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Congress decries GST overhaul, seeks 5-year lifeline for states' revenues

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04th September, 2025 11:51 IST

Even as the government hailed the GST council’s sweeping reforms as a landmark moment, the Congress poured cold water on the celebration, branding the revamp a mere ‘GST 1.5’ — a half-measure that falls short of the long-promised ‘true GST 2.0’ the nation still awaits.

The Opposition party reiterated its demand that all states be compensated for a period of five years, taking 2024–25 as the base year, arguing that the fresh reduction in GST rates would inevitably strain state revenues.

Kharge: BJP turned ‘One Nation, One Tax’ into ‘One Nation, 9 Taxes’

Congress president Mallikarjun Kharge recalled that his party had been pressing for GST simplification for nearly a decade. “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,” he said.

Kharge noted that the Congress had demanded a simplified GST 2.0 in both its 2019 and 2024 manifestos, as the existing system—with its complex compliances—had dealt a severe blow to MSMEs and small businesses.

GST revision: What gets cheaper and costlier from 22 September

He reminded that the Congress-UPA government had formally announced GST in Parliament in 2005, while the 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,” he said.

Kharge criticised the Modi government for taxing 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 said.

According to Kharge, 64 per cent of GST revenue comes from the poor and middle class, while only 3 per cent comes from the super-rich. 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% while GST collections jumped 177 per cent — all at the cost of common people,” he claimed.

While welcoming the overdue rate rationalisation, he stressed that the complex compliance burden still needs to be eliminated for MSMEs and small industries to benefit meaningfully.

Jairam Ramesh: GST council reduced to a formality?

Congress communications in-charge Jairam Ramesh accused the government of undermining the federal spirit, pointing out that states’ demand for a five-year compensation extension had been ignored. “That demand is even more critical now,” he said.

Ramesh also questioned whether the GST Council was being sidelined. “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.

He argued that GST 1.0 had “hit a dead end” due to its flawed design, which Congress had flagged in 2017. “It was meant to be a Good and Simple Tax but became a Growth Suppressing Tax,” he remarked.

While acknowledging that consumers may benefit from rate cuts on everyday goods — from parathas and hair oil to TVs and washing machines — Ramesh said 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.

Chidambaram: ‘Eight years too late’

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.

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 like Trump’s tariffs.

The new GST regime

Under the revised structure, effective 22 September—the first day of Navaratri — GST 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. But Congress maintains that the reforms, while welcome, remain half-measures.

“The wait for a true GST 2.0 goes on,” Ramesh summed up.

With PTI inputs

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