How To Destroy An Economy - India's New Tax System Is "Mind-Bogglingly Inane"

Authored by Mike Shedlock via,

Reader “IB” an India businessman, writes about the crackdown on cash and tax evasion by Prime Minister Narendra Modi.

“IB” is very concerned about recent events, as well he should be.

Background for this story started on November 8, 2016, when Modi stunned the country with an announcement that 500-rupee ($7.30) and 1,000-rupee notes, which account for more than 85 percent of the money supply, would cease to be legal tender immediately. For details, please see Cash Chaos in India, 86% of Money in Circulation Withdrawn; Cash Still King in Japan.

The crackdown on cash has hurt the poor the most, and likely the richest the least. Nonetheless, Modi has widespread popular support.

Modi’s latest set of mandates has small businessmen caught in the crossfire. Let’s tune into to an email from “IB” (India Businessman) for some details.

Hi Mish,


I am writing from Mumbai, India. I have been running a small business for a decade now. Since the business has been profitable we have also been paying tax as applicable. But with the introduction of Goods and Services Tax (GST) in India from July 1, 2017, it looks like business might start experiencing difficulties soon due to its plethora of rules, some of which are mind-bogglingly inane.


More than the tax rates, it is the implementation and the draconian measures that have been taken by the Government that has made me come to this conclusion.


Given that the incumbent government has been winning elections despite steps like demonetization and the opposition is in complete disarray (Modi is a great orator), they have been emboldened to introduce measures that would be viewed as draconian by normal standards. In this context, I have to mention Modi has been able to mesmerize voters to an extent that he can make even pain appear as something that is pleasurable and he has been able to conquer state after state and has an invincible aura about him now. Such acts always bring Goebbels to my mind.


I am attaching an article that highlights three steps (of the many) that have been introduced in GST that I feel would impact businesses negatively.


Thanks for your time.


New Rules

“IB” emailed a lengthy document describing new rules. What follows is a short list of three key points that I condensed from the document.

  1. The government will not allow Input Tax Credit on GST paid to vendors if the vendors do not pay their own taxes. The issue here is the Modi is forcing the role of tax-enforcement on businesses who buy goods for resale.
  2. Tax payments are required every month. For all cash businesses, there is no problem. There is a huge problem for those who have to pay taxes on receivables, in advance, when the business owners might not even get paid. Liquidity will kill many small businesses.
  3. Modi now wants three tax filings every month plus an annual tax return making it 37 overall. Currently, businesses file service tax returns twice in a year while they pay their taxes every quarter. Now with GST, small businesses have to file 3 returns every month, month on month, year on year, with fines stipulated for non-compliance.

All Hail Modi

The Economic Times reports PM Narendra Modi steps up assault on Congress, eyes Indian supremacy

Prime Minister Narendra Modi’s ruling alliance is stepping up its assault on the opposition Congress party as it looks to expand its national dominance and moves closer to securing a majority in the upper house of parliament.

How to Destroy an Economy

This is the path that populist fools take to gain control and destroy economies.

When tax collections actually go into reverse as businesses fail, Modi will come up with another set of ill-advised reforms, perhaps a total ban on cash.

All it takes is a Congressional majority and Modi can and will do what he wants.

In all likelihood, Modi’s enemies will soon be silenced for the “good of society”.


847328_3527 armada (not verified) Wed, 08/02/2017 - 00:15 Permalink

What India needs is something similar to the very successful Obamacare for it's 1.3 billion poor people. Modi looks like he's tryig to be India's version of Hussein Obama---destroying India by bits and pieces.It's no wonder all the middle and upper class Indians want to move to USA or Canada. Modi has a traget on their backs just like how much Obama hates the American middle class.

In reply to by armada (not verified)

misnomer00 Oh regional Indian Wed, 08/02/2017 - 10:09 Permalink

Lol,  IT cell?? haha. youre delusional. i run some of central govt schemes. extremely tight, too tight infact. all IT enabled. leakages are being dealt with. not good for my business, but not the scam that congress govt was. im not a libertarian nut that most people here are. demonetization was meant mostly for winning UP elections, we all know that. not some joo scam. although im not in favour of India being so pally with Israel at all. ORI, youre not from Bengal are you?

