Congress Demands GST 2.0 to Fix Broken Tax System

The Indian National Congress has launched a scathing critique of the current Goods and Services Tax (GST), labeling it a “Growth Suppressing Tax” and demanding an urgent overhaul into a “Good and Simple Tax” (GST 2.0). The call for reform comes on the heels of Prime Minister Narendra Modi’s Independence Day pledge to lower GST rates by Diwali, aiming to reduce prices of everyday essentials and revitalize the eight-year-old tax regime.

Congress general secretary Jairam Ramesh, in a fiery statement, emphasized that the party has been advocating for a transformed GST 2.0 for over 18 months, a key promise in its 2024 Lok Sabha election manifesto. “The current GST has stifled economic growth with its convoluted rate structure and rampant evasion,” Ramesh said. He criticized the existing four-tier tax system—5%, 12%, 18%, and 28%, with additional cess on luxury and sin goods—for fueling litigation and undermining private consumption and investment.

The Congress is pushing for a streamlined two-slab structure—standard and merit rates—to simplify compliance and reduce disputes. With the GST compensation cess set to expire on March 31, 2026, the party insists on its extension to safeguard state revenues during the transition. Ramesh also stressed addressing the concerns of Micro, Small, and Medium Enterprises (MSMEs), which he called “the backbone of employment.” This includes raising thresholds for interstate supplies and easing procedural burdens.

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Sector-specific issues in textiles, tourism, handicrafts, agriculture, and exports need urgent attention, Ramesh noted, while urging states to expand GST to cover electricity, alcohol, petroleum, and real estate. “We demand an official discussion paper on GST 2.0 to spark a nationwide debate,” he said, envisioning a tax system that fuels growth rather than hinders it.

Modi’s announcement from the Red Fort partially aligns with Congress’s vision, with the Union Finance Ministry proposing a two-slab system to replace the current structure. “By Diwali, taxes on daily-use items will drop, benefiting MSMEs and strengthening our economy,” Modi promised, highlighting eight years of GST reforms in collaboration with states.

Since its rollout on July 1, 2017, GST has unified multiple taxes but faced criticism for complexity and inefficiencies. “The current system is a nightmare for small businesses,” said Ankit Jain, a Delhi-based trader. “A simpler GST could change everything.” As the debate over GST 2.0 heats up, the Congress’s push for reform aims to balance economic growth with fiscal stability, but its success will depend on consensus with states and stakeholders.

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