Published On : Tue, Oct 17th, 2017

Why PM Modi trying to blame Congress for the GST mess is misleading

Narendra Modi
There’s a reason why the INC boycotted the midnight launch of the ‘biggest tax reform’ that has now caused unbelievable suffering to India’s trading classes.

It’s a truth universally acknowledged that Prime Minister Narendra Modi is least inclined to share the credit for a success of any kind; in fact, he’s more used to appropriating credit from the chief political rival Congress when it comes to policies and government schemes. However, a distinct difference in tone and timbre was visible yesterday, October 16, 2017, when Modi decided to “share” the credit of the GST rollout (and the staggering mess it has caused in the manufacturing, trading and retail sectors) with the Congress.

Modi said the Congress was as much a party to the decision and Parliament passed the GST Bill unanimously. That claim is at best a half-truth for a number of reasons.

In April this year, the Goods and Services Tax Bills – all four of them – were passed, cleared by both Lok Sabha and the Rajya Sabha, and the July 1 rollout date was announced by Union finance minister Arun Jaitley with much fanfare. While the Congress leaders, chiefly former finance minister P Chidambaram and former commerce minister Anand Sharma, were highly vocal in their criticism of the BJP government for not incorporating the Congress’ suggestion to cap GST at 18 per cent upper limit, and to have fewer slabs to facilitate ease of doing business, it was theJuly 1 deadline that was the biggest bone of contention.

Even though the GST was originally a Congress brainchild, there were major gaps in what was finally rolled out by the Modi government in the gilded midnight launch of the “boldest tax reform” in India, and what the Congress had originally conceptualised. True, even in the Congress version, the larger theoretical questions of states’ autonomy, eroding federalism, revenue sharing, uneven distribution of tax burden, etc, remained, compliance burden was least of the worries, because it was expected that the country would at least be infrastructurally prepared to withstand the GST rollout.

It is precisely for this reason that the Congress, and indeed a number of Opposition parties, such as the CPI(M), Trinamool Congress, RJD, DMK, among others, had a huge problem with the July 1 rollout date. In a number of interviews to various media outlets, Congress leaders, including P Chidambaram, Anand Sharma, Jyotiraditya Scindhia, Digvijay Singh, Kapil Sibal, among others, warned that the country wasn’t at all prepared to take to the GST overnight, even though the government had had over one year to prepare for this moment. Clearly, the preparation was highly inadequate.

However, even if Chidambaram – one of the original architects of the GST along with Pranab Mukherjee and of course former PM Manmohan Singh – had wanted to be present at the GST midnight launch on June 30-July 1 intervening night at Parliament, the Congress high command, including president Sonia Gandhi and former PM Manmohan Singh, decided that the imminent pain that the GST would unleash on small traders, retailers, SME entrepreneurs, those with multi-state businesses, local merchandise sellers in sectors like textiles, construction ware, etc, was a big reason why Congress’ participation in the mere “symbolism” and gimmickry of Modi sarkar wouldn’t be wise in the long run.

As always, Sonia Gandhi’s political foresight proved sharper than many journalists berating Congress for boycotting the “bipartisan” issue of GST rollout, as tweets, some now deleted, declared: “When India wins, Congress loses by boycotting… It no longer has the heart of a big, national party but of a petty, marginal player.”

It was also ironical that Modi, who as the Opposition leader until 2013, had vehemently opposed GST and had prevented the previous UPA government from taking it up as a formal legislative exercise in Parliament, was blaming the Congress for the poor implementation of the “transformational” indirect tax law. In fact, Congress leader Jairam Ramesh is on record saying that Modi was single-handedly [responsible for] derailing the GST. Expectedly, the Congress timed its boycott well by also digging out an anti-GST speech by the not-yet-PM Modi and tweeted the clip out from its official Twitter handle.

As Chidambaram had described, ultimately reality caught up with the “symbolism” of the big GST bash, with Modi mimicking a Nehru’s “tryst with destiny” midnight speech on the eve of India’s independence. The hype died down within days, as the warnings became all too real. GST proved to be a compliance mayhem, and as Anshuman Tiwari, the editor of India Today Hindi and a regular columnist at DailyO, has documented, the “tax nightmare” proved how BJP’s electoral triumphs fall flat when it comes to good, old governance.

Tiwari writes: “It was not just technology or economics that botched up GST, but also BJP’s own failure to connect with the nature and needs of India’s gigantic domestic trade sector when it got on to designing the mega tax reform… Politically speaking, GST was targeted towards BJP’s strongest constituency of small businesses and traders as big corporates were already tax-compliant… Loaded with draconian compliance rules, including cumbersome registration and returns provisos, the first piece of GST legislation sent chills down the spines of BJP’s trader vote bank. Against the hopes of a modern, simple and far-sighted tax system, the model law had set the course for a potential tax nightmare.”

Along with demonetisation, the hasty rollout of the GST “nuked the informal economy”, Tiwari asserts. His argument is supported by umpteen number of reports on the great slump in trading sector, in textile sector, the dip in exports, and the woes of the small and medium entrepreneurs in this country that doesn’t seem to end any time soon.

In fact, a report last month prepared by the country’s biggest public sector bank, the State Bank of India, said that the “free fall in GDP numbers [was] structural, and not transient”, as claimed by the BJP leadership, particularly the BJP national president Amit Shah, who called it a case of “technical reasons”. In fact, in the SBI report, the negative impact of the GST has been “majorly emphasised”, and the double whammy of demonetisation and GST has been held to be responsible for the disruptions.

The Economic Times report on the SBI findings says, “[An] analysis of a sample of 2,306 listed companies, whose results are out for first quarter of this fiscal, showed that 40 out of 69 sectors have shown quarter-on-quarter decline in sales and this is much lower than the 2016-17 growth rates, it said. Important sectors in manufacturing like capital goods, consumer goods & engineering goods have performed dismally and this is a cause of concern, it added.”

In fact, the SBI report is in sync with criticisms made by BJP stalwarts like Yashwant Sinha, who said “economy was poised for a hand landing” because of the “unmitigated economic disaster” that was demonetisation and a “badly conceived, poorly implemented GST [that] has played havoc with businesses and sunk many of them and countless millions have lost their jobs with hardly any new opportunities coming the way of new entrants to the labour market”.

In an earlier column, Tiwari had detailed “how poor planning and election panic toppled India’s transformational tax reform”, and the rollbacks within three months of the rollout took away much of what was in fact worthwhile in GST, at least theoretically. The exemptions now included majority of the enterprises, thus throwing digital financial inclusion and widening of the tax net to the wind. But GST’s impact on the informal economy – comprising 45 per cent of India GDP and 90 per cent of its employment opportunities – was already severe, shutting down many businesses, even in Gujarat where traders in Surat and Ahmedabad took out processions that wer so big that everyone from Gujarat CM Vijay Rupani to PM Modi and Amit Shah were visibly rattled.

As of now, PM Modi has started blaming the Congress and the Nehru-Gandhi family for “hating Gujaratis”, forgetting that some of the biggest icons of Indian National Congress, including Mahatma Gandhi and Sardar Patel, happened to be Gujaratis. PM Modi turned to his native Gujarati when he said this in Gandhinagar, which does come across as the desperate rant of an insecure leader, who has squandered his mandate of good governance to the hubris of electoral Darwinism.

That three years into his government he still needs to target the Nehru-Gandhis for the failures of his own regime says much about the months to come until 2019 Lok Sabha polls.

—As Published in