GST overhaul: Cong says wait for 'true GST 2.0' continues, demands compensation for states for 5 yrs

New Delhi, Sep 4 (PTI) 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.

Several Congress leaders claimed that former party chief Rahul Gandhi had suggested the changes to the GST regime years ago and the government eventually had to "follow his advice".

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.

The GST Council on Wednesday 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.

Congress' media and publicity department head Pawan Khera said, "When they finally have to follow Rahul Gandhi's advice, why do they take so much time in doing that?" PTI ASK ZMN