Is GST a loud laugh at farm­ers’ mis­for­tune

The new tax regime has cre­ated great con­fu­sion about move­ment of agri in­puts and farm pro­duce within and out of states, leav­ing the farm­ers in dilemma.

Alive - - Contents - by Me­hul Singh

At the stroke of mid­night on 30 June 2017, In­dia made his­tory with the roll­out of Goods and Ser­vices Tax, or GST. Al­most all the Union and State min­is­ters cel­e­brated the oc­ca­sion in the Cen­tral Hall of Par­lia­ment, while the farm­ers were still cry­ing at their ad­ver­sity, bang­ing their heads try­ing to find out the ways to cope up with the in­fla­tion that the GST would be bring­ing along.

Al­war Singh, a farmer in Meerut district of Ut­tar Pradesh, wakes up with few ques­tions on the morn­ing of 1 July. His ques­tions are ra­tio­nal, as it is about his daily life. Al­war’s main concern is if he will be earn­ing as much profit as he was, when the en­try taxes were ap­pli­ca­ble be­fore the roll­out of GST.

He said, “Most of the pro­duc­tion is sent to Haryana and we are given ex­tra money for cross bor­der sup­ply.” He fur­ther voiced his in­ner an­guish say­ing he is not sure if GST will help farm­ers in any way. Al­war has lit­tle idea about what GST ac­tu­ally is. He ques­tions if he will have to pay taxes on his pro­duce.

The gov­ern­ment had a hard time deal­ing with the farm­ers’ in­ter­est while de­sign­ing the GST plan. They called out rep­re­sen­ta­tives from the states to give their ad­vice in this mat­ter. Af­ter lis­ten­ing to ev­ery­one’s sug­ges­tions, the gov­ern­ment de­cided to frame a def­i­ni­tion to who is ac­tu­ally an agri­cul­tur­ist or a farmer.

Agri­cul­tur­ist is an in­di­vid­ual or a Hindu Un­di­vided Fam­ily (HUF) which car­ries out farm­ing on their own or by fam­ily mem­bers; by ser­vants on wages payable in cash or kind; or by hired labour un­der one’s per­sonal su­per­vi­sion or the per­sonal su­per­vi­sion of any mem­ber of one’s fam­ily. And such farm­ers have been kept out­side the cat­e­gory of tax­pay­ing pop­u­la­tion.

IN­NER AN­GUISH Most of the pro­duc­tion is sent to Haryana and we are given ex­tra money for cross bor­der sup­ply. His in­ner an­guish say­ing he is not sure if GST will help farm­ers in any way.

The land­lords who lend their farm­ing space to farm­ers or com­pa­nies on agree­ments or con­tract ba­sis with no per­sonal su­per­vi­sion, mainly for busi­ness pur­poses will have to pay taxes un­der GST. So, farm­ing might be­come costlier to such farm­ers.

Fur­ther, the farm im­ple­ments are go­ing to cost more as they at­tract 12 per cent tax un­der GST. The pic­ture is same for pes­ti­cides. Cur­rently, farm­ers in Haryana pay 12.5 per cent excise duty on pes­ti­cides. But from now on, they will have to pay 18 per cent tax un­der GST.

Fer­tiliser was al­most tax-free in Pun­jab but un­der the new re­formed GST pol­icy a tax of 5 per cent is to be charged upon fer­tilis­ers, which might turn good for other states, where 6 per cent tax was be­ing charged. But farm­ers in Pun­jab and Haryana are not happy with these re­forms.

Fun fact, ear­lier a 12 per cent tax rate was fixed for fer­tilis­ers but due to con­stant pres­sure and sore words from farm­ers, the gov­ern­ment had to cut down the tax rates from 12 per cent to 5 per cent. The farm­ers have al­ready been dis­tressed with the loss that de­mon­eti­sa­tion had caused to them re­cently and adop­tion of GST seems like rub­bing salt into their wounds.

Clear pic­ture

Whole­sale Price In­dex (WIP) of agri pro­duce has been fall­ing for some years. This fall in WPI harms the In­dian farm­ers in so many ways. A high in­dex gives profit and more money to the agri­cul­tur­ists.

Farm­ers have al­ready been com­plain­ing about not get­ting enough prices for their pro­duce and with the GST in place, the prices (at which a farmer would sell his pro­duce) are ex­pected to go fur­ther down. The three phases show a clear down­fall of prices cre­at­ing mis­eries for farm­ers.

Phase I was the pe­riod of bet­ter mon­soon and great mar­ket de­mands un­til the end of June 2016, with the high­est WPI per cent at 8.64 per cent. Dur­ing Phase II, farm­ers suf­fered the wrath of de­mon­eti­sa­tion that caused a lot of loss to their crops and just when the rates were up­lift­ing long af­ter de­mon­eti­sa­tion, the GST roll­out again brought WPI rates to the knees.

April saw a steady in­cre­ment in rates and May proved to be the worst time in the decades for In­dian farm­ers with down­fall in WPI rates to as low per cent as 0.15.

