In a few months, PM Narendra Modi’s home state goes to the polls in what is being billed as one of the most important tests for the BJP before the general elections in 2019.
Simmering discontent in Gujarat’s major industrial hub Surat is threatening to boil over. For over a month now, the city famous worldwide for its diamond and textiles business has seen protest marches by traders demanding a rollback of certain provisions of the new Goods and Services Tax (GST).
Last Saturday, over a lakh traders came out on the streets to oppose the 5% GST on textiles. A day earlier, Union minister of state for road and transport Mansukh Mandaviya had met traders’ leaders and promised to take up the matter with the GST Council.
“Some discomfort is expected in the beginning whenever a big change is introduced. The BJP has been in constant touch with the traders,” Mandaviya told reporters in Surat. But some traders are getting impatient.
“Business is our God. If business is not there, do we worship the Bharatiya Janata Party (BJP),?” asks Mahendra D Raoliya, a power loom owner and diehard BJP supporter till the GST hit his textiles business.
Over 10 lakh people associated with big and small power looms and textile mills of Surat are a worried lot, fearing the GST would add to the woes of the industry barely recovering from the effects of demonetisation.
“Most of our products are sold on two-wheelers in the countryside. A Rs-100 saree will cost Rs 190 after GST. Imported products will be cheaper and our industry will be finished this time,” says Mahendra, a member of the Patidar community that traditionally votes for the BJP.
As Gujarat heads for crucial assembly elections later this year, issues like demonetisation and GST are bound to figure in the campaign for garnering votes of disaffected sections.
Even the famed diamond business of Surat, the world’s largest hub, is getting the jitters. Just a daylong shutdown by diamond traders on June 18 to press for exemption from GST led to a loss of roughly Rs 700 crore. Traders are opposing the proposed 3% GST on polished diamonds, 5% as labour tax and 0.25% on rough diamonds.
“Taxes under GST would shrink our export turnover by 20 %. Considering that 96% of the diamonds processed here are exported, taxes on local transactions should not be levied,” says Dinesh Navadiya, president of Surat Diamond Association.
Cut and polished diamonds were until now exempted from all taxes. The industry, small units in particular, was hit by last November’s demonetisation. Now, Surat’s diamond workers and owners fear the GST could deal a crippling blow to the Rs 90,000 crore business.
“The 3% GST on polished diamonds is refundable once the product is exported. Why take the taxes in the first place if it is to be repaid?” asks Jaysukh Bhai Gajera of the GST Sangharsh Samiti that organised the June 18 shutdown.
At Surat’s Shree Ramkrishna Exports (SRK), one of the world’s biggest diamond cutting and polishing units, founder Govindbhai Dholakia agrees that GST would affect the industry somewhat.
“The 0.25 % tax will help in making transactions transparent. But there is a problem with the 3% refundable tax. This is to streamline local trade, which accounts for just 4 %, but it will also affect the remaining 96% businesses that deal in exports,” says Dholakia.
Surat’s diamond industry employs more than 10 lakh people directly and indirectly. Another 5 lakh people are employed in smaller centres like Ahmedabad, Bhavnagar and Amreli.
Small units make up 15-20% of Surat’s diamond business employing one-third of the work force.
“First demonetisation hit us. Now, we do not even know how to register for GST, forget about its impact on our business,” says Ramesh Bhai of Tapadia Gems that employs 65 workers and caters to the domestic markets.
“Diamond traders have written to us. We will discuss the issue and try to reach some conclusion,” says Gujarat finance minister Nitin Patel.
The ruling BJP is wary about the renewed disenchantment in Surat – the nerve centre of the violent Patidar agaitation for OBC quota in September 2015.
Political observers say the disenchantment in this Patidar-dominated BJP stronghold has been building up for quite some time now.
“Most of the diamond businessmen and workers are Patels (Paitidars) who have migrated from Saurashtra. Already unhappy with BJP, if the Patels show their anger in their voting pattern, it will make a huge difference,” says political analyst Achyut Yagnik.
Patidars or Patels comprise 15 % of Gujarat’s population. In bid to reach out to the community, the BJP had organised a road show on June 1 for Prime Minister Narendra Modi in Surat. The road show drew huge crowds, making the BJP believe that Modi magic was still shining bright in the diamond hub that traders fear will soon lose lustre.