Modi govt feels heat as GST woes, poll losses and fraud expose chinks in 2019 bid
Prime Minister Narendra Modi | Photo Credit: Reuters

Last year, the government had ushered in the Goods and Services Tax with much fanfare. Since then, however, the one-nation-one-tax structure, which was supposed to simplify India’s indirect tax system, has turned out to be a rather complex affair. It has also led to a shortfall in collections.

In a report released earlier this week, the World Bank said that with five tax slabs, India’s GST structure is one of the most complex systems in the world. It also comprises the second highest tax rate among 115 countries, which have a similar indirect tax regime.

Although finance minister Arun Jaitley has promised to bring the existing five-slab tax structure – 0%, 5%, 12%, 18% and 28% – down to three, by merging the 12% and 18% tax brackets, he has not put a timeframe to it.

However, in the interim, the GST Council have made some efforts to bring down the tax rates on a host of items. In November, for instance, it did bring down the number of items in the 28% bracket from 228 to 50. The council takes the final call on all matters related to the new tax system.

While the government had to contend with the scathing criticism from the World Bank, there was no respite for the ruling Bharatiya Janata Party (BJP) either. For the second week in a row, prime minister Narendra Modi and his party suffered setbacks with shock defeats in Lok Sabha and assembly by-elections in Uttar Pradesh and Bihar, respectively. The BJP managed to retain just one assembly seat in Bihar.

In fact, the losses in Gorakhpur and Phulpur were particularly stinging. Yogi Adityanath had held the Gorakhpur parliamentary seat for five consecutive terms, and had vacated only after he was given the charge as UP’s chief minister. With the losses, the BJP’s strength in the Lok Sabha has come down to 272, down 10 seats from the 282 it had won in the 543 member house in May 2014.

But, the BJP’s woes do not end here. On Friday, the Telugu Desam Party (TDP), the most prominent ally in the National Democratic Alliance (NDA) formally moved out and decided to move a no-confidence motion against the Union government. In fact, TDP’s main rival in Andhra Pradesh, the YSR Congress Party, too, announced its intentions to move a separate no-confidence motion, citing similar reasons.

However, even without the TDP, the ruling NDA enjoys the support of 310 members in the lower house, which should help it easily cruise past the halfway mark of 272, but the fact that a no-confidence motion might indeed be moved against the first majority government since 1984, will come as an embarrassment of sorts for the prime minister.

The BJP could see its ties further strained with yet another ally, the People’s Democratic Party (PDP) in Jammu and Kashmir, after the state’s chief minister Mehbooba Mufti sacked her finance minister Haseeb Drabu, following some controversial remarks he had made in Delhi. Although Drabu, the former Jammu & Kashmir Bank chief, is a PDP member, he is seen as being close to the BJP, whose leaders are reportedly miffed at his ouster.

Having said that, one sure sign of the government’s muscle power in the Lok Sabha was evident in its decision to clear the finance bill, with 218 amendments, in just over 30 minutes, without any debate. In recent memory, it is perhaps only for the third time, after 2004 and 2013, that a government has bulldozed the budget without any discussion – a development that has been frowned upon by commentators for going against the basic principles of democracy that allow for debate and dissent by opposing members.

But as political temperatures rose in Delhi, stock markets in Mumbai continued to bleed for the second week in a row, after starting off on a high. The BSE Sensex was down 1.27% during the week.

This, however, did not deter fresh offerings from hitting the bourses, with initial public offerings of Bandhan Bank and ICICI Securities, besides two state-owned defence companies, Bharat Dynamics and Hindustan Aeronautics, hitting the mint street.

The rush of IPOs may ensure mopping up of Rs 15,000 crore in March alone, taking the annual tally past the Rs 82,500 crore mark, to bettering the 2007-08 record numbers by over two times.

The bad only got worse for the present dispensation with the news of the alleged Rs 13,000-crore Punjab National Bank scam, involving diamond merchants Nirav Modi and Mehul Choksi, becoming even bigger. The bank detected additional fraudulent transactions of Rs 9 crore. This, even as the government reportedly moved to block as many as 91 defaulters from leaving the country.

The move may have been a tad too little and too late, given that 31 of the 91 alleged defaulters, including Vijay Mallya, Nirav and Lalit Modi and Choksi, having already fled the country with Rs 40,000 crore.

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