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Subramanian Swamy fears GST could be Narendra Modi’s Waterloo: A fact check

Subramanian Swamy fears GST could be Narendra Modi’s Waterloo: A fact check

Source indiatoday.intoday.in/

Subramanian Swamy is not alone in voicing doubts over GST roll out preparedness. The banks, too, are not geared up for implementation of the new indirect tax regime.

Prabhash K Dutta | Posted by Bijin Jose
New Delhi, June 5, 2017 | UPDATED 14:52 IST
 BJP leader Subramanian Swamy today raised apprehension about the state of preparedness for rolling out what is being hailed as the biggest tax reform in the country.

Taking to twitter Subramanian Swamy said, “GST rollout be on July 1 but of 2019 . A huge risk if implemented before 2019 given the state of preparedness. It could become our Waterloo

GST roll out be on July 1 but of 2019.A huge risk if implemented before 2019 given the state of preparedness. It could become our Waterloo.

For record, the Battle of Waterloo took place in Belgium on June 18, 1815. It marked the final defeat of French military leader and emperor Napoleon Bonaparte.BANKS NOT READY FOR GST

Subramanian Swamy is not alone in voicing doubts over GST roll out preparedness. The banks, too, are not geared up for implementation of the new indirect tax regime.

The Indian Banks Association has written to a parliamentary panel saying that the banks are not prepared for GST roll out from July 1.

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The IBA told the Parliamentary Standing Committee on Finance that “since the GST will be operational from July 1, 2017, banks have to make lot of changes in their systems and other procedures. The preparedness of all banks for implementation of GST on July 1, 2017, is a question mark.”

Explaining the difficulties, the IBA said, that several services by banks to customers are centralised while many others are localised. Banks will have to make changes in the existing infrastructure which would be a huge challenge for the banks, the IBA said.

If banks are not ready, the GST roll out may go the demonetisation way in implementation.

GST WOES FOR FARM SECTOR

The farmers are in distress. The ominous signs are visible in several states. Farmers of Tamil Nadu – Subramanian Swamy’s home state – staged protest in New Delhi for 40 days. They came back again last month.

The farmers of Maharashtra and Madhya Pradesh are agitating. Maharashtra government announced a Rs 30,000 crore loan waiver but farmers are not ready to relent. Farmers of Madhya Pradesh are going the same way.

The GST may further increase the farm distress. GST regime may increase the cost of agriculture production.

After GST roll out, fertilisers will attract 12 per cent tax. Currently, fertilisers are taxed under VAT between zero and eight per cent. This means that the GST regime will make fertilisers costlier by over four per cent the least.

Similarly, pricing of pesticides may go upwards. Pesticides currently attract a VAT of 4-5 per cent in different states and a central excise tax of 12 per cent. Under GST regime, the prices are likely to go up slightly.

The prices of tractors may also rise. The tractors attract a VAT of 4-5 per cent in states while enjoy an exemption from central excise tax (zero per cent). From July 1, GST of 12 per cent will be applicable on tractors. Moreover, the accessories used with tractors in farming will attract 28 per cent of GST.

The combined increase in prices of fertilisers, pesticides and tractors will increase burden on farmers.

GST IMPACT ON TEXTILE

Though textile industry leaders welcomed average 5 per cent GST on textiles but the finer points may tell a different story.

Multiple tax points at various stages have been proposed for textile industry under the GST regime. For example, handloom products manufactured by weavers are exempted from taxation.

Under GST regime cotton yarn, dying chemicals and natural fibres will attract 5 per cent tax. Man-made yarns or synthetic fibres will attract 18 per cent GST.

Textile sector is the second largest employer after agriculture and a large part of the industry is unorganised employing semi-skilled workforce. Their livelihood may be adversely affected under GST regime.

It is estimated that textile industry employs around 4 crore people directly and another 6 crore indirectly.

There are about 26.3 crore farmers in the country. They overwhelmingly supported the BJP in the last Lok Sabha elections.

INCREASING RURAL DISTRESS

The state of farm sectors is an indication that rural distress is reaching its limits. Combined failure of the Centre and state governments in creating enough number of jobs particularly, in rural areas has only increased the rural distress – only little over 3 lakh employment avenues in the last two years.

There have been complaints that the government has not shown keenness in releasing funds under MNREGS. Fund release for wages under the employment guarantee scheme for 2015 declined by 9.5 per cent.

The farmers’ demand for increase in MSP has been resisted and well-countered by controlled inflation. But, a similar situation during Vajpayee rule proved costly for the BJP in the 2004 Lok Sabha elections. Subramanian Swamy must have the memories of Vajpayee years despite having a not-so-cordial relation with the former Prime Minister.

However, the government looks confident that the revenue-neutral formula of the GST will set off the side effects of its implementation. Still, Subramanian Swamy’s apprehensions don’t appear to be baseless.

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