In reply to by Oh regional Indian

enfield0916 tmosley Wed, 08/02/2017 - 11:59 Permalink

Says the guy who has never been to India.Yes, modern India has MAJOR LEAGUE Issues but they learned these political tricks from the British, who are responsible for ushering in modern day imperialism and the divide and conquer philosophy.Before the British Raj, India was called the Golden Sparrow and had untold wealth. Furthermore, it was part of the old Silk Raod and LONG before the Library of Alexandria ever or Copernicus existed, universities in India had figured out the number Zero and Aryabhatta almostmost accurately calculated the size of the earth and that the earth was NOT flat.British raj loved to rape and pillage the locals, (just like modern day imperialism pillages the middle east for oil) and took away all the wealth through the East India Company. Sounds familiar?The queen's crown jewels are from -- INDIA!Now go fuck yourself and eat shit with your BitShitCoins.

In reply to by tmosley

enfield0916 DaNuts Wed, 08/02/2017 - 14:21 Permalink

There are other henious crimes committed and bloody stupid things in other parts of the world too, Chinese eat dogs and American kiss their faces right after they've licked their balls and butt but no body cars about that.The LARGEST production of porn comes from the US. Stop projecting your guilt on others!The igniorant crowd always like to point fingers at others for their own stupid opinions. It's always the "other guys fault".Being on ZH doesn't mean you grew brains just by being here.

In reply to by DaNuts

enfield0916 Oh regional Indian Wed, 08/02/2017 - 14:23 Permalink

EXACTLY! The Indians learned how to stab each other in the back during the British Raj. It took root SO strongly that the entire country was turned upside down as the British started bribing btother against broither so they could spy on each other and alert the local police about who had joined the Revolutonary movement under that asshole Gandhi!It were the Sikhs who were INSTRUMENTAL in kicking the Brits ass!

In reply to by Oh regional Indian

HRH Feant2 (not verified) Tue, 08/01/2017 - 22:23 Permalink

Mish, I wouldn't call Modi a populist. I will call him what he is: a globalist tool.

As far as having to file taxes / pay taxes three times a month, I agree, this is one way to destroy your economy.

Déjà view HRH Feant2 (not verified) Tue, 08/01/2017 - 22:56 Permalink

Return to pre July 01, 2017 tax system...

Seized vehicles. Bribes. Days-long delays. Moving goods across Indian states isn’t exactly easy -- and that’s a major barrier to economic growth.

Take the border crossings: Lorry drivers in India lose 60 percent of transit time to road blocks, tolls and other stoppages, which means logistics costs are up to three-times higher than international benchmarks. ,

That’s why he and other companies are cheering the July 1 implementation of India’s biggest tax reform since independence in 1947. The move will replace more than a dozen levies with a new goods and services tax. That should help reduce the immense power India’s myriad middlemen wield at state borders, free up internal trade, make it easier to do business and widen the country’s tiny tax base. 
“Even if your documents are correct, they will find some small error and hold your vehicle,” Kaul says in his New Delhi office, located in a dusty trucking depot where hundreds of drivers sit near their brightly painted trucks in the 42-degree Celsius (108-degrees Fahrenheit) heat. “Once GST is there, all that is gone.”
Common Market…

Still, the benefits are expected to be significant even if reality doesn’t live up to expectation. The metals industry is predicting savings of 40-45% in the time taken to move goods as border tax points to collect state taxes and hence lengthy delays of up to 10 hours will become unnecessary.

In reply to by HRH Feant2 (not verified)

fulliautomatix Déjà view Tue, 08/01/2017 - 22:58 Permalink

How 'bout the taxes (I can't wait to see those numbers in a deflationary environment - and do the losses due to holdings in Swiss banks count as a tax write off?)  go to building roads where you can drive non-stop for eight or ten hours, everywhere? No road blocks, no officious officials. It'd keep the global price of oil up, too. Sincerely, best of luck. Here's an idea - the Chinese have been doing this stuff for years (lookit Pakistan) and they're a bit quiet now...

In reply to by Déjà view

Chauncey Gardener HRH Feant2 (not verified) Tue, 08/01/2017 - 22:51 Permalink

This Modi creep is a real piece of work. On Nov. 8th of 2016, his globalist handlers thought it would be a hoot of an experirment to withdraw 86% of ALL of India's currency. To, you know, get the "black money speculators" out of the system. So, the outcome was people literally starving in the streets. Because, if you have more than the equivalent of $20.00 in your pocket, you are evil according to the new Harvard intelligentsia who just published a book on the subject of the glorious wonders of a cashless society. This is a true anecdote, based on firsthand experience of a trusted advisor I listened to at a private seminar last week. Oh, yeah, minor detail, Modi is uber anti-christian, and had several christian orphanages burned also. What a guy.

In reply to by HRH Feant2 (not verified)