After Friday’s GST Council meeting, which decided to cut the goods and services tax rate on two dozen commodities and announced relaxations for exporters and small and medium companies, Prime Minister Narendra Modi said the changes brought in an early Diwali.
This ebullience is intriguing. The impact of the Goods and Services Tax is complicated. Billed as India’s biggest tax reform, GST subsumes all the indirect taxes that businesses earlier paid the Centre and states separately with the aim of creating a common market. It involves a complete overhaul of the tax filing system.
Since its implementation on July 1, as several articles in Scroll.in and other publications have shown, small and medium companies in a range of industries are struggling to stay viable while complying with the new tax regime’s requirements. That is not all. GST also affects different companies in the same industry in different ways. For both these reasons, the GST Council’s revisions on Friday deserve a closer look. How far do they go? Do they really address the major concerns of all Micro, Small and Medium Enterprises, also known as MSMEs, in the country?
In a good year, he grows 100 kilos of groundnuts – or peanuts – for every Rs 4,000 he invests. The minimum support price – or the price at which the government buys the crop – is Rs 4,400. But the middle-aged farmer said government officials buy only from “vyapari aur mota rajkarmi” (traders and big farmers). Smaller farmers like him sell to private oil mills at very low rates. Last year, he got just Rs 3,500 for every 100 kilos of groundnuts – lower than both his investment and the minimum support price.
Blame it on rising edible oil imports — especially palm oil. And therein hangs a story. Do read.
On one hand, small industrial units are shutting down. This is not a recent development. Micro, small and medium units in the state started getting into trouble about five years ago, well before the central government demonetised high-value currency notes in November and introduced the Goods and Services Tax in July. As Scroll.in reported from Surat, several factors were at work – rising imports from China, the entry of bigger players with greater economies of scale, and government policies such as import duties that favoured bigger companies over smaller ones.
On the other hand, financial investments have boomed in Gujarat. Two years ago, a sharebroking firm in Rajkot, Marwadi Shares, was adding about 1,000 new customers every month. That is now up to 6,000 new customers a month, said Ketan Marwadi, its managing director.
It was set up last month by the Union Ministry of Mines after the Supreme Court’s tough judgement on illegal iron ore mining in Odisha. Disposing of a petition filed by the non-profit Common Cause, Justice Madan B Lokur and Justice Deepak Gupta not only ordered the Union government to recover the full value of iron ore mined illegally by the mining lease owners, it also asked it to review India’s mining regulations.
These regulations have failed to arrest illegal mining in the country as is evident in several cases across India – for instance in Karnataka and Odisha, as well as Goa, where the Supreme Court imposed a ban on iron ore mining in 2012, and Tamil Nadu, which has seen rampant illegal sand mining for several years. They have also failed to mitigate the social and environmental consequences of mining. Indeed, there are glaring economic inequalities in India’s mineral-rich districts. Communities living close to the mineral reserves teeter at the edge of destitution and battle environmental pollution even as a handful of politically-connected people amass extraordinary riches.
The Supreme Court therefore directed the Centre to set up an expert committee, chaired by a retired judge, to identify the regulatory lapses that allowed illegal mining. It also directed the Union government to review the National Mineral Policy, 2008, in order to bring in greater transparency, environmental protection and more social and economic growth.
Accordingly, the Ministry of Mines set up the KR Rao Committee on August 14. The committee is expected to submit its report on October 31. Its composition, however, raises questions on whether India’s mining sector will see a fundamental overhaul or more of the same.
Three months ago, when the central government was getting ready to roll out the Goods and Services Tax, the textile industrial cluster of Surat, Gujarat, India’s biggest manufacturer of synthetic fabrics, was distinctly nervous.
At play were two conflicting views of how the new tax regime would affect India’s predominantly informal business sector. The government said GST would make it impossible for firms to evade tax. Even small companies would enter the tax net, boosting both the formalisation of India’s economy and tax revenue. Companies in the Surat cluster, however, were unsure if they could pay these taxes and remain competitive.
Such fears, dismissed by GST supporters as no more than a desire to avoid paying taxes, resulted in the industry petitioning the government several times. When that failed to deliver relief, they went on a general strike in mid-June. The government still did not yield. There was a police crackdown, and the strike petered out. GST was rolled out as planned on July 1.
A wrap of all our #EarToTheGround reportage from Bihar is finally out.
The arsenic crisis is not the only problem area where the state’s response has been weak and underwhelming. Bihar has improved on law and order, roads and power, but as the previous stories in Scroll.in’s Ear To The Ground series have reported, its performance on matters crucial for the poor – preventing infectious diseases, implementing the Mahatma Gandhi National Rural Employment Guarantee Scheme that promises all rural households 100 days of employment in a year, pushing land redistribution, providing quality education – remains abysmal.
Its solitary rail track – a 57-km long metre-gauge line connecting the town of Mehsana to the Jain temple at Taranga – has been ripped out. It is being replaced by a broad-gauge line and extended till Abu Road in the neighbouring state of Rajasthan.
Paint and plaster have been hammered off the tiny asbestos-roofed building housing the station’s ticketing office and station master’s room. It is being redone as a part of a Rs 8 crore project to redevelop the station as a heritage station, said Hardik Bhand, who runs the ticketing office at the station.
Look to the left and the station’s solitary platform blurs into a construction site. One group of men carries iron rods bent into rectangular brackets past the yellow board at the edge of the platform announcing the station’s name. Another set inserts these rods into the steel scaffoldings of what will become concrete pillars. Behind them, an earthmover moves soil around. The whole station is seeing an upgrade. From one platform to three. From one train trip a day – which stops at Vadnagar while heading to Taranga and again while heading back – to three a day.
It is a real overhaul. At one time, with its single platform and no more than two train halts a day, this station in North Gujarat must have been quite sleepy. And pretty too – herons roost on the trees behind the station.
It is not easy to locate the reason for this exuberance of redevelopment. Around here somewhere is the tea stall where Prime Minister Narendra Modi used to sell chai as a child. But ask around and you get contradictory answers….