Opposition dubbed the Centre’s decision to cut Goods and Services Tax (GST) rates an “eight-year-late U-turn”.
Former finance minister P. 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. 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.”
Congress president Mallikarjun Kharge dismissed the announcement as half-measure reform.
“The Modi government changed ‘One Nation, One Tax’ to ‘One Nation, 9 Taxes’. It included tax slabs of 0 per cent, 5 per cent 12 per cent, 18 per cent, 28 per cent and special rates of 0.25 per cent , 1.5 per cent , 3 per cent and 6 per cent ,” he said, adding that what has been rolled out is “GST 1.5,” not the GST 2.0 his party has long demanded.
On Wednesday, the Narendra Modi government simplified the GST regime into a two-slab structure of 5 per cent and 18 per cent .
Taxes on household essentials such as soaps, toothpaste and Indian breads have been reduced to 5 per cent or nil, while life-saving drugs and medicines have been exempted. Two-wheelers, small cars, televisions, air conditioners and cement will now attract 18 per cent instead of 28 per cent . Tobacco, pan masala, aerated drinks and luxury goods remain at a higher bracket of 40 per cent .
Jairam Ramesh said the states would suffer.
“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.”
Kerala’s finance minister K. N. Balagopal said the state stood to lose Rs 8,000–10,000 crore annually. “The state supports the GST rate cuts that will reduce prices but the central government should ensure that the rate cut benefits are passed on to the common man,” he said.
Non-BJP ruled states had voiced concern over the potential Rs 50,000 crore revenue loss. Karnataka, Punjab, and West Bengal asked for clear revenue loss estimates and guarantees of compensation in the Council meeting on Wednesday, reported CNBC-TV18.
The Trinamool Congress claimed victory on insurance exemptions.
“A victory for common people. A victory wrested from a tone-deaf regime that only listens when forced,” the party said.
It credited Bengal chief minister Mamata Banerjee for opposing what it called an “anti-people” tax.
Ashok Gehlot turned the reform into a jab at the BJP’s shrinking majority. “When the BJP's seats in the Lok Sabha reduced from 303 to 240, the income tax also decreased, and the GST slabs also got reduced. With such benefits from a loss of 63 seats, if the BJP's seats in the Lok Sabha were to reduce by 150, the benefits to the public would increase even more.”