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Congress dubs GST reforms as ‘GST 1.5’, demands 5-year state compensation

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Mallikarjun Kharge Congress

Congress President Mallikarjun Kharge addresses a press conference, in New Delhi

New Delhi: With the GST Council approving a complete overhaul of the Goods and Services Tax (GST) regime, the Congress on Thursday termed it a "GST 1.5" and said the wait for a "true GST 2.0" continues.

The opposition party also demanded that all states should be given compensation for a period of five years, considering 2024-25 as the base year, citing that the reduction in rates would have an adverse effect on their revenue.

Congress president Mallikarjun Kharge said that for almost a decade, the party has been demanding simplification of GST.

"The Modi government changed 'One Nation, One Tax' to 'One Nation, 9 Taxes'. It included tax slabs of 0%, 5%, 12%, 18%, 28% and special rates of 0.25%, 1.5%, 3% and 6%," Kharge said.

"The Congress party had demanded GST 2.0 with a simple and rational tax system in its 2019 and 2024 manifestos. We had also demanded simplification of the complex compliances of GST, which had badly affected MSMEs and small businesses," he said.

On February 28, 2005, the Congress-UPA government formally announced GST in the Lok Sabha, he said.

In 2011, when the then Finance Minister Pranab Mukherjee brought the GST Bill, the BJP opposed it, Kharge said.

He said that when Prime Minister Narendra Modi was the chief minister of Gujarat, he had strongly opposed GST.

"Today, this same BJP government celebrates record GST collections, as if it has done a great job by collecting tax from the common people. For the first time in the history of the country, farmers have been taxed. This Modi government imposed GST on at least 36 items of the agricultural sector," Kharge said.

The Modi government imposed GST on everyday things like milk-curd, flour-grains, even children's pencils-books, oxygen, insurance and hospital expenses, he said.

That is why we named this GST of the BJP as "Gabbar Singh Tax", Kharge sakd.

"Two-thirds of the total GST i.e. 64% comes from the pockets of the poor and the middle class, but only 3% GST is collected from billionaires, while the rate of Corporate Tax has been reduced from 30% to 22%," he said.

In the last 5 years, Income Tax collection increased by 240% and GST collection increased by 177%, he claimed.

"It is a good thing that even after 8 years of delay, Modi government woke up from its deep slumber on GST and talked about Rate Rationalisation, " he said.

All states should be given compensation for a period of five years, considering 2024-25 as the base year, because the reduction in rates is sure to have an adverse effect on their revenue, he said.

The complex compliances of GST will also have to be eliminated, only then will MSMEs and small industries be truly benefited, the Congress chief said.

Congress general secretary in-charge communications Jairam Ramesh said that a key demand of the states made in the true spirit of cooperative federalism, namely, the extension of compensation for another five years to fully protect their revenues, remains unaddressed.

In fact, that demand assumes even greater importance now, he said.

The Indian National 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, Ramesh said on X.

He noted that Union Finance Minister Nirmala Sitharaman has made major announcements on Wednesday 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 15th, 2025. Is the GST Council to be reduced to a formality?" Ramesh said.

"Faced with a lack of buoyancy in private consumption, subdued rates of private investment, and endless classification disputes, the Union Finance Minister has 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 INC way back in July 2017 itself, when the PM had made one of his typical U turns and decided to introduce GST," he said.

It was meant to be a Good and Simple Tax. It turned out to be a Growth Supressing Tax, Ramesh said.

Last evening's announcements have certainly made headlines since the prime minister had already laid down the pre-Diwali deadlines, he said.

Presumably the benefits of rate cuts will be passed on to consumers, he added.

"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.

Common use items from roti/paratha to hair oil, ice creams and TVs will cost less, while tax incidence on personal health and life insurance will be brought down to nil after the all-powerful GST Council on Wednesday approved a complete overhaul of the tangled GST regime.

The GST Council approved limiting slabs to 5 per cent and 18 per cent, effective from September 22, the first day of Navaratri.

Senior Congress leader and former finance minister P Chidambaram described the overhaul as a "U-turn" and said one is left with the thought that these steps are eight years too late.

In a statement, Chidambaram said, "GST rationalisation and reduction of the rates are welcome, but one is left with the thought that these steps are eight years too late."

Congress, many economists and the middle and poorer sections of the people have, for years, pointed out that the design of the GST and the initial rates were wrong, but the government turned a deaf ear, Chidambaram said.

"I am happy that the government has realised that the path on which they had walked for 8 years was wrong, and done a U-turn," he said.

It should have always been a 'Good and Simple Tax', he said.

The middle and poor classes will heave a sigh of relief, Chidambaram said.

"The government and, in particular, the FM (Nirmala Sitharaman) had defended the flawed design and the complicated multiple rates so far. It is heartening to see the FM and other government leaders applauding the changes made yesterday!" the Congress MP said in his statement on Thursday.

In a post on Wednesday night, Chidambaram said, "The GST rationalisation and the reduction in rates on a range of goods and services are WELCOME but 8 years TOO LATE."

The current design of GST and the rates prevailing until today ought not to have been introduced in the first place, he said.

"We have been crying hoarse for the last 8 years against the design and rates of GST, but our pleas fell on deaf years. 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?" he said.

Almost all personal-use items and aspirational goods for the middle class, like AC, washing machines, will see rate cuts as the government looks to boost domestic spending and cushion the economic blow of the US tariffs.

Premium paid for individual life insurance and health insurance (including family floater), policies too have been exempted from GST.

Earlier, such policies were subject to 18 per cent GST.

GST rate structures GST revenue GST council meeting GST Council Meet GST council decisions GST Council GST compensation GST reform GST Congress Jairam Ramesh Mallikarjun Kharge