Surat is perhaps India’s largest textile manufacturing as well as trading center. It is in the state of Gujarat which is BJP as well as PM Narendra Modi’s stronghold. In fact Modi as Gujarat CM resisted GST because it is one of India’s “producing” states and GST, being a consumption based tax, is favorable to “consuming” states like Bihar or UP which have very little manufacturing but huge populations.
As we have highlighted in our earlier article, GST, in addition to bringing large parts of underground economy into the open, also facilitates better Income tax compliance. Once dealings are recorded, tax evasion, not just of GST but even other taxes like Income Tax, becomes that more difficult.
And everyone knows that while the salaried class and even large sections of organized business sectors pay taxes and have less means of evasion, the small and medium sized traders that dominate the textile sector carry out their entire business in “black”. This means not just no sales tax or very little, but no Income tax.
It is to protect this illegal and damaging modus operandi that Surat based textile traders went on strike soon after GST was implemented. Markets were shut down for weeks and blatant threats issued to BJP that they will “pay” in votes should they not be allowed to continue with their tax cheating ways.
This article in Indian Express explain the motives quite clearly. “Traders readily concede most of their business was “unaccounted” in order for them to avoid income-tax”. Here is another article that narrates how a nosy Excise inspector was thrown into the boiler!
In fact this strike has been one of those rare highly publicized cases of post GST disruption and troubles. In fact, anti-Modi rags like Wire were reduced to playing up this strike, for want of “better” news. This article, full of hyperbole about the negative impact of the strike in terms of livelihood etc., surprisingly completely omits the tax evasion aspect of the strike, which is in fact its main trigger!
Of course, one can readily imagine how Wire would have played it if Congress or CPM was in power. The strikers would be labelled Sangh parivar fascists who are looting the poor and deserve still jail terms!
Arun Jaitley and Narendra Modi should take up this gauntlet thrown by Surat traders head on. The workers affected by this senseless strike should be helped to tide over this difficulty as well as educated on the real reasons behind this strike. While their daily purchases are taxed, it would be cruelty if their masters don’t pay any tax on their much fatter earnings. Our socialist warriors and their propaganda mouth pieces that shed copious false tears for the “sub-altern” instead of highlighting the real story, choose to fish for anti-Modi sound bites instead!
The strike also highlights how entrenched corruption, cheating, tax evasion is in India to the extent where they become “rights” for which open agitations can be launched.
Genuine and reasonable demands, such as extra time for filing returns, simpler paperwork, protection from corrupt officials etc., can be and should be provided, of course. That is no excuse to demand complete exemption from tax laws of the country. As the FE article cited says quite clearly “If the government stands firm, this protest will fizzle out ultimately. But if it budges, it will encourage similar elements in other industries as well,”
Jaitley sahib it is your call!