Policies fail because policy-makers do not know the ground realities and do not consult those that know. The GST is a prime example
Policy failure to achieve objective is often attributed to implementation hurdles. They also fail and primarily so because the proposed beneficiaries or those who are to actually implement the programmes, like the patwaris, block development officers and others, are not taken into confidence at the designing stage.
The case with the messed up GST Constitutional Amendment Bill, India’s biggest tax reform, suffered from the same problem and the draft model GST law would leave one in splits had it not had such serious repercussions. As per the model GST law “agriculture” includes floriculture, horticulture, raising of crops, grass, grazing and such others but excludes: dairy, poultry, gathering of fruit, raising of man-made forest or rearing of seedlings and plants.
For all practical GST purposes then, eggs or cow’s milk may be taxed. However, selling meat may escape the GST because grazing is considered agriculture. Growing grass is not in the tax bracket but tribals collecting forest produce surely are. Possibly, half of all land leasing transactions work on a crop-sharing basis. The land owner and the cultivator share costs, inputs and labour in an agreed upon ratio. In the new GST, such agreements are proposed to be taxed, even when it is impossible to differentiate on the basis of an agreement of how a crop is grown.
There is more laughter waiting to come because given the legacy of the British Raj, the policymaker will not let go easily. Indeed a reading of the GST bill reminds one of the French guillotine. In the definition of“goods’’, it includes growing crops attached to the land that ‘are agreed to be severed before supply’ (like decapitating the head from the neck). Meaning, sale of tomato sapling is taxable but selling tomatoes is 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 the definition of the “agriculturist” is limited to one who cultivates the land personally. The implication is that any entity entering into a contract will be taxed. In one stroke, contract farming and 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 into laws, the country would not face this interpretation conundrum. The hullabaloo centres on the rate of taxation though logically the specifics of the model GST law should have been questioned first. Politicians conveniently kept liquor out of GST because the trade generates the 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 out to be as good as it is being projected to be but not unless errors pointed out are corrected. The amendments will end up ushering in a regime of universal misery instead of a regime of simple and unified tax rates.
The insidiously worded GST cannot hide the one clear intent to tax farmers. The Bible says: “Beware of false prophets, which come to you in sheep’s clothing, but inwardly they are ravening wolves”. Was it referring to the Indian policymaker?