Eight opposition ruled states are making their voices heard, and they are demanding a robust mechanism to ensure that the benefits of any GST rate cuts directly reach the consumers. This is a big move that could reshape how we experience price changes in everyday items. The support for reducing the number of Goods and Services Tax rate slabs and lowering rates for mass consumption items is clear. But it comes with a crucial condition: the guarantee that these savings will be passed on to the people.
Jairam Ramesh, a prominent Congress leader, highlighted these demands. He expressed hope that the upcoming GST Council meeting would be more than just a typical “headline grabbing exercise” something he attributes to the current Modi government. This sentiment underscores a desire for genuine, impactful change rather than superficial announcements.
The states involved in this push are Karnataka, Himachal Pradesh, Jharkhand, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal. These states are united in their call for consumer protection.
Beyond direct consumer benefits, these eight states are also seeking compensation for a five year period, with 2024 to 2025 as the base year. Why? Because they anticipate an adverse impact on their revenues due to these very rate reductions. This demand is about fiscal stability for the states themselves, ensuring they are not left financially vulnerable in the pursuit of tax reform.
Another significant demand focuses on additional levies on ‘sin’ and luxury goods. The states propose that any revenue generated from these levies, over and above the suggested 40 percent, should be fully transferred to them. This is a critical point, as Ramesh noted that the Centre currently receives a substantial portion, around 17 to 18 percent, of its revenue from various cesses that are not shared with the states. This uneven distribution has been a point of contention and the states are looking to rectify it.
Ramesh emphasized the legitimacy of these demands, pointing to recent papers published by the Union Finance Ministry’s own National Institute of Public Finance and Policy (NIPFP) as supporting evidence. This lends considerable weight to the states’ arguments, as they are not just political positions but are backed by economic analysis from within the government’s own institutions.
The Congress party has been a long time advocate for what it terms “GST 2.0”. This vision goes beyond merely reducing rate slabs and cutting rates. It aims for a drastic simplification of procedures and compliance requirements. This focus on simplifying bureaucracy is especially crucial for Micro, Small, and Medium Enterprises (MSMEs), which often struggle with complex tax regulations. A simpler system could unlock significant growth for this vital sector of the economy.
Furthermore, the Congress has consistently stressed the importance of protecting the interests of all states. This principle of cooperative federalism is central to their approach, ensuring that no state is unfairly disadvantaged by national tax policies.
The upcoming GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, is scheduled to take place on September 3 and 4 in New Delhi. This high stakes meeting will delve into several key recommendations, including moving towards a two slab taxation system. The council, which includes finance ministers from all states and Union Territories alongside the Centre’s representatives, will also deliberate on recommendations from three Groups of Ministers (GoMs) concerning rate rationalization, compensation cess, and health and life insurance. The decisions made in this meeting could have far reaching consequences for both consumers and state governments.
Earlier this month, the Congress had called for an official discussion paper on GST 2.0, advocating for a broader public and expert debate on the matter. They argue that the reform should truly embody a “Good and Simple Tax” in its essence and in its practical application. This is a stark contrast to their assessment that the current system has become a “Growth Suppressing Tax”. This push for transparency and widespread discussion highlights the party’s desire for a more inclusive and effective tax reform.
This renewed focus on GST reform comes after Prime Minister Narendra Modi’s announcement that GST rates would be lowered by Diwali. The aim is to reduce prices of everyday use items, an effort to reform the eight year old regime. This regime has faced its share of challenges, including ongoing litigation and issues with evasion. The goal is to create a more efficient and equitable tax system. The **GST** reform discussion is truly heating up, with states demanding a fair share and consumers hoping for tangible benefits.