Cong Decries GST Overhaul, Seeks 5-Yr Lifeline For States’ Revenues

The recent sweeping reforms announced by the Goods and Services Tax (GST) Council have been hailed by the government as a landmark moment in India’s tax history. However, the opposition Congress party has dismissed these changes as a mere “GST 1.5” — a half-measure that falls short of the comprehensive overhaul the nation has long awaited in the form of a “true GST 2.0.”

Congress president Mallikarjun Kharge was quick to pour cold water on the government’s celebrations, reiterating the party’s demand that all states be compensated for a period of five years, taking 2024–25 as the base year. He warned that the fresh reduction in GST rates would inevitably strain state revenues. “The Modi government changed ‘One Nation, One Tax’ into ‘One Nation, 9 Taxes’ — slabs of 0 per cent, 5 per cent, 12 per cent, 18 per cent, 28 per cent, along with special rates of 0.25 per cent, 1.5 per cent, 3 per cent, and 6 per cent,” Kharge said, highlighting the complexity that has plagued the GST system since its inception.

Kharge recalled that the Congress had been pressing for GST simplification for nearly a decade. “We demanded a simplified GST 2.0 in both our 2019 and 2024 manifestos,” he said, pointing out that the existing system—with its complex compliance requirements—had dealt a severe blow to micro, small, and medium enterprises (MSMEs) and small businesses. “The current GST regime has been a burden on MSMEs, and the promised simplification has yet to materialize.”

He also took a historical swipe at the ruling party, reminding the public that the Congress-led United Progressive Alliance (UPA) government had formally announced GST in Parliament in 2005, while the Bharatiya Janata Party (BJP) had resisted the reform for years. “When Narendra Modi was Gujarat’s chief minister, he opposed GST. Now, the same BJP government celebrates record collections, conveniently forgetting it imposed GST even on farmers for the first time in history,” Kharge said.

Kharge did not hold back in his criticism of the government’s taxation policies on essential goods and services. “They have taxed daily essentials and services like food grains, milk-curd, schoolbooks, oxygen cylinders, and hospital care. This is why we called it the ‘Gabbar Singh Tax’,” he remarked, referring to the perceived harshness of the tax regime on common people.

According to Kharge, the burden of GST revenue collection disproportionately falls on the poor and middle class. “Sixty-four per cent of GST revenue comes from the poor and middle class, while only 3 per cent comes from the super-rich,” he said. Meanwhile, corporate tax rates have been slashed from 30 per cent to 22 per cent. “In the last five years, Income Tax collections rose by 240 per cent while GST collections jumped 177 per cent — all at the cost of common people,” Kharge claimed, underscoring the growing inequality in tax burdens.

While welcoming the overdue rate rationalisation, Kharge stressed that the complex compliance burden still needs to be eliminated for MSMEs and small industries to benefit meaningfully. “Rate cuts alone are not enough. The government must simplify compliance to truly help small businesses,” he said.

Congress communications in-charge Jairam Ramesh echoed these concerns, accusing the government of undermining the federal spirit by ignoring states’ demands for a five-year compensation extension. “That demand is even more critical now,” he said, emphasizing the financial strain the reforms could place on state governments.

Ramesh also questioned the role of the GST Council itself. “Before the council met, the Prime Minister had already announced its decisions in his Independence Day speech. Is the council reduced to a mere formality?” he asked, suggesting that the body’s consultative role may be sidelined in favour of top-down decision-making.

He described GST 1.0 as having “hit a dead end” due to its flawed design, which Congress had flagged as early as 2017. “It was meant to be a Good and Simple Tax but became a Growth Suppressing Tax,” Ramesh remarked, pointing to the unintended consequences of the tax system on economic growth.

While acknowledging that consumers may benefit from rate cuts on everyday goods — from parathas and hair oil to televisions and washing machines — Ramesh cautioned that the reforms fall short of true simplification. “This is, at best, GST 1.5. Whether it stimulates investment or eases MSME burdens remains to be seen,” he said, expressing skepticism about the reforms’ long-term impact.

Senior Congress leader and former finance minister P. Chidambaram described the changes as a belated U-turn. “Rate rationalisation is welcome, but one is left with the thought that these steps are eight years too late,” he said, reflecting on the long-standing calls for reform that had gone unheeded.

Chidambaram noted that Congress, economists, and ordinary citizens had long warned about the flawed design and high rates of GST. “The government ignored us then, only to admit its mistakes now. It should always have been a Good and Simple Tax,” he said, adding that the poor and middle class will finally feel some relief.

He suggested that the sudden reforms were driven by a mix of sluggish growth, mounting household debt, falling savings, state elections, and even international pressures such as tariffs imposed by U.S. President Donald Trump. “These factors have forced the government’s hand,” Chidambaram observed.

Under the revised GST structure, effective 22 September — the first day of Navratri — the tax system will now have just two slabs: 5 per cent and 18 per cent, with sin and luxury goods taxed at 40 per cent. Everyday use items and aspirational goods like air-conditioners and washing machines will see rate cuts, while premiums on health and life insurance policies have been fully exempted.

The government has said these reforms will ease burdens on households and spur consumption. However, Congress maintains that the reforms, while welcome, remain half-measures. “The wait for a true GST 2.0 goes on,” Jairam Ramesh summed up, capturing the opposition’s sentiment that the journey toward a simpler, fairer tax system is far from over.