On September 21, 2025, Prime Minister Narendra Modi announced the beginning of the “GST Bachat Utsav” (Festival of Savings), inviting citizens to celebrate sweeping changes in the Goods and Services Tax (GST) structure. With much fanfare, he claimed that this rationalisation would increase household savings and simplify the tax system.

Newspapers dutifully carried headlines about a “festival of relief,” while television studios beamed jubilant graphics of cheaper goods and economic buoyancy. Yet beneath the pageantry lies a sobering truth: this is less a celebration than an overdue correction. For eight long years, Indian consumers and small businesses bore the burden of a convoluted, distortionary tax system that was supposed to be the greatest reform of independent India. Instead, the GST regime, as implemented under Modi, became a case study in how good ideas can be mangled by poor design, arbitrary execution, and political opportunism.

It is only now, on the eve of crucial state elections that the government has chosen to reset the system, framing it not as a long-delayed rectification but as a gift to the people. Such rhetorical sleight of hand is typical of Modi: transform a crisis into a celebration, erase memory of the intervening suffering, and monopolise credit for whatever correction is finally made. But to understand the full import of this “Utsav,” one must retrace the journey of GST – its promise, its failures, and the hidden costs it imposed on the Indian public.

‘Good and simple tax’ or a ‘Gabbar Singh tax’

Before 2017, India’s indirect taxation system was a labyrinth of excise duties, state value-added taxes (VAT), central sales tax, service tax, octroi, entry tax, entertainment tax, and sundry surcharges. A product moving from one state to another could accumulate cascading taxes at every stage, raising costs and discouraging interstate commerce. It was said only half in jest that it was “easier to ship goods to Europe than to another Indian state”.

The GST was conceived as a grand reform to eliminate this cascading effect and create a common national market. The idea had bipartisan origins, with earlier Congress-led governments pushing the concept, and the BJP – while in opposition – sometimes obstructing it but later embracing it. Economists hailed GST as a potential “game-changer” that would rationalise rates, broaden the tax base, and increase compliance through digitalisation. Many countries had adopted VAT-style systems with great success, combining efficiency with transparency.

The theoretical model was elegant: a few low, broad-based rates, seamless crediting of input taxes, and minimal exemptions. But theory and practice diverged sharply when the Modi government implemented GST in July 2017.

GST was introduced at midnight in Parliament, with the Prime Minister calling it a “Good and Simple Tax.” Reality proved otherwise. Instead of a simple dual-rate system, India rolled out a multi-slab monster: 0, 5, 12, 18, and 28%, with additional cesses on so-called “sin” goods.

The GST Council, meant to harmonise decisions, became a forum for constant tinkering. Classifications were arbitrary, rate changes frequent, and compliance costs punishing.

Take the now-infamous case of popcorn. Salted popcorn was taxed at 5%, branded popcorn at 12%, and caramel popcorn classified as confectionery at 18%. Similarly, the “roti versus paratha” dispute saw courts decide whether a stuffed paratha deserved the 18% slab or the 5% slab of plain roti. These absurdities were not merely comic – they imposed real burdens on businesses forced to litigate, consult experts, and navigate contradictory notifications.

The then-Congress president Rahul Gandhi labelled it “Gabbar Singh Tax,” capturing the widespread sentiment that the government had created a system more extortionate than efficient. The phrase stuck because millions of small businesses felt looted rather than liberated.

Eight years of implicit loot

While policymakers congratulated themselves on historic reform, ordinary citizens and firms bore the brunt. The costs came in many forms:

