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Sunday, December 3, 2023

Will the State Polls be a Referendum On GST?

Post DeMo, BJP &  NDA won the UP elections resoundingly which was considered a vindication of Modi’s demonitization move and a vote against corruption. Close on the heels of demonitization came GST which was introduced at the stroke of midnight in the parliament hall as it was  a momentous milestone in our country’s history to usher in a new & reformed tax structure.

However in the first by-election after the introduction of GST, which was held in  Gurdaspur in Punjab – a traditional BJP bastion – the saffron party received a drubbing in an area which has a sizeable trading population. The loss by nearly 2 lakh votes was surprising as the BJP had won this seat by a handsome margin in the 2014 general elections.
Was it a verdict against the hurried imposition of GST and the pinching 28% tax slab? Many believed so as how could a traditional stronghold fall so timidly and with such a big margin.
Post Gurdaspur, Himachal has already gone to the polls & as the key State of Gujarat is given more time by the Election Commission (raising many eyebrows), the GST rates on many key items are slashed from 28% to 18% by the GST council. So is it an acceptance by the government that the GST rates were high and hurting and need to be set right before the Gujarat election?
The government has received much flak from  Yashwant Sinha – a former  Finance minister in the Vajaypee government who is cooling his heels in the much mocked Marg Darshak mandal – who has asked Prime Minister Modi to sack the current finance minister for the hurried  implementation of GST. The way the GST council is going about tinkering with  the tax slabs is an acceptance of the high tax rates imposed  initially  and the consequent public resentment.  The 12.5 % VAT prior to GST coupled with the a few cesses had the common man paying 15 to 16 % tax instead of the current exorbitant 28%  tax rates until the correction came in for a few items amid growing discontent.
The Gujarat election which was delayed given the adverse trading sentiment in the State, is the cynosure of all eyes, one because it happens to be the Prime Minister’s home State and second because it has a large segment of business population which has been directly effected by the various GST slabs particularly the 28% rate.
The postponement of the  Gujarat election by approximately one month has given the government the much needed time to pacify the upset trading Gujarati community  by  rectifying  the anomalies in the current GST structure so that it can sooth and mollify the mood of the average  Gujarat trader.
Will Prime  Minister Modi be able to garner as much support for GST as he managed for DeMo remains to be seen, but the rejig on the GST rates is an acknowledgement by the Finance Ministry, inspite of claims to the contrary that there was a lack of brainpower and thinking and  much  more could have been  done before the final GST product was rolled out.
With essential commodities like plyboards, plywood and until recently marble & granite in the 28% category, trading sentiment was bound to take a hit and it took the Gujarat election for the government to realise that everything was not hunky dory and that therr was a need to relook it’s own  financial arithmetic.
Government’s should at all times have a tab on the pulse of the people so they can do a course correction whenever they falter or err, otherwise they are made to learn the hard way by the electorate.  Low tax rates and a wider tax base have been the hallmark of good governments & economies  all over the world. Singapore has 7 % GST rates, Australia has 10% & Canada has 5% rate to name a few and any attempt at high & arbitrary taxation has not gone down well with the masses.
Buckling under public sentiment the Modi government has  tried a partial course correction which could help it weather the storm for the moment, but there are stormier waters ahead which will need all the navigating skills that this government can muster.

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Aman Gupta
Aman Gupta
Political Editor, Samast Bharat magazine


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