Even in a closed network like Indian Railways, food is now served and sold without receipts, or if you get receipts, then you do not know where the service tax collected is going
An otherwise modest increase in service tax from 12.36% to 14% on an all-India basis would have gone largely un-noticed and without causing much of a flutter had it not been for the simple fact that this small change appears to be setting off huge reactions. These reactions travel across the real world that is India and Bharat.
A good example is that of a ship loaded with a heavy cargo, say steel or iron ore, and calculations for stability, stress as well as strain giving the ship a safe margin for a passage from say Australia to Japan. These calculations take into account every possible form of bad weather and adverse conditions with ample margins to spare.
Still, ships, which are loaded perfectly, break up and sink. Sometimes in perfectly calm weather, sometimes in bad weather, but all the same - they sink. This is where we learnt that disaster is not just about small changes in one particular parameter, but about the "hole in the cheese effect" that this one small change can have with all the other parameters, amplifying them beyond redemption.
What is the "hole in the cheese" effect? If you have seen naturally processed cheeses, you will often see that there are holes going across from one end to the other, thus making it in terms of strength, a "weak" cheese, one that can and will break easily if, say, dropped. Likewise, the longer effects of this small service tax increase.
1) Social unrest goes up when the value of the money printed by the Government keeps going down. Whether it is about domestic purchasing power or value vis-a-vis foreign exchange, people are acutely aware that the government does not appear to be keeping its part of the bargain on the purchasing power of the rupee, despite a huge drop in oil prices and largely reduced scams.
2) Social unrest also goes up when the reporting and returns procedure for something like service tax becomes so complicated that ordinary citizens have to hire specific consultants to save them from the draconian clauses that surround any form of inability to adhere to the absolute letter of the service tax regime. People who have to, perforce; replicate the same work for two different agencies, often, working at cross-purposes, do not understand why the service tax regime could not have been combined with the income tax regime.
3) Social unrest also goes up with an even more aware population that increasingly has access to a public grievance system, which, however, does not appear to work too well, starts reacting. Blatant service tax scams-amounts being charged by vendors but visible non-deposit of service tax in government coffers in cases like Kingfisher and others, make people ask, what for are we paying service tax?
Citizens of India have never been as aware about governance and mis-governance as they are now. In neighbouring Malaysia, which was behind India two-three decades ago, the governance in terms of the basics like primary education, sanitation, law & order, preventive healthcare and water are leaps and bounds ahead of India. Now, the combined goods and service tax (GST) in Malaysia is expected to be 6% and that is also causing social unrest.
Thanks to a virtual destruction of the concept of clean air and a sabotage of the food chain, India has a population of citizens weakened by decades of bad health because of these two additional parameters, which increase the cost of living. The other part is the damage done to the economy because of rampant import of sub-standard products, mainly from China, but from all over the world now. WTO places the responsibility on quality of products exported on to the importing country. India is now amongst the few importing countries where quality of products imported is shoddy compared to the same products being used by the exporting country.
Social unrest takes place in a country when people are aware that they are being taken for a solid ride by the Government for no tangible benefits. This small rise in service tax, which is actually not so small because the stringency of laws for even accidental or small errors are enough to shut down a business, will have a force multiplier effect in the days to come as we run up towards GST. More and more people will move into the cash economy otherwise called "black". You have to step out to see the writing on the wall. Even in a closed network like Indian Railways, food is now served and sold without receipts, or if you get receipts, then you do not know where the service tax collected is going.