GST suffers from structural problems: Balagopal – The Hindu BusinessLine

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What we need is collectives and co-operatives of farmers that can add value to farm produces, Says Kerala Finance Minister

Kerala Finance Minister KN Balagopal, who was here recently to meet Union Finance Minister Nirmala Sitharaman, shares with BusinessLine his views on the GST regime and impact of FTAs. Excerpts from the interview:

In your first budget, you raised two points against the Centre — the free trade agreements and the problems in GST. Are you trying to open a new war front with the Centre?

The agriculture sector suffered hugely because of the impact of bilateral and multilateral trade agreements on our domestic production and trade. The ASEAN free trade agreement brought miseries to Kerala’s plantation and spices sector. Low quality products from the Far East and SAARC flooded the domestic markets. Mixing of such products with our own products raised questions about quality and credibility of our products in the international markets. The result was huge decrease in the earning of farmers.

The Centre must stop discussions on all such anti-farmer treaties. They must revise the clauses in ASEAN and other free trade agreements. Governments in many countries are now trying to protect their farmers and industries from this uncontrolled flow of goods and services. We must also learn from the experiences of Brexit and Greece. The entire world is re-examining such agreements that gave a free access to a few people who control markets.

The Centre is duty-bound to do this in the wake of protests of farmers across the country. They are facing distress. All those agreements that are detrimental to the interests of Indian farmers and to the economy of the country should be revised. The three farm laws are against the farmers, so are the free trade agreements. They must be revisited to protect the rights of farmers. Parliamentary ratifications must be made mandatory for all free trade agreements and treaties. Centre must hold discussions with States and increase import duty to protect the interests of farmers. At present, the Centre is serving the interests of these importers.

You wrote a dissent note against the GST Bill when it was discussed by a select committee of Rajya Sabha. The Bill is an Act now. Did you change your views?

We opposed the GST in principle even from the stage of the first draft Bill.The constitutional Assembly, particularly Dr BR Ambedkar, was clear that Sales Tax should remain with the States for a healthy federal system. When this Bill was brought to Parliament, both the UPA and the NDA governments gave a hope that it will increase the tax buoyancy and both producing and consumer States will be benefited. They claimed that goods traffic will be quick without any barriers and consumers will benefit as prices will come down.

But none of these promises are fulfilled. Tax evasion is rampant. There’s no increase in tax revenues. Even before the pandemic, revenue income of States, including that of Kerala, got stagnated. The actual income of the States have come down. People also did not get any benefit as prices touched sky. The only beneficiaries are a few corporate houses and the Centre. They have a win-win situation, but for us it is a loss-loss situation.

In the select committee of Rajya Sabha on the Bill, only three-four MPs pointed out that the GST Council, in its present form, is weighed in favour of the Centre and a few corporate houses. We were a minority. But after four years since the implementation of the law, even BJP-ruled States have started voicing their apprehensions. For example, Sikkim wanted ₹300 crore additionally for a specific scheme to manage Covid-19. They came to GST Council as they are unable to raise their own tax. A sub committee of GST sent the proposal to the Centre. Basically, States will have to go to Centre for each and every decision on taxation.

The very concept of GST is against co-operative federalism. States are losing revenue. One-third of States’ revenues lost due to GST. If this continues, the entire education, health, welfare apparatus of States will collapse. This cannot be corrected through a compensation. The issue is structural. There should be democratic content and fiscal independence within the GST system. The Centre should initiate democratic discussions on taxation and devolution. But look at what happens to petroleum products.

The Centre unilaterally pockets big chunk of the taxes. Centralisation of revenues will not benefit the country.

What suggestion do you have to address the farmers’ distress?

What we need is collectives and co-operatives of farmers that can add value to farm produces. Farmers should get a good share of the profit industries make by adding value.

Look at Amul. It is a co-operative and it can take on any global giants such as Nestle. Amul also gives a good per cent of the shelf price to the farmers. We need more such collectives and co-operatives and the governments should protect it.

We have decided to promote such collectives and co-operatives under the Co-operative Initiative for Agriculture Infrastructure in Kerala (CAIK) in the revised Budget for 2021-22.

Government willhelp farmers in marketing and technology upgradation.

Many economists fear a great depression like scenario after this pandemic. Are we prepared to handle such a crisis? What is the alternative Left parties have to propose?

It is not a question of Left alone. It is a question of the basic economic practice our country and many other countries in the world has been following for some time. The basic issue is to create employment, purchasing power and demand for our products. We need to ensure that agriculture production is not impacted. To ensure this, we need to find a market for the agricultural produce. This can be ensured only by assuring jobs for people in industries and other sectors.

To take on great depression, Franklin D Roosevelt introduced new deal in United States, modelling the public expenditure mechanisms under the five-year plans of USSR. Roosevelt activated economy by spending more on public infrastructure and agriculture. Here in India, we are not creating any jobs. More cut in expenditure means more trouble. It is like a black hole. A great depression situation may occur again if this shrinkage on public expenditure continues. Spending on infrastructure building and activating economy is the only way to create jobs and come out of this situation.

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