Delhi Belly: Now For GST-II

Most economists are aware that the Indian economy is like an ice-berg: one tenth is visible above the surface and nine-tenths is hidden from the gaze of the tax man. Mr. Arun Jaitley, by promulgating GST at the bewitching hour on the 30th June, has taken care of the former but the problem of the latter part still remains. This under water, or underground, economy however is, however, subject to a different kind of taxation, but one in which the lucre does not go to the consolidated fund of the state but finds its way into the pockets (and lockers) of various government functionaries from a whole host of departments: police, excise, income tax, revenue, transport, local bodies, PWD, forests, industries, etc. to name just a few. Each has its own slabs of rates and sub-rates, which again vary from state to state. All this creates massive confusion which is not good for the economy: any businessman or tax avoider wants a stable regime of under-the-table payments so that he can build them into his quotes or ensure that he doesn’t get ripped off by his chartered accountant or tax consultant. It is time, therefore, to address this huge problem by bringing in GST II or Graft and Sleaze Tax.

If this sounds weird, let me inform the puzzled reader that a public movement for rationalising this kind of extortion and palm greasing has already been launched in this great country of ours. In an article in the 1st July issue of the Hindustan Times it has been reported that the folks of Nagaland have banded together under an organisation called ACAUT (Against Corruption and Unabated Taxation) to demand a uniform rate of extortion by the rebel and militant outfits operating there ! There are nine such groups in this unfortunate state and they all levy different rates of “taxes” on the populace, which range from 12% to 24% of one’s salary or income. In an improvement over Mr. Jaitley’s tortured formulation, no one is exempt: even policemen pay up ! The long suffering citizens of Nagaland say they are “not against paying taxes to the parallel governments but demand a common structure.”
Why limit this demand to Nagaland ? Since, as I explained (to the harsh cacophony of much trolling) in a recent article, corruption is an integral part of our culture and genes, let us acknowledge it and rationalise it for the benefit of the larger economy. So far we have done so in piece meal and in yogic knee-jerk reactions by introducing VDS and the Pradhan Mantri Garib Kalyan Yojana and whatnot – it is time now to catch the bull by the you-know-what and pass legislation to regulate this plunder. To promulgate, in other words, the GST II.
The proposed Graft and Sleaze Tax would lay down one uniform rate of bribery throughout the country for notified transactions and approvals by government officials: award of projects, approval of building plans, issue of licences, traffic challans, registration (or non-registration) of cases, purchase of rations, scrutiny of tax returns, transfer of property etc. It will be a long list since the government dominates every little cranny of our lives and its functionaries know how to extract a pay-off for every conceivable activity: from mid-day meals to releasing bodies from morgues.
Fixing the slabs may present a bit of a problem since certain departments who have large “capital” budgets, or those who have unfettered powers to lock anyone up, have traditionally had high rates of “taxation” and may resist lowering them. But since the concept of equity and Sabka Saath Sabka Vikaas lie at the heart of all government decision making, Mr. Jaitley must be firm and remind these greedy G-men that lower rates result in better compliance. I would personally prefer just two slabs – 15% for non-plan departments and 20% for plan departments. There would be only one exemption, primarily to correct a distortion that has crept into the present  “tax” regime – dead men, or those who have been missing for more than six years, would not be subject to any Graft and Sleaze Tax. They will, in any case, have to account to the Almighty in due course (provided, of course, St. Peter has linked their Aadhar and PAN numbers to their names in the celestial register, since regrettably their bio-metrics can no longer be verified, post cremation or burial). But that’s HIS problem: Mr. Jaitley has enough of his own, including that little matter of keeping Mr. Subramaniam Swamy away from the FM’s chair.
With the passing of GST-II corruption shall become seamless, across states and departments. Inter-state investment flows will improve, project costs will become more reliable and will not be held hostage to cost escalations just because the next Chief Engineer or Minister does an Oliver Twist and asks for more, manufacturers and suppliers will be able to standardise the dilution of quality and adulteration in their products thus improving ease of business, and the Eighth Pay Commission can build this into its calculations while computing increase in salaries of government servants. It will be a win-win for Mr. Jaitley whichever way you look at it. Time for him to book Parliament for another midnight twist-sorry, tryst. ?

Avay Shukla retired from the Indian Administrative Service in December 2010. He is a keen environmentalist and loves the mountains.....he has made them his home. He blogs at http://avayshukla.blogspot.in/

2 Comments

  • Nodnat says:

    Excellent take! When Humour is used, and increasingly, to say the most serious things, the intended readers / audience usually snort back, “Very funny”! In the case of wily politicians and pompous (and corrupt bureaucrats) retribution can be swift; send in the CBI or the daily paid goon squads depending on their insecurity levels. The standard policy adopted by most ‘Gorments’ is, as will happen in this case, to keep quiet / ignore. Things will pass.

    GST II to tackle the growing (instead of shrinking) icebergs would, however, need a very high level of transparency. Like the one only hardened criminals are reputed to exercise?

  • Avay Shukla says:

    Touche, Subodh !
    A cousin of mine (who will remain anonymous out of choice) has made the following further suggestions for incorporating in the GST II:
    A bribe should be considered a Facilitation Tax, as without it no work would ever get done in the govt. and productivity and GDP growth would suffer. Consequently, the Income Tax Deptt. should provide input credit for this expense to the bribe giver while computing his tax liability. An eminently sensible suggestion.

Leave a Reply

Your email address will not be published. Required fields are marked *