and the problems in the GST framework to win the loyalty of small businesses, farm labour, youth and women. That is fair enough, but he needs to get his basics right before pouring venom against political rivals in the hope of fooling the people. Politicians must always remember that they can fool some of the people some of the time, all the people some of the time, but not all the people all the time.


Some salient features of the GST are in order. This indirect tax reform aims to replace the multiple cascading taxes levied by the central and state governments, and subsumes over one dozen taxes to create a single market, an idea first mooted by Rajiv Gandhi in 1986 as the economic reform process began with the introduction of the Modified Value Added Tax (MODVAT). Subsequently, Manmohan Singh, as Finance Minister under Prime Minister P V Narasimha Rao, initiated early discussions on a Value Added Tax (VAT) at the state level.


 In 1999, a single common Goods and Services Tax (GST) was proposed and given a go-ahead during a meeting between Prime Minister Atal Bihari Vajpayee and his economic advisory panel, which included three former RBI governors, I.G. Patel, Bimal Jalan and C. Rangarajan. Vajpayee set up a committee headed by the then finance minister of West Bengal, Asim Dasgupta, to design a GST model.


The Dasgupta committee was also tasked with putting in place the back-end technology and logistics (called the GST Network, or GSTN, in 2017) for rolling out a uniform taxation regime in the country. In 2002, the Vajpayee government formed a task force under Vijay Kelkar to recommend tax reforms. In 2005, the Kelkar committee recommended rolling out GST as suggested by the 12th Finance Commission.


After the fall of the BJP-led NDA government in 2004, and the election of the Congress-led UPA government, Finance Minister P Chidambaram in February 2006 continued work on the same and proposed a GST rollout by 1 April 2010. However in 2010, with the Trinamool Congress routing CPI (M) in West Bengal, Asim Dasgupta resigned as head of the GST committee.


With the dissolution of the 15th Lok Sabha, the GST Bill, approved by the standing committee, lapsed. Seven months after the formation of the Modi government, Finance Minister Arun Jaitley introduced the GST Bill in the Lok Sabha. In May 2016, the Lok Sabha passed the Constitution Amendment Bill, paving the way for GST. Over the next few weeks, 18 states ratified the GST Bill and President Pranab Mukherjee gave his assent to it.


Opposition parties led by the Congress and including Trinamool Congress, Left parties and the DMK boycotted the GST launch altogether. They said they found virtually no difference between the GST and the existing taxation system, claiming that the government was merely trying to rebrand the current taxation system. They also argued that the GST would increase existing rates on common daily goods while reducing rates on luxury items, and affect many Indians adversely, especially the middle, lower middle and poorer classes.


It is only to be expected that the shift to the GST system would involve teething troubles. As the GST Council carries out monthly reviews - has already rationalized tax rates for over 100 items - shortcomings will continue to be addressed. The Council has approved an Approach Paper to be followed by the fitment committee to decide future rate revisions.


Experts believe that the advantages of GST include transparency, simplification and reduction of indirect taxes; no hidden taxes and lower cost of doing business; lowering prices; taxation burden to be split equitably between manufacturing and services; and levy only at the final destination of consumption; corruption free tax administration.


The government website states that the Goods and Services Tax Network (GSTN) is a non-profit organisation proposed for creating a website/platform for all concerned parties related to the GST, namely stakeholders, government and taxpayers, to collaborate on a single portal.


As GST is technology-driven, it will reduce human interface and lead to speedy decisions. As per experts, the GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of industry, government and the consumer. It will lower the cost of goods and services, give a boost to the economy, and make products and services globally competitive and pave the way for an integrated economy at the national level.


Further, GST will make goods and services produced in India competitive in the national and international market. All imported goods will be charged integrated tax (IGST) which is equivalent to Central GST+State GST. This will bring equality with taxation on local products.


Finally, the GST is expected to bring buoyancy to government revenue by widening the tax base and improving taxpayer compliance. GST is likely improving India’s ranking in the Ease of Doing Business Index and is estimated to increase GDP growth by 1.5 to 2per cent.


Viewed in this holistic framework of GST conceptualization and formulation by persons such as C. Rangarajan, Manmohan Singh and P. Chidambaram, the ongoing political tirade and name calling is totally unjustified. India should not get carried away by the politics of denunciation of economic reforms. All economic reforms have a gestation period before they can yield returns.

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