GST reforms a boost for BJP, but Opposition unfazed

Upbeat over reforms in the Goods and Services Tax (GST) regime announced by Union Finance Minister Nirmala Sitharaman on Wednesday (September 3), the ruling Bharatiya Janata Party (BJP) is expectedly planning to milk the tax overhaul for electoral gains, but the Opposition aren’t losing sleep over it, just yet.

There is a grudging acceptance within the wider Opposition that, though “eight years too late”, the reforms approved by the GST Council must be “welcomed with riders”.

However, the Opposition’s engagement with the issue, which the BJP is highlighting as yet another “historic” milestone of the Narendra Modi-led regime and a “pre-Diwali bonanza” to the citizens from the prime minister, is expected to be limited.

Also read: Will the GST rejig revive consumption and boost growth?

Relief for Modi govt amid 'vote chori' charges

Leaders cutting across Opposition parties who spoke to The Federal concede that the “belated decision” to simplify the GST regime by removing the 12 per cent and 28 per cent tax slabs could give some buoyancy to the Modi government’s popularity at a time when it is grappling with allegations of “vote theft”.

Given that the Centre has shrewdly timed the rollout of the GST overhaul to coincide with the Navratri festivities beginning September 22, Opposition leaders also agree that rationalising the tax slabs would inject some added euphoria in the festive season, with people at large feeling emboldened to spend more on a range of products that are slated to get cheaper because of the tax cuts.

Also read: GST 2.0: Will 2 slabs simplify India's tax maze? | Talking Sense with Srini

Opposition not cowed down

Yet, despite the obvious political advantages that the BJP hopes to draw from the GST rationalisation, dubbed “next-generation reforms” by Modi in his Independence Day speech last month, the Opposition believe they don’t stand to lose much.

The official reaction from Opposition parties to the GST reforms has been palpably lukewarm. Almost all constituents of the Indian National Developmental Inclusive Alliance (INDIA) bloc have called the tax rationalisation a belated move and said that its impact on the finances of the states, several of them ruled by these Opposition parties, will have to be assessed in due course.

Also read: 'GST 2.0 is a correction, not a reform; earlier model was exploitative'

Centre forced to agree to reforms, claim Opposition parties

Opposition leaders such as the Congress’s Mallikarjun Kharge and P Chidambaram, Trinamool Congress supremo and Bengal Chief Minister Mamata Banerjee and Dravida Munnetra Kazhagam-ruled Tamil Nadu’s Finance Minister Thangam Thennarasu have variously welcomed the rate rationalisation but simultaneously asserted that the Centre was forced to agree to the reforms because of the Opposition’s pressure and that the necessity for reform had itself arisen because of the haphazard way the GST was introduced in the first place.

Meanwhile, Communist Party of India (Marxist)'s Central Committee member Thomas Isaac called the GST reforms a “big setback for fiscal federalism”.

Also read: GST bonanza: SUVs, small cars get cheaper; relief for premium car segment

Pointing out that “reduction in average GST rate from 15.3 per cent in 2017 to 9.8 per cent in 2025 will severely erode the fiscal capacity of states”, Isaac alleged that the Modi government had, once again, “prioritised corporate profit and ease of doing business over welfare”.

Call to guarantee state's financial security

Calls for ensuring that states, particularly those ruled by Opposition parties, aren’t discriminated against in financial devolution and that the rate rationalisation must not mean a cut in the central assistance to financially backward states such as Jharkhand, Bihar and Uttar Pradesh have also come from the Jharkhand Mukti Morcha’s Mahua Majhi, Rashtriya Janata Dal’s Sanjay Yadav and Samajwadi Party’s Javed Ali Khan, respectively.

Also read: GST 2.0: Historic reform or delayed fix? Political, economic angles decoded

The Opposition parties, however, also recognise the need for a “measured response” to the GST reforms; one that is neither of “unqualified praise” nor of “blunt criticism and abject dismissal”.

'Why govt exploited for eight years?'

