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

In a statement, Jairam Ramesh said FM Nirmala Sitharaman has 'finally recognised that GST 1.0 had reached a dead end’, as there is a 'lack of buoyancy in private consumption, subdued rates of private investment, and endless classification disputes'.

New Delhi: Describing the overhaul of the Goods and Services Tax (GST) regime as “GST 1.5”, 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.

Party chief Mallikarjun Kharge said the party had described BJP’s GST regime “Gabbar Singh Tax” because it has imposed taxes on farmers for the first time besides slapping GST on items like milk, curd and flour-grains as well as on pencils, books and insurance. “The complex compliances must also be eliminated. Only then will MSMEs and small industries truly benefit,” he said.

He said the party has has been demanding the simplification of GST and it was a “good thing” that Modi government has woken up after eight years, as he demanded that all states should be given compensation for a period of 5 years, taking 2024-25 as the base year, because a reduction in rates is certain to have an adverse impact on their revenues.

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?”

In a statement, General Secretary (Communications) Jairam Ramesh said Finance Minister Nirmala Sitharaman has “finally recognised that GST 1.0 had reached a dead end’, as there is a “lack of buoyancy in private consumption, subdued rates of private investment, and endless classification disputes”.

He said Wednesday evening’s announcements have certainly made headlines since Prime Minister Narendra Modi had already laid down the pre-Diwali deadlines.

“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.

“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 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 recalled that the Congress has 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, mis-classification, 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.

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 it “assumes even greater importance now”, as there could be revenue implications, he said.

He also asked whether the GST Council, which is a constitutional body, has been “reduced to a formality”, citing Modi announcing the substance of its decisions in his Independence Day speech before the meeting of the Council.