GST is go­ing to bring a bur­den upon farm­ers’ pocket. With an in­cre­ment in the prices of farm im­ple­ments, farm­ers might pre­fer to go back to tra­di­tion ways of farm­ing rather than me­chan­i­cal process that usu­ally yields bet­ter pro­duc­tion as com­pared to tra­di­tional method of farm­ing.

Agri­cul­ture is the largest con­tribut­ing sec­tor to In­dia’s GDP, cov­er­ing around 16 per cent of In­dia’s GDP. It seems like PM Modi has failed to keep the prom­ises of favour­ing farm­ers. This pol­icy is not show­ing much favour to farm­ers but, the ex­perts be­lieve there could be a cut down on the prices of pes­ti­cides, fer­tilis­ers and farm­ing im­ple­ments to help farmer sur­vive the newly re­formed tax sys­tem. Cow, buf­falo and other cat­tle have been kept out­side the sway of GST to give some re­lief to the farm­ers.

Some agro ex­perts ar­gue that the in­clu­sion of con­tract farm­ers and farm­ers with big land ar­eas un­der GST is not a smart act. They be­lieve that farm­ers do not earn as much as an IT em­ployee does and fur­ther, con­tract farm­ing was in­tro­duced by In­dian gov­ern­ment it­self in the name of ad­vance­ments and the GST might trig­ger such farm­ers to take a step back from con­tract based farm­ing to avoid pay­ing taxes.

The agro ex­perts call this in­clu­sion of such farm­ers un­der GST an act of be­trayal to­wards farm­ers.

An­other ques­tion that Al­war asked was re­gard­ing his loans. Around 87 per cent In­dian farm­ers take big loans to buy seeds, fer­tilis­ers, pes­ti­cides, trac­tors and other farm­ing im­ple­ments to grow their crops.

TAX FREE Fer­tiliser was al­most tax-free in Pun­jab but un­der the new re­formed GST pol­icy a tax of 5 per cent is to be charged upon fer­tilis­ers, which might turn good for other states,

The farmer’s loan was set at a 15 per cent in­ter­est rate as of now but un­der the GST, it has been shifted to a higher rate of 18 per cent. The farm­ers are seething with the in­cre­ment in the in­ter­est rates.

BKS (Bharatiya Kisan Sangh), a farm­ers union af­fil­i­ated to the RSS (Rashtriya Swayam­se­vak Sangh) is op­pos­ing GST by or­gan­is­ing protests and hunger strikes with the de­mands to ex­clude any kind of farmer from GST. Bring­ing down the in­ter­est rates, to waive off the ear­lier loans and to pro­vide farm­ers with cheaper pes­ti­cides, fer­tilis­ers and other equip­ments re­quired for farm­ing are their other de­mands.

With this out­rage amongst farm­ers, var­i­ous states are try­ing to plan a farm loan waiver pol­icy for farm­ers but, the scheme is get­ting heavy for states. UP gov­ern­ment un­der Yogi Adityanath is try­ing hard to fig­ure out ways of ap­ply­ing this scheme but the chances are that the scheme might throw state into deeper depth traps.

No op­tion

As state gov­ern­ment can no longer ask for ad­di­tional taxes in the form of VAT (Value Added Tax) un­der GST, the state is left with no op­tion other than bor­row­ing and it will only cause fur­ther dam­age to fi­nan­cial po­si­tion of UP where debt has reached Rs 3,75,049.45 crore as on 31 March 2017.

Ma­ha­rash­tra and Mad­hya Pradesh have been suc­cess­ful in ini­ti­at­ing loan waiver pol­icy for farm­ers while the farm­ers in Ut­tar Pradesh are very much ag­i­tated with the un­ful­filed prom­ises that the BJP men­tioned be­fore elec­tions.

Some fi­nan­cial ex­perts be­lieve that Goods and Ser­vices Tax will be ben­e­fi­cial for traders and farm­ers in long run, though they might face some crises in the begin­ning due to in­fla­tion but long term ben­e­fits will com­pen­sate for it.

Union fi­nance min­is­ter, Arun Jait­ley has asked the peo­ple to look at the brighter side of this tax­a­tion re­form rather than rant­ing about small-term strug­gles that the GST will cause. BJP is sure of the ben­e­fits that this tax re­form will cause but, farmer’s des­tiny is still the same.

Hunger strikes and protests that cause no good to the farm­ers still con­tinue with the hopes of hear­ing good news one day. The Op­po­si­tion par­ties have been at­tack­ing GST with no valid rea­sons but only for po­lit­i­cal ob­jec­tives. GST is a tax re­form that might ben­e­fit the so­ci­ety, but how it is go­ing to ben­e­fit the farm­ers is still un­fore­see­able.

Only the time will tell how GST helps the In­dian econ­omy and farm­ers. For now, farm­ing com­mu­nity might have to face the ad­ver­sity of in­fla­tion, and keep pray­ing for ‘Good Days’, which are still elu­sive even three years af­ter Bharatiya Janata Party came to power.

Food grains ar­riv­ing in a mandi but left unat­tended.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.