The people of India must not be misled by visible reductions while ignoring hidden hikes. They must oppose this anti-people GST system.
Published Sep 11, 2025 | 2:00 PM ⚊ Updated Sep 11, 2025 | 2:00 PM
Union Finance Minister Nirmala Sitharaman said the changes on GST of all products, except sin goods, will be applicable from 22 September.
Synopsis: Modi’s media boasts that reducing tax on essential goods like health insurance, pencils, erasers, books, and life-saving medicines proves the government is “pro-people.” But the real question is: Why did the government tax these essentials at 12–18% for the past eight years in the first place?
For the past week, the central government and its ‘Godi’ media have been loudly propagating that Modi’s government has brought about major reforms in the GST system and gifted the people of the country a Deepavali bonus.
The main claim is that the earlier multiple tax slabs of 0%, 1–3%, 5%, 12%, 18%, and 28% have now been streamlined into just two slabs: 5% and 18%. Taxes that fell under 12% have largely been shifted to the 5% slab, and those under 28% have been shifted to the 18% slab, thus supposedly giving the public the benefit of large tax cuts and price reductions.
In addition, “sin goods”—luxuries and socially harmful products—have been put into a new category taxed at 40%.
The government claims that because of these changes, prices of goods will drastically fall, people will buy more in a frenzy, and the declining economy will revive. On the surface, the government admits that this tax cut might initially cause a notional revenue loss of ₹48,000 crores in the first year, but it argues that increased consumer demand will expand business activity and ultimately increase revenue rather than reduce it.
This is the story being sold to the people of India.
But how much of this is true? How much is false? How much is exaggeration? And what does the people’s experience since GST’s introduction in 2017 really say?
What Modi’s government is doing is not a genuine reform of the GST system. No fundamental or many required reforms have been introduced. What has been done is merely the modification of tax rates and the reduction of slabs.
In most countries that have GST or VAT (Value-Added Tax) systems, there is only one tax rate—usually around 10% or 12%. But in India, even though GST was launched under the slogan of “One Nation, One Tax,” the country was taxed with seven or more slabs: 0–1–3–5–12–18–28, plus cesses.
Worse, different versions of the same product were taxed differently, creating chaos for traders and consumers alike.
For example, as Finance Minister Nirmala Sitharaman herself admitted, plain popcorn is tax-free, salted popcorn attracts 5% tax, and caramelised popcorn is taxed at 18%.
In another viral video from Tamil Nadu, a bakery owner explained: Plain bun – 0%, butter – 5%, but bun with butter – 18%! In this kind of “Tughlaq tax durbar,” ordinary people were burdened, and traders struggled to comply, often paying fines.
Since 2017, traders, entrepreneurs, consumers, and opposition parties have repeatedly demanded that GST be simplified. But Modi’s government, blinded by arrogance, kept insisting “Sab changa si” (all is well).
Now, with economic confusion mounting from Modi’s Tughlaq-style GST, and with the Trump administration recently imposing 50% tariffs on Indian exports, India’s economy is under severe strain. Thus, there’s a compulsive need to boost the domestic economy.
Meanwhile, Modi’s media now boasts that reducing tax on essential goods like health insurance, pencils, erasers, books, and life-saving medicines proves the government is “pro-people.” But the real question is: Why did the government tax these essentials at 12–18% for the past eight years in the first place?
Therefore, this is not a reform. In fact, none of the structural fault lines of the existing GST system has even been tinkered with. All the anomalies are intact. The government is only correcting some of its earlier blunders in tax slabs and tax rates.
When GST was introduced in 2017, the Modi government and its media claimed that prices of all goods and services would fall significantly. But as every Indian has experienced, prices did not come down; instead, they kept rising steadily as before. Why?
Earlier, under the old tax system, multiple layers of taxes, which went on adding at different stages (tax-on-tax), inflated prices. GST was meant to fix this by introducing “Input Tax Credit” (ITC), allowing producers to reclaim taxes already paid on previous stages, thus supposedly lowering final prices.
But in practice, companies never reduced prices. Instead, they inflated the costs of raw materials, technology, etc., and pocketed the ITC benefits, rather than passing them to consumers.
Moreover, for goods under the 0–5% slab, claiming ITC is difficult or impossible. So items moved from the 12% slab down to 5% won’t really become cheaper for consumers since it is unlikely that the companies would transfer it to consumers.
