'Not Just Rates, Entire GST Regime Should Be Reshaped': Congress's Jairam Ramesh

New Delhi: The Congress party on Sunday reacted to Union Finance Minister Nirmala Sitharaman’s remark about the GST rate that it would further come down soon, suggesting the government is working on rationalising tax rates.

Sharing the party’s statement on his social media platform, Congress General Secretary in Charge of Communication Jairam Ramesh said that the party has long argued that it is not just GST rates that need to be reduced but the entire GST regime that needs to be reshaped.

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Noting that any changes in the GST must be more comprehensive than a mere rate reduction, the Congress observed that reducing on caramel popcorn, without fundamentally reforming a system that has three rates of tax for popcorn, is “just window-dressing.”

The first objective of the GST 2.0, according to the Congress, must be to simplify the tax labs. The three-slab tax system for popcorn, and the differential tax rates for cream buns and regular buns are only the tip of the iceberg, the party opined.

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“As the Modi government’s former Chief Economic Advisor, Arvind Suubramanian, has acknowledged, the GST has up to 100 different tax rates, including cesses. “The complexity increases the compliance burden on businesses and the government bureaucracy,” the party highlited.

The Congress alleged that the multiplicity of rates has facilitated alarming GST evasion of Rs 2.01 lakh crore, almost double the Rs 1.01 lakh crore reported in FY23. A total of 18,000 fraudulent entities were uncovered; many more are likely undetected, the party noted, underscoring that the complexity of the current GST regime reflects a lack of seriousness on the government’s part in enforcing a good and simple tax.

The second issue, the Congress highlighted is the alleged slowdown in GST collection in recent months due to high refunds. It said that the data from December 2024 showed that net GST collections, after adjusting for refunds, slumped to a 3.3 % growth due to a 45.3% increase in refunds to taxpayers.

“While some part of this increase in refunds is certainly credible, a significant component of these refunds is likely fraudulent,” the Congress stated, alleging that the complexity of the GST system is the reason for large-scale fraud.

The party then pointed out that the Input Tax Credit Fraud (ITCF) is particularly common, with over Rs 35,132 crore worth of fraud identified, amidst a recovery rate of just 12 %. Weak supply chain tracking as the buyers can claim ITC without receiving supplies, often using false invoices or inflating turnover to secure fraudulent refunds.

“Firms have also claimed refunds on exports that are ineligible for such benefits,” the party claimed while stressing the need for reform, noting the inadequate enforcement mechanism of the GST.

Another important thing is that government should reduce tax on several key items, including educational textbooks and stationery, uniforms and school bags etc, the party said.

“A punishingly high GST is charged on the affiliation fee paid by a college to a university and on open distance learning courses, which are critical to enabling widespread educational access,” the statement noted.

The Congress further observed that this would be the appropriate year for a GST 2.0 since the GST compensation cess is likely to meet its revenue targets later this financial year. The Finance Ministry now has the fiscal cushion to anchor a simplified GST, the party pointed out. Notably, it added that the Congress has envisaged GST 2.0 for a “perfect and Simple Tax,” which it remains committed to.

“The ball is now in the Union Government’s court – will they take this historic opportunity,” the Congress asked.

Earlier, Finance Minister Nirmala Sitharaman on Saturday said the GST rates will come down further. The minister had pointed out that the revenue neutral rate (RNR) has come down from 15.8 percent at the time of the launch of GST on July 1, 2017, to 11.4 percent in 2023.