Ghost of Taxation Returns: On Illegal Taxation Burden in Nagaland

The old ghost of illegal taxation seems to have returned to toll gates to haunt the business community and general public alike. Well, in May 2022, Nagaland’s Home department ordered the closure of all government and private check gates across the state, a move that helped curb illegal tax collection and facilitate trade. Any structure used as check gates was dismantled to prevent anyone from misusing it. All government agencies, departments, and organisations were directed to toe the line with the order with immediate effect, and they did, except for some stray incidents which were resolved. It brought cheers to the business community, who had been bearing the brunt of this nuisance for years. Terming it as a fulfilment of their long-pending demand and a bold step, traders lauded the state government’s move. However, their happiness is short-lived, apparently. The Dimapur Chamber of Commerce and Industry (DCCI) has alleged that “illegal collections at check gates” have resurfaced, in violation of the government’s standing order. Claiming that vehicles transporting goods are being taxed multiple times, the trade body has called for the dismantling of all check gates, including those set up by the Dimapur Municipal Council (DMC). It went on to express concern over reports of harassment of traders during Inner Line Permit (ILP) checking, terming it “another form of taxation”.

If these claims turn out to be true, it’s in fact concerning, something the government can’t afford to turn a blind eye to. Several states, including Nagaland, had removed transport check posts at state borders after the Centre asked to do so following the introduction of Goods and Services Tax (GST) in July 2017. One of the objectives of the GST was to streamline various indirect taxes such as excise duty, service tax, value-added tax (VAT), and others through a simplified, single tax regime. So, this integrated tax regime rendered inter-state check gates useless. The removal of inter-state tax barriers has benefitted traders across the country, perhaps more in Nagaland, a state notorious for multiple layers of taxation from both state and non-state actors. Now, undoing the progress made in improving the ease of doing business in the state will be costly not only for traders but also for the general public. The state government should take DCCI’s allegations with utmost seriousness and take appropriate measures. It should clearly specify who is authorised to collect tax, which goods are subject to taxation, and the locations where this applies. The government also must ensure that the ILP is not used as a means to harass or extort money from vulnerable individuals. Any regressive act, whether it involves illegal taxation or harassment under the guise of ILP, must not be tolerated.