“Ultimately, it is a move that the Opposition have been seeking ever since the GST came into existence. So, it is obvious that we can’t oppose it, but that also doesn’t mean we have to shower the government with unqualified praise. It is a fact that the government, for eight long years, extracted high taxes from common people despite every hardship, be it growing unemployment, the COVID-19 pandemic or agrarian crises. Will people not ask the government why you exploited us for eight years? Should the Opposition not ask this?” said a senior Opposition MP.

Also read: GST reforms are mere tokenism, don't address systemic issues: TN MSMEs

The principal Opposition party, the Congress, sees the GST simplification as “another vindication” of the Lok Sabha’s Leader of Opposition, Rahul Gandhi, who had been consistently critical of the previous GST regime and criticised it as Gabbar Singh Tax.

'Modi realised his ideas not good'

“What is the BJP celebrating about? For eight years, Rahul Gandhi kept saying we need a better GST model, and for eight years, this government that is now calling the rationalisation Modi’s Diwali gift had rejected Rahul’s suggestions and mocked him. It is good that finally Modi has realised that his ideas are not good for the country and that he must steal Rahul’s ideas to survive, although this is not surprising considering that Modi’s government itself was elected by stealing votes,” the Congress’s media and publicity department chief, Pawan Khera, told The Federal.

FM slams Opposition

On Friday (September 5), Sitharaman slammed the Opposition parties, the Congress in particular, for suggesting that the GST reforms had been approved belatedly, dubbing the reactions as an “absolute lack of understanding”.

Also read: Why new GST rates are a shot in the arm for auto industry

The finance minister also reiterated her previous claims of Opposition-ruled states having regularly signed off on all GST Council decisions of the past when the earlier rates applied.

An Opposition MP, who is also a member of the Parliamentary Standing Committee on Finance, however, told The Federal that if the finance minister wants Opposition parties to share the blame for previous decisions of the GST Council “even though they were invariably presented to Opposition states as a fait accompli”, then she must also be “ready to share the credit for GST simplification, because the Opposition-ruled states, by her own admission, enabled the (GST) council to approve the rate cuts”.

A section of Opposition leaders believes the INDIA bloc “needn’t spend any time either welcoming or criticising the rate cuts”.

“We have our own issues that we are raising effectively among the people. The narrative against vote chori and SIR has caught on. The issue of the BJP’s constant assaults on the Constitution is still alive in the minds of the public. Issues like unemployment, problems of the farmers, and communal disharmony are all still resonating with the people. Why should we then get drawn into this GST debate and engage with the BJP on an issue that suits them? If you go to Bihar today, where elections are due, what do you think the people are talking about… even today, they are talking about vote chori and not GST,” said an RJD MP.

While agreeing that the GST rate cuts may, for the upcoming festive season, boost retail sales and consumption because of the BJP’s “loud publicity”, a Trinamool Congress MP pointed out that “eventually this euphoria is bound to settle down”.

The parliamentarian argued that "the Modi government has this misplaced idea that just cutting tax will bring the economy back into shape and fuel consumption; what they still don’t get is that to sustain high consumption, high sales, revival of manufacturing and all the other imperatives for a good economy, the citizens need to have jobs that give them the money to spend and those jobs are still not available… all your PLI, ELI (schemes launched by the Centre to boost employment generation) have been a flop show; you are still not paying states like Bengal their dues for MGNREGA and other central schemes which is preventing Opposition-ruled states from helping their people financially; you cannot brush all this under the carpet with one GST reform".

A Rajya Sabha MP from the Congress said the BJP’s “GST reforms balloon will burst in a few months”, claiming that while the upcoming financial quarter “may see a spike due to the festive season”, eventually “the lack of jobs and continuing agrarian distress, compounded further this year by floods in major agricultural states like Punjab” will flatten the potential gains from the tax cuts.

This MP also claimed that "with elections due only in Bihar this year, where GST reforms aren’t expected to be a major electoral factor, and the excitement over the tax cuts bound to die down by the time the next election cycle for Bengal, Assam, Tamil Nadu and Kerala begins next year, the Opposition don’t need to worry about the BJP making any major electoral gains" from GST rationalisation.