The Goods and Services Tax (GST), implemented in 2017, has been a subject of intense debate and political discourse in India. Recently, with the rollout of GST 2.0 and revised tax rates, the Bharatiya Janata Party (BJP) has lauded the reforms as a significant achievement, while the Indian National Congress has criticized them, pointing out structural flaws and claiming the reforms are inadequate.

BJP's Perspective: "GST Reform Has Delivered Happiness"

The BJP has strongly defended the GST reforms, presenting them as a major economic achievement that will benefit businesses and the general public. BJP leaders have stated that the GST reforms will be even more transformative than the 1991 economic liberalization, delivering direct and visible benefits to every citizen. They emphasize that essential commodities now attract zero percent GST, and goods previously taxed at 28% have been brought down to 18% or less. Items in the 12% slab have been reduced to 5% or even 0%, providing direct relief to the middle class and common people. The BJP also claims that the GST has eliminated the confusion and complexity created by the multiple indirect tax systems that existed before its implementation.

To promote the new GST rates and create a festive atmosphere, the BJP has launched a week-long nationwide initiative titled the 'GST Savings Festival'. BJP Members of Parliament (MPs) and party workers have been directed to visit local markets in their constituencies as part of this campaign. They will conduct foot marches in market areas, visit shops, greet shopkeepers, and distribute placards promoting Swadeshi (Indian-made) products. The Prime Minister described the rollout of GST 2.0 as the beginning of a 'GST Savings Festival', framing it as a step towards economic self-reliance and the promotion of indigenous manufacturing.

The BJP asserts that the GST has strengthened the business ecosystem, encouraged investments, and created more employment opportunities. They also highlight that India's GDP growth has surpassed projections, and exports are rising due to GST rate rationalization, underlining macroeconomic stability. The government expects GST 2.0 to reduce compliance challenges, cut disputes, and make goods and services cheaper for households.

Congress's Criticism: "Negative Politics"

The Congress party has been a vocal critic of the GST, describing it as a "Growth Suppressing Tax" with structural flaws. They argue that the current reforms are inadequate and fail to address the concerns of Micro, Small & Medium Enterprises (MSMEs). The Congress has been advocating for a GST 2.0 since 2017, emphasizing the need for comprehensive changes.

Key criticisms from the Congress include:

• High number of tax brackets: The Congress claims that the GST is plagued with a high number of tax brackets, leading to complexity and confusion.
• Punitive tax rates: They argue that the GST imposes punitive tax rates on items of mass consumption.
• Large-scale evasion and misclassification: The Congress alleges that the GST system suffers from large-scale evasion and misclassification of goods.
• Costly compliance burdens: They claim that the GST imposes costly compliance burdens on businesses, especially MSMEs.
• Inverted duty structure: The Congress points out the issue of an inverted duty structure, where the tax on output is lower than the tax on inputs.
• Inadequate reforms: The Congress claims that the recent GST reforms are inadequate and do not address the states' demand for an extension of compensation for another five years.

Congress leaders have accused the Prime Minister of taking "sole ownership" of the amendments made to the GST regime by the GST Council, a constitutional body. They argue that the government should apologize to the public for imposing GST on essential items. The Congress also questions where the GST collections over the past years have gone.

Impact of GST on the Indian Economy

The GST has had a significant impact on the Indian economy, both positive and negative.

Positive Impacts:

• Simplified tax system: The GST has streamlined the tax system by replacing multiple indirect taxes with a single tax, reducing complexity and making compliance more manageable for companies.
• Increased tax compliance: GST's technology-driven procedures, such as online registration, e-filing of returns, and e-way bills, have increased tax compliance.
• Economic growth boost: The GST has contributed to economic growth by creating a more unified market, enabling the free flow of capital and services, and facilitating easier business operations.
• Reduction of the tax burden: By eliminating the cascading effect of taxes, the GST has reduced the overall tax burden on businesses and consumers.
• Economic formalization: The GST has promoted transparency and reduced tax evasion, leading to the formalization of the economy.

Negative Impacts:

• Short-term inflation: The GST may have caused short-term inflation.
• Compliance burdens for small businesses: Small businesses may face increased compliance costs due to the GST.

GST Collection and Revenue

GST collections have generally shown a positive trend since its implementation. In the fiscal year 2023-24, GST collections crossed the ₹20 lakh crore mark, signaling economic resilience and the transformative power of digital tax administration. The total GST Collection for the calendar year 2024 amounted to Rs. 21.36 lakh crore, the highest collection since 2017. The month-wise GST Collection shows a dynamic pattern of growth, with the highest-ever monthly GST collection recorded in April 2024. Maharashtra has consistently been the leading state in GST collection, followed by Karnataka and Gujarat.

Conclusion

The GST reform in India remains a contentious issue, with the ruling BJP highlighting its benefits and the opposition Congress pointing out its flaws. While the BJP emphasizes the simplification of the tax system, increased compliance, and economic growth, the Congress criticizes the high number of tax brackets, punitive rates, and compliance burdens. The GST's impact on the Indian economy has been both positive and negative, with increased tax compliance and economic formalization on one hand, and short-term inflation and compliance burdens for small businesses on the other. As GST 2.0 is rolled out, the debate surrounding its effectiveness and impact on various sectors of the economy is likely to continue.