At best, in sectors where companies’ inventory is inflating with unsold goods—like automobiles or refrigerators—some benefits may trickle to consumers. But for everyday items like toothpaste, brushes, and soap, or such FMCG goods, a price cut won’t lead to people buying more than they need.
Most importantly, India has no strict law requiring companies to pass tax-cut benefits to consumers.
Initially, when GST was launched, a “National Anti-Profiteering Authority (NAA)” was set up. But it was toothless, with endless conditions for filing complaints. In 2022, Modi’s government dissolved it altogether, shifting some responsibilities to the Competition Commission of India (CCI). But CCI’s scope didn’t cover GST profiteering. By 2024, CCI itself declared it couldn’t handle this responsibility.
Now, only the GST Appellate Authority looks into such matters—essentially stripping away any real enforcement mechanism. The government has deliberately dismantled legal safeguards, enabling companies to engage in unregulated profiteering.
Modi’s media highlights only the products that will see tax cuts. These lists aren’t lies—but they’re half-truths. While taxes have been reduced on final goods, taxes on raw materials needed to produce them have been sharply increased.
Example: Energy inputs like coal for power generation and petroleum for transportation are critical. Modi’s government raised coal tax from 5% to 18%, and pipeline-transported petroleum products from 5% to 18%. This 13% hike in input taxes directly increases production costs, nullifying the supposed benefits of lower GST on final goods.
Similarly, while health insurance GST was cut from 12–18% to 5%, private insurers have already announced premium hikes of 6–15%, citing loss of ITC. The government has taken no action.
Even now, the Tughlaq-style confusion persists:
Thus, true patriots must look beyond Modi’s fanfare and see what’s being taken away through the back door.
Even if prices fall slightly, will the economy revive, as Modi’s government boasts? No. For that, people need disposable income.
But thanks to corporate-friendly policies, demonetisation, GST chaos, and COVID lockdowns, the purchasing power of 80% of Indians has decreased, and savings have evaporated. They earn just enough to survive, with little left to spend. Yet this bottom 50% of the population bears 80% of the GST burden, while the richest 10% contribute just 3%.
Thus, GST was imposed without proper planning, destroying the livelihoods of small traders and common people who were already reeling from demonetisation.
GST merged state government-imposed Sales Tax and commercial taxes, Octroi, and such other taxes imposed by the local institutions, and central excise and service taxes into a single system. But this also stripped states of their taxation sovereignty. Now, states only retain stamp duties, excise on alcohol, and electricity/fuel taxes as independent sources.
Half of GST revenue is shared with states. Earlier, state taxes were growing at 14% annually. To compensate, the law required the central government to ensure states didn’t lose revenue—via a “GST Compensation Cess.” But since 2017, Modi’s government has discriminated against non-BJP states in releasing funds.
Also, the GST Council, where all states are represented, gives one-third voting power to the Centre. Any decision needs a 75% majority—effectively giving the Centre a veto power. Without changing this, no real reform is possible.
Globally, progressive systems tax the rich more and exempt the poor. But GST is regressive: it expands indirect taxes, reducing direct taxes on corporations, while squeezing ordinary people. It strengthens corporate capitalism at the cost of a welfare state.
Modi’s government claims these amendments may cause a ₹48,000 crore revenue loss, but argues it will be offset by increased consumption. In reality, with 90% of people lacking income or savings, large-scale economic recovery is impossible.
The actual revenue shortfall will exceed ₹2 lakh crore. How will the government fill this gap, especially after already slashing corporate taxes? It has made no provision in the budget for a possible decrease in revenue.
Thus, there could be two ways in which the Modi government could overcome this deficit: Increase cesses without raising GST rates. This burdens ordinary citizens while reducing the share of revenue that goes to states. Or decrease the spending on the social sector!
Therefore, the people of India must not be misled by visible reductions while ignoring hidden hikes. They must oppose this anti-people GST system.
Instead of expanding regressive indirect taxes, India must increase direct taxes on the top 10% who control 90% of the nation’s wealth—through wealth tax, inheritance tax, and higher corporate tax. Only then can we build a welfare state instead of a corporate state.
(Views are personal. Edited by Majnu Babu).
