Congress terms GST overhaul 'GST 1.5'; says wait for 'true GST 2.0' continues

Congress general secretary Jairam Ramesh says a key demand of the States made in the true spirit of cooperative federalism — extension of compensation for another five years to fully protect their revenues remains — unaddressed

NEW DELHI: Describing the overhaul of the Goods and Services Tax (GST) regime as "GST 1.5", the Congress on Thursday said only time will tell whether it will stimulate private investment as well as ease the burden on MSMEs, while the wait for a "true GST 2.0" continues.

In a statement, Congress general secretary (Communications) Jairam Ramesh said, "one of the key demands" of the States made in the true spirit of cooperative federalism — the extension of compensation for another five years to fully protect their revenues — remains unaddressed and in fact, that demand "assumes even greater importance now".

Former Finance Minister P. Chidambaram said, "We have been crying hoarse for the last eight years against the design and rates of GST, but our pleas fell on deaf ears. It will be interesting to speculate on what drove the government to make the changes: sluggish growth? Rising household debt? Falling household savings? Elections in Bihar? Mr Trump and his tariffs? All of the above?"

Ramesh said faced with a lack of buoyancy in private consumption, subdued rates of private investment, and endless classification disputes, Union Finance Minister Nirmala Sitharaman had "finally recognised that GST 1.0 had reached a dead end".

"In fact, the very design of GST 1.0 was flawed and this had been pointed out by the Congress way back in July 2017 itself, when the Prime Minister (Narendra Modi) had made one of his typical U-turns and decided to introduce GST. It was meant to be a Good and Simple Tax. It turned out to be a Growth Supressing Tax," he said.

He said Wednesday evening’s announcements have certainly made headlines since the Prime Minister had already laid down the pre-Diwali deadlines and presumably the benefits of rate cuts would be passed on to consumers.

"However, the wait for a true GST 2.0 continues. Whether this new GST 1.5, if it can be called that, stimulates private investment — especially in manufacturing — remains to be seen. Whether this will ease the burden on MSMEs, time alone will tell," Ramesh said.

He said the Congress had for long been advocating for a GST 2.0 that reduces the number of rates, cuts the rates on a large number of items of mass consumption, minimises evasion, misclassification, and disputes, does away with inverted duty structure (lower tax on output as compared to inputs), eases the compliance burden on MSMEs, and expands GST coverage.

"The Union Finance Minister made major announcements last evening after the meeting of the GST Council, which is a constitutional body. However, even before the GST Council meeting, the Prime Minister had already proclaimed the substance of its decisions in his Independence Day speech of August 15, 2025. Is the GST Council to be reduced to a formality?" he said.