Electoral Politicking and GST
By: Amit Bhushan Date: 21st October 2017
With the Electoral Politicking on GST chiming in, the woes of the Netas seem to be reverberating loud and clear. The woes of the ‘small businesses’ seems to have been picked up by the Netas and the commercial news media along with the focus being on newly implemented Goods and Service Tax laws. Some of the measures like Demonetization seem to have been thrown in alongside as well. As per the Netas and also the commercial news media, this seems to have caused a slowdown and that too from ‘the last 6 quarters in all probability’ along with other policy mess by the government. While there seem to have been a lack of jobs growth, however instead of a failure of expansion of manufacturing on account of non-performance of the Make & build scheme including fizzling out of DMIC may be for High speed rail or a lack of expansion of Services on account of low performance of Digital and Skills scheme doesn’t seem to be a reason. Quite strangely, lack of growth in bank credit on the back of Corporate NPAs and the pressures of loan waivers are not being mentioned even once. Of course the commercial news media is unable to get any information around ‘seasoned’ defaulters on its own and the Netas also usually ‘know’ very little about the history of such cases ‘as is expected’.
With the implementation of GST, the businesses especially large businesses are finding themselves into a new role or an altered relationship with the government. They are having to push their suppliers and dealers to be tax compliant, something that hasn’t been done before. This along with the promise to curtail ‘inflation’ by the Netas in government seems to have burdened the businesses quite a bit. That seems to have slowed down political donations on this count and a resultant reluctance amongst the junior Netas to go out for voter mobilization especially for the Netas in government. Of course this doesn’t stop people from collecting together to mark their protest on other issues and the Netas of course help to channelize these energies for their political goals. The kind of politicking has been around and all the political Netas have to undergo through the grind. The ‘change’ in relationship of the businesses with the taxation system seems to be having its political impact and the Netas need to come to terms with the same. While the lack of new job creation seems to have come to criticism, however there seems to have been little impact on overall ‘sales’ in small retail businesses although these businesses may be doubting GST on account of being forced to comply for a higher tax payout and if this may not be immediate, then it is certainly expected in near to medium term meaning coming 1-3 years.
The GST seems to have impacted the level of confidence amongst the lower level Netas to mobilize public in support of the government. The reaction of the Netas in government seems to be all the more interesting. Instead of a faster roll-out of all the features and services along with steps that would help boost compliance, the government seems to be trying to back-pedal and future dating the launch of the reforms. This is while the reforms seem to be almost a one way street with a structural foundation in GSTN as well as dismantling of some other teams. In such a case a swift flow would at least be better since that would ensure that these reforms are absorbed faster and businesses as well as the Netas adjust to the same faster. Where the government seems to be developing a cold feet is slowing the implementation of the tax reforms for the businesses while it seems to trying some measures like improving speed of the passenger trains or a passenger ferry service to mobilize ordinary public. Measures such as structural redevelopment of railway stations or a faster roll out rural roads infra seem to have been pushed in similar anticipation but seem to be having little impact. There also seem to be consideration for creation of ‘exceptions’ say for Restaurants or Food businesses to pacify lower level Netas as the implementation of GST has become a shared responsibility among political parties. It may be noted that there has little protest of the ordinary people for these businesses not lowering their ‘menu rate’ however just the concerns of the Netas being aired. It is these ‘wholesale buyers’ who are expected to drive compliance amongst Large Retailers and Wholesalers of Food, however by creation of exceptions, the new tax system might be weakened for political goals.
What may be needed is to concentrate on greater and faster alignment of businesses with the reformed taxation system. This can be possible by ensuring that all features are rolled out at earliest say by October or November so that businesses have tried and tested their compliance with the complete system before the date of full compliance is mandatorily implemented. Also as banks and organized financiers align the credit with the business turnover as represented in the GST returns, more businesses would become amenable to it. A steady rise in compliance and faster implementation and percolation of the new tax system amongst ‘public and businesses’ would bring to fore ‘changed expectation of people’ across all political Netas and parties. To shore up confidence in businesses and improve jobs opportunities, the government can focus on areas that help cut costs like in logistics, by improving rail schedules for goods trains and may be automation goods yards of the railways by introduction of containerization for domestic manufactured goods etc. or may be working out some improved schemes to cut down on ‘commercial energy/electricity rates’ which remains static despite lowering of costs of coal or solar energy. If fact bringing in Diesel to GST might be a better idea to improve compliance amongst businesses further and the buy patterns would help in further tax compliance. There has been little efforts (in political parties as well as in commercial news media) to understand how this compliance with tax laws changes expectation of the businesses and of the ordinary people from the Netas & the government and if their expectation regards government services rise up in proportion with their compliance or their reluctance to part away with other ‘donations’ goes down in tandem with the tax outflow. Let’s see the ‘Game’ evolve…