Real benefits from GST reforms in India can hail from constructive politics

By Dr. Manoj Kumar Mishra*

The Goods and Services Tax (GST) underwent rationalization and democratization in the first week of September this year, but its journey began much earlier. Introduced in July 2017 by the BJP-led NDA government, GST was hailed as the most significant indirect tax reform since independence—an outcome of years of discussions, negotiations, compromises, and eventual all-party consensus. It replaced multiple state and central taxes with the idea of “One Nation, One Tax.”

At its launch, even Dr. Manmohan Singh, then leader of the opposition, congratulated Finance Minister Arun Jaitley for the achievement. The Congress rightly points out, however, that it was the UPA government which first announced GST in Parliament in 2005 and introduced the Bill in 2011, though the BJP then opposed it.

What is striking is that it took more than eight years after its introduction to rationalize GST rates. The 56th GST Council meeting in September 2025 merged the 12 percent and 28 percent slabs into two main rates—5 percent and 18 percent. While the government projected this as a Diwali gift, doubts quickly surfaced. Critics, particularly from the Congress and regional parties, suggested it was timed to influence the upcoming Bihar elections.

Others saw it as an attempt to revive a debt-burdened, savings-starved economy, or as a hedge against global trade pressures following steep U.S. tariffs. The opposition accused the government of taking too long to admit its mistakes, while the ruling alliance sought credit for reform.

Yet questions persist. How could the GST Council, a federal body, and other parliamentary committees be prevented from addressing these concerns earlier? Why did Prime Minister Narendra Modi announce reforms in his Independence Day speech before formal deliberations by the Council? Why did the Council finalize its decision on the first day of what was supposed to be a two-day meeting?

Revisiting an Unequal Structure

The earlier GST regime disproportionately burdened ordinary citizens. Farmers were hit, with at least 36 agricultural items taxed. Two-thirds of GST revenue came from the poor and middle classes, while billionaires contributed only 3 percent. A system designed to simplify taxation instead became complicated, with multiple slabs and frequent changes, fueling perceptions that it was more onerous than the older tax structure. Essential services such as health and life insurance were treated as luxuries, while lifesaving drugs carried a 12 percent tax before exemptions were introduced.

The Congress, in its 2019 and 2024 manifestos, had demanded a simplified GST 2.0, including easier compliance for MSMEs and small businesses. But all major parties bear responsibility for allowing such a skewed system to persist for so long.

GST has always been projected as a product of cooperative federalism. Both Congress- and BJP-led governments played critical roles in shaping it. States raised concerns over revenue losses, but accepted the reformed structure after receiving assurances of compensation from the Centre.

Unfortunately, what should have been celebrated as a rational policy change has instead been reduced to partisan one-upmanship.

Looking Beyond Credit and Blame

The real challenge lies not in who deserves credit but in ensuring that reforms benefit citizens. Lower tax rates must translate into lower consumer prices. Producers may cite rising input costs to maintain high prices, but strict monitoring is essential to prevent corporate houses from pocketing the gains. In a democracy, people too must remain vigilant, track commodity prices, and hold companies accountable when benefits fail to reach them—especially the poor.

The GST reform story demonstrates how constructive politics, rather than credit-seeking and mudslinging, is what ultimately ensures that economic policies serve the people.

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*Senior Lecturer in Political Science, SVM Autonomous College, Jagatsinghpur, Odisha

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