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Adding to the GST Conundrum

Can India’s goods and services tax progress beyond being an election plank?

ince its inception in July 2017, India’s goods and services loss of revenue, “federalism,” as a deciding factor, has already
tax (GST) has encountered over 400 orders and notifica- started waning.
tions, largely on grounds of complexities of execution. More importantly, this compromise suggests an alternative
With the 2019 general elections on the horizon, both the reality: the uncertainty amongst the politicians and policy-
Bharatiya Janata Party (BJP) and the Congress in opposition makers (read the NDA) themselves regarding the outcomes of
are pledging further modifications. While the BJP government the GST. And, the political expedience of denting robust evi-
has already rationalised the GST rates to 18% or below for dences for coaxing the vote bank to bear the brunt of such
23 items out of the enlisted 40 broad categories, media reports ambiguity: first, making them pay through the nose in the
divulge the Congress’s promise of yet another version of a sim- name of increasing collections during the election-interim
pler tax structure with (item-wise) wider coverage and a single years (for example, households having to pay up to `32 more
rate, GST 2.0, in its 2019 electoral manifesto. But, what remains per liquefied petroleum gas (LPG) cylinder from July 2017 due
unclear is whether and how these modifications (executed or to the twin impact of GST and subsidy reduction), then lower-
promised) will resolve the alleged complications fundamental ing prices in the name of tax “rationalisation” in the wake of
to the GST. Various questions relating to critical issues, like an election (reducing LPG prices by `120.50 for unsubsidised
India’s fiscal federalism, compliance and, above all, the future consumers, and `5.90 for subsidised consumers since January
of unorganised sector businesses or small capital, are still 2019), and finally, making poll promises of further “rationali-
pertinent or unresolved. sation” after having made the economy succumb to the burden
There is nothing novel in tax reforms being used as floor- of compliance for a year and a half. Implementing the GST is
boards for contesting elections. Malaysia’s case in recent times indeed an arduous task in a country like India with such a het-
has shown that governments do not hesitate to rollback taxes erogeneous economy and polity. Hence, a process of trial and
to douse populist displeasure even when such taxes (read GST) error is normal. Given this, the NDA’s nerve and effort, should
constitute about a fifth of their revenue earnings. One would both be commended. But, what about the political intentions
shudder to think of the costs of “rolling-back” the GST for India. driving such experimentations?
One saving grace of the narcissism of the contending political Where various governments over the past four decades or
parties (of being either the “daring” executor or the “innova- so have procrastinated implementing GST-type reforms to not
tive” conceptualiser of GST) is that it deters such retraction. go against the grain of the Indian democracy, the NDA’s (hasty)
But, parallelly, it entails a threat for the federal structure of adoption and propaganda of the GST as a “silver bullet” for
the state polity. (indirect) tax reforms befuddles economic common sense. In
Gourav Vallabh, the Congress spokesperson on economic fact, many of the projected benefits—for instance, increased
affairs, recently commented that constitutional amendments collection from the GST, decreased rate of inflation, and
will not be necessary for GST (2.0) as “the GST Council is increased economic growth—are mutually exclusive by eco-
empowered enough to carry out the amendments needed.” nomic logic. More alarming, however, is the BJP’s surreptitious
This resonates with a familiar tone of disregard for the intention of political and economic hegemony behind the
statutory provisions of fiscal autonomy of the states, charac- NDA’s non-committal persistence for such a “one-size-fits-all”
teristic of the National Democratic Alliance (NDA). In this strategy. For example, its lackadaisical assumption of the
context, one should not forget that the economic realities and small firms being small-scale replicas of large firms in terms of
problems across various states are quite diverse. Thus, while their activity structure, has brought the unorganised sector
Punjab may find it beneficial to bring electricity, real estate, under a disproportionate burden of prohibitive administrative
and petroleum within GST’s domain and evolve a common costs, while enabling the organised sector to expand at its
composition scheme for goods and services, it may not be the expense, by furthering income and employment insecurities.
case elsewhere. The validation of a party’s political will rests on its resolve
The Congress’s victory in the three assembly elections in the to end uncertainties, and not in creating new puzzles through
Hindi heartland in 2018 have tilted the power configuration of rhetoric. With the GST being potentially irreversible, political
the GST Council, somewhat against the BJP/NDA. But, a com- parties (read the NDA-led ruling coalition) might find it
plete overhauling of the GST structure based on this is an over- expedient to rhetorise it for creating political clientele, not-
optimistic promise. Even if the Congress comes to power in withstanding the ephemerality of such successes. Whereas,
2019, it will still require at least three-fourths majority voting for leveraging the peoples’ agency in the long run, policy-
to pass any change at the GST Council, wherein the states will makers will need more definitive or holistic approaches inclu-
continue playing a crucial role. However, with the state sive of resolving structural anomalies, identifying appropriate
governments’ acceptance of the GST in general, and that too points of taxation or exemptions, simplifying tax rates, etc,
against assurances of compensation from the centre for any but all in parity with the edifice of the country’s democracy.
8 JANUARY 5, 2019 vol lIV no 1 EPW Economic & Political Weekly