Let’s say a truck is moving stuff from Delhi to Chennai. It will pass through about 8 states. During that time, it will pay a variety of taxes – octroi, VAT, excise duties and so on. Each source of tax collection is a source of confusion, corruption and delay. By the time the truck arrives at a destination in a couple of weeks, a huge amount of cost is indirectly added to the consumer. Instead of India being a common economy, we are a patchwork of dozens of economies making growth slow, business impossible and corruption high.
This problem has been recognized by the developed economies and all the progressive ones – Sweden, Denmark, Germany, Switzerland, Japan – have moved to a common GST (Goods and Service Tax) to provide a one common window for tax collection. With just one place of collecting taxes, there won’t be much delays and corruption. When delays and corruption reduce, economy prospers. The single place for tax collection will drastically improve amount of revenues collected [since it will be much easier to verify who didn’t pay] and at the same time help businesses grow. Win-Win.
So, who gets to lose? All the babus and police who are in the middle and used to collecting random taxes & bribes from these businesses will lose if the taxes are streamlined. Even some businesses that are built around babu connections will lose as their competitors can grow without much political connections. The middleman is the ultimate power in India – whether it be kiranas blocking retail reforms or blocking GST through a variety of hidden tactics – and given that the consumers are sheep with no voice for themselves reforms will sleep.
The thing is, the issue is so straightforward that all the major political parties agree to it. However, it doesn’t move. Because, all political parties depend on the middleman. Thus, they all keep making noise about it – with no real action.
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