GST maze engulfs Gujarat elections, overtakes quota demand for Patidars

Traders protest against the goods and services tax in Ahmedabad, Gujarat. (Photo: Reuters)
For months, P M Shah and Hetal Mehta, president and vice-president of the Southern Gujarat Chamber of Commerce and Industry, have been darting from their base in Surat to both Gandhinagar and Delhi. The effort has been to process the Goods and Services Tax (GST), its various amendments and to decode its “intricacies” for users.

They have frequently interacted with Union finance secretary Hasmukh Adhia, who as the revenue secretary, was in charge of the new levy's rollout, and with Subhash Garg, the economic affairs secretary. The chamber's objective, it says, was to handhold the Centre as it grappled with political pressures and waded through a procedural maze. Arising from a “conviction” that GST was a “far-reaching reform, beneficial to the whole country”, as Ketan Desai, the chamber’s treasurer, puts it.     

Desai stresses that barring textile, no other industry in south Gujarat had opposed GST. “We did not endorse the textile strike. We told the protestors we can represent their issues before the Centre; their strike fizzled out,” he said.

The chamber believes the flap over GST was because the excise tax and value-added tax (VAT) that were earlier collected and refunded separately by the Centre and the states are now rolled into one. That "induced a psychological apprehension in industry's mind".  "The refunds came from two sources. If one delayed reimbursing, the other would pay on time; so, there was parity,” he explains.

Nearly 450 km to the east of Surat, at Rajkot, the commerce and industry chamber is markedly less sanguine about GST. Rajkot is the headquarters of both Saurashtra and Kutch, the state's politically significant region, accounting for 58 of the 182 Assembly seats as compared to the south’s 29. Ostensibly, Saurashtra’s importance propelled Union Finance Minister Arun Jaitley, Congress Vice-President Rahul Gandhi and P Chidambaram, the former finance minister to lately hear the chamber out. "The Centre's unprepared to accept the need to modify and streamline the procedural glitches," says Shivlal Patel, the chamber's president. 

He maintains that with GST, units in Saurashtra that worked to 90 per cent capacity and "fed" at least 10 or more families each are down by 50 per cent and pruning their workforce. "There's no money, no demand in the retail sector. When the growth figure is computed, the job-generating informal sector is unaccounted for," said Patel. 

The chamber was apparently so miffed with the Bharatiya Janata Party (BJP) government that it derived solace from interacting with Rahul and Chidambaram. “They placed the Congress' version of GST with the BJP's but said nothing political, did not canvass for votes,” an office-bearer said.

GST dominates the political discourse through Gujarat because traders, farmers and consumers alike are impacted. It has overtaken the reservation demand for the Patidars or Patels that loomed large over the political landscape fairly recently.  

Unjha in north Gujarat, 110 km from Ahmedabad, is Asia’s largest spice market. The marketplace, controlled by the Patels and redolent with the aroma of coriander, fennel and cumin seeds, looked desolate. “Trade’s down by 60 per cent, thanks to GST,” says Jayantibhai Patel, a trader, and office-bearer of the state government’s Agriculture Market Produce Committee (AMPC), Unjha. 

The BJP never lost Unjha since 1995. In September, its area MLA, Narayan Lallubhai Patel and his son, Gaurang Patel, who heads the town’s AMPC, were chased out of a public meeting by women. “We don’t need (Narendra) Modi, Jaitley or (Amit) Shah because Rahul, Jyotiraditya Scindia and Sachin Pilot are backing us,” claimed Ganpat Patel, another trader and office-bearer of the state government’s AMPC, Unjha. For two decades, the Congress was anathema in Unjha. GST explains the conversion in the traders.

At the core of their problem is the 28 per cent GST on tobacco, Unjha's biggest export. Every trader spoken to said the Centre owed him a refund of Rs 1-1.5 crore on export, accumulated since GST kicked in. “We don’t have the cash to purchase the previous volume of raw materials,” complained Ganpat.

North Gujarat's farmers said they bore the brunt of GST because, first, traders were not taking their produce and, second, even if they did, they paid only half the dues, asking to wait for the rest till the export reimbursements came. The farmers said they had little or no money to buy their inputs for the next sowing season.

For the farmers, GST exacerbated an earlier agrarian problem —crop loss due to flooding, non-payment of crop insurance despite the premium ranging from Rs 2,500 to 5,000 being cut directly from their bank accounts, and a low Minimum Support Price for cash crops.    

Youths, some of whom have left farming to go into informal investment and stock and share management, felt that had the BJP communicated better the immediate issues in operating GST, it might have contained agrarian anger. “Nobody came to us, no booklets were circulated,” said Jay Patel, a young stockbroker of Bhandu village in north Gujarat.

A STAGGERING COINCIDENCE

On November 11, Congress leader P Chidambaram tweeted: “Thank You Gujarat” after Finance Minister Arun Jaitley announced a big overhaul in GST rates on November 10. Hinting that the Bharatiya Janata Party (BJP) government had timed the review with an eye on next month’s election in Gujarat, where small traders are upset over the new tax, Chidambaram said "Your (Gujarat) elections did what Parliament and common sense could not do.” After a GST Council meeting, Jaitley said only 50 items would remain in the highest tax slab of 28%. Consider some of the specific items. For instance, nowhere in the country is khakra produced and consumed on the scale it is in Gujarat. So, was the GST tweak done with an eye to the Gujarat poll?