Note ban foolish, GST full of holes, says P Chidambaram

Terming demonetisation as a foolish step and the Goods and Services Tax (GST) design faulty, senior Congress leader P Chidambaram said over the weekend that these decisions of the Narendra Modi government have derailed the economy.

With "demonetisation and GST, they have derailed the economy", Chidambaram said at a Congress meeting in Mumbai on Saturday.

He reiterated these comments at a meeting with businessmen in Rajkot, saying the Centre should have admitted that it had made a mistake in scrapping high value currency notes last year, and that the present GST design is faulty.

"Who will put the economy back on the rails now? Don't look at us. I am looking at you (the voters). You have to decide who will put the economy back on the rails," the former finance minister said, and expressed the optimism that the country will have a government which will be able to correct these mistakes.

"That (new) government will say the maximum tax in GST will be 18 per cent and no tax will be higher than 18 per cent. That government will say 90 per cent of traders and businessmen who are small and medium businessmen, it is ok if you file your returns once in six months. But when that government will be in place is entirely in your hands," he told Congress workers.

Stating that every businesses is affected by GST, Chidambaram said, "We told them don't do this in a hurry but wait for some time, while traders, and businessmen told them to delay it till September (but to no avail)."

Interacting with businessmen at an event in Rajkot, the Congress veteran said demonetisation was not a bold step, but a reckless one. ''What's a bold step? A farmer who commits suicide is also a bold step. Do you welcome it? Committing suicide also requires courage. I call it a rash, reckless and adventurous step.

''Demonetisation has destroyed lives. For two to three months, millions of people stood in queues to exchange notes. Nearly, 140 people lost their lives. Carpenters, rickshaw pullers, plumbers, who depend on daily cash earning, went without business for two months. Demonetisation was a foolish step,'' Chidambaram said.

The leader said demonetisation had failed to achieve its stated objectives like ending black money and curbing terror funding. He also said that there was no such thing as black money, but a ''shadow economy'' that operated in India. By shadow economy, Chidambaram said he meant income that escaped the tax system.

''There is nothing like black money but merely income which is taxed and income that is taxable but escapes the tax net. India's shadow economy is around 12 per cent. There are many European countries whose shadow economy is more than 12 per cent. Even the US has around 8 per cent shadow economy. What is shadow economy? It is income that your tax system is not able to capture,'' he said.

''The answer to shadow economy is to make your tax system more efficient. If you put cruel tax rates, people will avoid it. People will say why should I pay? If you make the tax system friendly, they will pay. The answer is not demonetisation. It's like saying there is a mosquito in my house, so I am going to burn down my whole house,'' he said.

He also said the government implemented GST in such a hurry that when businessmen file returns, the whole GST network breaks down.

Noting that the government had brought about as many as 135 changes to the official objectives of demonetisation, he said, "Now I am waiting to see when they will make 135 changes to GST. Every day the finance minister is announcing some changes and exemption to the GST framework."

He said the opposition parties, including the Congress and the Trinamool Congress have decided to observe 8 November as 'Black Day'.

He said GST is a good tax and a good idea, but this government has given GST a bad name, which is why it's appropriate to call it a 'Gabbar Singh Tax' (referring to a famous Bollywood villain) rather than Goods and Services Tax.

Describing demonetisation as a decision driven by total ignorance, he said this government does not have the honesty to admit it made a mistake.

"I think the whole scheme was to help some people who had black money to convert it into white money. It is one of the biggest scams," he said, adding, "I am sure someday, somebody will enquire into it".

He said none of the objectives of demonetisation – ending counterfeit notes, stopping terror funding and black money, as claimed by government, have been served.

"Therefore, they shifted the goal posts. No longer do they speak about terrorism and fake currency but now say it was to being in a cashless economy which was an afterthought," he said.

Blaming the government for being completely insensitive to what the people are going through, he said, "The result is jobless growth. There is some growth but there are no jobs being created".