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Taxing knowledge and nature

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The success of GST cannot come at a cultural cost to India. A well-informed tax system must widen the dialogue finance has with handicrafts and hand weaves. [This article has been published by The Pioneer, New Delhi.]

On 15 September, in a notification about the Central Goods and Services Tax (GST) Act 2017, the Central Board of Excise and Customs exempted “casual taxable persons making taxable supplies of handicraft goods” from requiring to be registered under the Act. The previous day, a similar exemption was given for the Integrated GST, and which concerns the inter-state supply of handicraft and handloom goods, a traffic that contributes a substantial livelihood to many crafts households.

There are a few conditions explained in the stilted language such notifications employ, such as value of sales, the need for craftspeople and artisans to obtain a Permanent Account Number (PAN) and fill out an e-way bill.

Yet these corrections to GST, made by the Ministry of Finance, are the first signals that the entreaties made to the Government of India by craftspeople and artisans are at last being heeded and responded to. They were made, and took shape in the form of a representation, titled “A plea for reconsidering GST rates for the crafts sector” and was submitted in July 2017 to the Prime Minister’s Office.

The reason this representation had been discussed, compiled and delivered was the ruinous effect on the handicrafts and handloom sector of the Goods and Services Tax (GST), which came into force on 1 July 2017 under the slogan, “the single biggest tax reform in the history of the nation”. The representation to the PMO pointed out that this single biggest tax reform had been drafted, passed and was being implemented without a single consultation with the largest national number of craftspeople and artisans in the world.

The representation went on to explain that the GST consultations had not included or even recognised “the widespread existence of crafts people, practices and products based on centuries old histories and skills, which give India a unique place in the world and brings economic benefits to dispersed rural artisans”.

Handicrafts and hand weaves provides employment and livelihood which is, in terms of numbers, next only to agriculture (indeed the two are concomitant, being based on nature and the application of knowledge). While many crafts and artisanal products are seasonal, estimates are that over 110 lakh persons are so engaged, with more than 43 lakh in the handloom sector alone.

Click for a pdf file of this article (courtesy The Pioneer).

The GST crisis for handicrafts and hand weaves has shown that this sector is constantly on the defensive. It can only proceed by causing the recognition in economy that this sector (cultivation and its ‘arts and local manufactures’ included) does not produce only food, it also produces feed for animals, fuel (both traditional fuels and biofuels) and fibres and grasses and woods, the minerals and clays, the colours, for artisanal (and industrial) production, and that the maintenance of the bio-economy – that is the service of balancing our ecological habitats upon whose gifts we base our lives, a balancing brought about by the application of uncountable streams of local knowledge – is fundamental to the well being of the country’s peoples.

“One would assume that natural materials, organic cultivation, reduction of plastics and other synthetic materials, and recycling would figure in the Centre’s approach to policies across the board,” Jaya Jaitly has observed. As president of Dastkari Haat Samiti, the conceiver of Dilli Haat and the initiator of several of India’s most innovative programmes to return dignity and viability to craftspeople and artisans, her expectation of policy coherence is well warranted.

Both dignity and viability are important, and for as long as handicrafts and hand weaves were held in high esteem by the ruling administrations of ancient and medieval, colonial and independent India, both were assured. In the 1951 Census, the first of independent India, among the list of industries and occupations according to which the working population was described were herdsmen and shepherds, beekeepers, silkworm rearers, cultivators of lac, charcoal burners, collectors of cow dung, gatherers of sea weeds and water products, gur manufacture, toddy drawers, tailors and darners, potters and makers of earthenware, glass bangles and beads, basket makers.

The liberalisation and ‘market reform’ which swept through the country from the early 1990s brought with them a view of both macro- and local economics that became more distant from ‘arts and local manufactures’. India began to pay more attention to GDP and less to the meanings which handicraft and hand weaves represented. By the middle of the decade of the 2000s, biodiversity, carbon, ecosystem services, and even cultural services had begun to be discussed and considered. Terms and ideas such as ‘externality’ and ‘social costs’ began to be used to describe the changes to society and environment that were under way, visible but never acknowledged, which weakened and sickened both.

Such discussion rarely recalled quiet efforts that had been made in the same direction only a little earlier, such as in the report of the Steering Committee on Handlooms and Handicrafts for the Twelfth Plan, which had observed that “these two sectors constitute the only industry in the country that provide low cost, green livelihood opportunities to millions of families, supplementing incomes in seasons of agrarian distress, checking migration and preserving traditional economic relationships”.

‘Green livelihood’ made a quiet entry into planning vocabulary then. Now, ‘livelihood’ has been replaced with ‘economy’, which is quite a different idea, and the recent loud calls in favour of a ‘green economy’ for India have helped shelter a variety of very ungreen enterprises and practices. Perhaps in the notifications of 14 and 15 September we are seeing the first admission from the central government’s financial and planning authorities, that there is no need for a new ‘green economy’ (especially one based on expensive finance and fickle technologies) when we have had one for all the ages that we can enumerate.

The notifications are a worthy start, and I submit to the Ministry of Finance that these can and should lead it to consider anew how incentives and encouragements in the form of taxation instruments can do much to renew, revive and strengthen a ‘green economy’ that is the only genuinely grassroots activity India has and can have.

Some aspects that still require consultation and an extra-financial view are that crafts and weaves are not commodities and should not therefore be fitted by force into the Acts’ labyrinthine system of HSN codes, that the imposition of taxes higher than 5% on handicrafts and hand weaves discourages both sustainable production and consumption (at a time when such practices are gaining international currency), and that a well-informed system of taxation must include an understanding of the continuum of natural material, habitat, and the knowledge streams that use and transform nature’s materials into craft and fabric.