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.
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.
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.
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.