After 8 Years of Pain, GST Finds Its Conscience

 

The introduction of GST 2.0, with a simplified two-slab structure (5% and 18%) and a 40% rate on luxury goods, is being presented as a milestone in tax reform. However, its timing and context suggest repentance rather than genuine reform. Since 2017, GST has disproportionately burdened households, farmers, and small businesses, taxing essentials like food, medicines, and school supplies, while government revenues doubled to ₹22 lakh crore by 2024–25. The relief now offered comes only after sustained opposition criticism, growing domestic discontent, looming elections, and external pressures such as U.S. tariffs on Indian goods. The unilateral announcement by the Prime Minister, later endorsed by the GST Council, underscores questions about the Council’s autonomy. While the new structure may ease compliance and lower prices, the absence of compensation for eight years of excess taxation leaves GST 2.0 less a bold reform and more a politically expedient correction.

“After eating 100 mice, the cat went on the Hajj pilgrimage.”

Few proverbs capture India’s latest tax reform moment better. After eight years of draining the pockets of ordinary citizens through an irrational Goods and Services Tax (GST) regime, the government now projects sweeping rate cuts as a benevolent reform. But for millions of households, it feels less like foresight and more like repentance.

The long road from promise to pain

When GST was launched on 1 July 2017, it was billed as India’s most ambitious indirect tax reform. Its promise was bold: replace a fragmented system with a unified structure, improve compliance, and reduce prices. Instead, what followed was a complex maze of slabs — 5%, 12%, 18% and 28% — plus cesses.

For the common man, this meant taxation even on basics: parathas, milk products, pencils, school notebooks, medicines, oxygen cylinders, tractors, tyres, and cement. In practice, GST became a silent tax on survival. Families cut back on essentials, farmers bore higher input costs, patients paid more for life-saving drugs.

Meanwhile, the government celebrated revenue milestones. By 2024–25, GST collections doubled to ₹22.08 lakh crore. The exchequer grew fat; household savings thinned out.

What has changed in GST 2.0?

Earlier GST regime (typical)	Revised 2025 GST 2.0	Examples (moved from → to)
Multiple slabs: Exempt / 5% / 12% / 18% / 28% (plus compensation cess on sin goods)	Two main slabs: 5% & 18%, with a 40% special rate for select luxury/sin items (pan masala, cigarettes, some demerit goods); some essentials made nil.	Education stationery: 12% → Nil (exercise books, maps, pencils).
		UHT milk / paneer / rotis / parathas: 5% → Nil for many dairy & Indian breads.
		Soaps, shampoos, toothpaste: 18%/12% → 5%.
		TVs (over 32"), ACs, dishwashers: 28% → 18%.
		Cement: 28% → 18%; tractors & many farm implements: 12% → 5%.

(For a full itemised list see the GST Council/PIB release and consolidated press lists published after the 56th meeting.)

Simplified slabs: Two broad rates — 5% and 18% — replacing four earlier slabs.

Special 40% rate: On luxury and sin goods like pan masala, aerated drinks, luxury cars, and private aircraft.

Sectoral relief: Major cuts in food, agriculture, construction, healthcare, education, textiles, handicrafts, and hospitality.

Insurance exemption: Life and health premiums exempted, in line with the “Insurance for All by 2047” vision.

Soaps, shampoos, and toothpaste are down from 18% to 5%. TVs, ACs, and dishwashers from 28% to 18%. Cement, tractors, and farm implements are now cheaper. School supplies and many dairy products have been exempted entirely.

This is genuine relief. But the question remains: why now?

Political timing or economic necessity?

The Prime Minister’s announcement from the Red Fort on 15 August 2025 preceded the GST Council’s formal endorsement weeks later. Constitutionally, the Council is meant to be a forum of “cooperative federalism,” where Centre and states negotiate rates. In practice, it looks like the Council was reduced to rubber-stamping a pre-decided script.

Opposition leaders have long called the GST “Gabbar Singh Tax,” highlighting how irrational slabs punished small traders, farmers, and consumers. Jairam Ramesh, P. Chidambaram, and others repeatedly demanded rationalization and relief. Those demands were ignored for eight years — until now, when elections loom and global headwinds gather.

And global headwinds matter. The U.S. decision to impose 50% tariffs on certain imports has raised the stakes for Indian exporters. Rationalizing GST slabs to fix inverted duty structures is as much about keeping Indian manufacturing competitive as it is about helping consumers. The reform is timely, yes, but it is also reactive, not visionary.

The missing piece: compensation for lost years

What is absent from all the celebratory headlines is a frank accounting of the lost eight years.

Families were forced to cut consumption and savings to cope with inflated expenses.

Farmers fell deeper into debt as farm inputs stayed expensive.

Patients and caregivers paid GST on medicines and oxygen cylinders even during the pandemic.

Housing became costlier as construction materials were taxed at punitive rates.

Now, the government asks citizens to celebrate rate cuts as if they were a Diwali gift. But does reform today erase the burden of yesterday?

If a thief steals openly in broad daylight, does returning a fraction years later absolve the crime? For many Indians, GST felt like theft on gunpoint — visible, unavoidable, and punishing.

Autonomy or pocket borough?

The GST Council, by design, is a federal forum. States hold two-thirds of the vote, the Centre one-third. The Supreme Court has clarified that its recommendations are persuasive, not binding. On paper, this is balanced.

In practice, when the Prime Minister announces reforms first and the Council meets later, the perception of autonomy collapses. Opposition-ruled states rightly demand guarantees of compensation for lost revenue. Without a transparent compensation formula, the Council risks becoming less a platform for cooperative federalism and more a pocket borough of the ruling party.

Reform, yes. But justice? Not yet.

GST 2.0 is undeniably a step toward simplification and fairness. Households and small businesses will feel relief, and India’s competitiveness may improve.

But reforms must not blind us to reality: for eight years, ordinary citizens bore an unfair burden while the government boasted of record collections. Opposition voices inside and outside Parliament were dismissed. Global tariffs forced urgency, not compassion. And the Council’s autonomy looks increasingly nominal.

A truly just reform would not only lower taxes today but also acknowledge, quantify, and redress the damage already done. Without that, GST 2.0 is less a new chapter and more a confession of past error — a repentance dressed up as reform.

References

1. PIB summary of 56th GST Council decisions and date of implementation. Press Information Bureau

2. Government press note: record gross GST collections in FY 2024–25 (₹22.08 lakh crore). Press Information Bureau

3. Coverage of revenue implication estimates (₹48,000 crore) and analysis. The Indian ExpressFinancial Times

4. Reports on opposition/state concerns and pre-Council discussions. mintThe Economic Times

5. International context on U.S. tariffs and global trade shock. The Washington PostThe Atlantic

6. Macro data (GDP growth and CPI/inflation context). MOSPI+1Press Inform