Failures of policies to achieve objectives are commonly attributed to implementation hurdles. Policies primarily fail to deliver because at the designing stage the proposed beneficiaries or those who are to actually implement the programs like patwaris, block development officers and others are not taken into confidence. Similar is the case of GST Constitutional Amendment Bill, India’s biggest tax reform. The model GST law draft will leave you laughing.
As per the model GST law “agriculture” includes floriculture, horticulture, raising of crops, grass, grazing, etc. But excludes: dairy, poultry, gathering of fruit, raising of man-made forest or rearing of seedlings and plants. So for all practical GST purposes, eggs or cow’s milk may be taxed. While selling meat may escape the GST as grazing is considered agriculture. Growing grass isn’t in the tax bracket but tribals collecting forest produce surely are.
Possibly, half of all land leasing transactions work on a crop-sharing basis, where the land owner and the cultivator share costs, inputs and labour in an agreed ratio. In the new GST, such agreements are proposed to be taxed, even when it’s impossible to differentiate the agreement of how a crop is grown.
Don’t laugh yet, it’s the legacy of the British Raj, the policymaker won’t let go so easily. Reading GST will remind you of the French guillotine. GST defines “goods’’ to include growing crops attached to the land which ‘are agreed to be severed before supply’ (like decapitating the head from the neck). Meaning, sale of tomato sapling is applicable for tax but selling tomatoes are not.
The government’s farm sector reforms are founded on the proposed land leasing law. As per the model GST law, “agriculturist” will not be a taxable person. But, definition of “agriculturist” is limited to a person who cultivates the land personally, implication being any entity which enters into a contract will be taxed. In one stroke, contract farming & land leasing have been dealt a fatal blow. Not one Parliamentarian raised a voice of caution at such lunacy.
Farmers watching the Rajya Sabha debate must have wondered why they could not spot a single farmer in the ranks. If only the Parliamentarians read what they pass as a law, we would not face this interpretation conundrum. The hullabaloo centres on the rate of taxation, while logically the specifics of the model GST law should have been questioned first. Politicians conveniently kept liquor out of GST because the trade generates largest quantum of slush funds for state politicians.
In all probability, GST will subsume the mandi tax and the states are yet to fathom the cascading ramifications. GST can turn to be as good as it being projected to be, but, if changes are not made, the amendments rather than simply unifying the tax rates, will make everyone universally miserable.
Policymakers insidiously worded GST can’t hide the one clear intent to tax farmers. In the Bible it is written “Beware of false prophets, which come to you in sheep’s clothing, but inwardly they are ravening wolves”.