• Over-taxation. Many essential goods that should have fallen in the lowest slab languished at 12 or 18%. For instance, household staples like ghee and butter were taxed at 12% until this year’s rationalisation. Over eight years, that gap represents billions extracted from consumers beyond reasonable levels.
• Inverted duty structures. In some sectors, inputs attracted higher GST than outputs, creating negative incentives. Footwear, textiles, and fertilizers suffered under this anomaly. Manufacturers faced unrecoverable tax burdens, losing competitiveness both domestically and abroad.
• Delayed refunds. Exporters and SMEs often waited months for refunds of input tax credits, choking working capital. The time value of money – foregone interest, lost liquidity – was a silent tax paid by small entrepreneurs.
• Compliance burden. GST required multiple returns each month, complex e-filing, constant reconciliation, and professional help. For micro and small enterprises, compliance costs were disproportionate. A 2021 survey found that 63% of SMEs reported higher costs of compliance post-GST.
• Inflationary pass-through. When GST rates were high, companies swiftly raised consumer prices. But when rates were cut, the benefits rarely reached consumers. The so-called “anti-profiteering authority” was toothless, pursuing a few headline cases while systemic profiteering continued.
• Fiscal uncertainty for states. The Union government promised compensation to states for revenue shortfalls for five years. When collections dipped, disputes erupted. During the pandemic, states accused the Centre of reneging on its constitutional obligation. Trust eroded, undermining cooperative federalism.

All these added up to what citizens rightly feel was eight years of implicit loot. They were told to bear short-term pain for long-term gain, quite like in earlier fiasco of demonetization. The long term never arrived – until now, under electoral duress, with Modi reframing a correction as a festival.

From failure to festival

Defenders of GST often cite revenue buoyancy as proof of success. Indeed, collections crossed Rs. 1.5 lakh crore monthly by 2023, peaking at Rs. 1.87 lakh crore in April 2024. But these numbers obscure more than they reveal.

First, much of the buoyancy came from higher tax incidence on consumers, not efficiency gains. Inflation contributed significantly to nominal growth. Second, revenue was uneven across states: richer states with more formal economies collected disproportionately, while poorer states lagged. Third, compliance improved partly due to digital enforcement, but evasion and fake invoicing remained rampant.

In effect, the government’s revenue success was purchased at the cost of citizens’ purchasing power and small businesses’ viability. To then portray the partial reversal of these excesses as a “bonanza” is an exercise in political gaslighting.

The so-called “GST 2.0,” effective 22 September 2025, collapses the 12 and 28% slabs into a simpler structure: two principal slabs of 5 and 18%, with a 40% demerit slab for luxury and sin goods. The government projects revenue forgone at around Rs. 2.5 lakh crore annually.

This reform addresses several anomalies:

• Essentials like ghee, butter, and dairy-based products move to 5%.
• Many industrial goods are standardised at 18%.
• Inverted duty structures in textiles and fertilizers are corrected.
• Disputes like popcorn classification are resolved by placing them in a single slab.

These are undeniably positive steps. But they raise uncomfortable questions: if the system could be rationalised now without fiscal collapse, why not earlier? Were citizens overtaxed for eight years solely because of political timidity or administrative laziness?

Not all citizens will benefit. Apparel above Rs. 2,500, previously taxed at 12%, now attracts 18%. Middle-class consumption in certain categories may actually become costlier. States are bracing for revenue losses, with Telangana alone estimating a shortfall of Rs. 7,000 crore. Without robust compensation, state finances could deteriorate, affecting public services.

Moreover, the retention of a 40% slab for luxury and sin goods suggests that complexity has not been eliminated. Differential treatment continues to invite lobbying, classification disputes, and bureaucratic discretion.

Why then the celebratory tone? The answer lies in Modi’s political style. His governance thrives on symbolism: demonetisation was “a festival of honesty,” the abrogation of Article 370 was “a festival of unity,” the vaccine rollout was “a festival of hope.” GST rationalisation is now cast as “a festival of savings.”

Such rhetoric serves two purposes: it erases the memory of past pain, and it centralises credit in Modi’s persona. The GST Council, a federal body, made the decisions. Yet the narrative frames it as Modi’s benevolence. Opposition leaders have pointed out the hypocrisy: Mallikarjun Kharge called it “a band-aid on deep wounds”, while Mamata Banerjee emphasised that the relief comes at the cost of state revenues¹³.

Timing is equally revealing. With key state elections approaching, tax relief doubles as electoral bait. Citizens are invited to celebrate their own past exploitation being partially undone.

If the government were serious about accountability, it would:

• Acknowledge past mistakes. An apology for design flaws, delays, and burdens would signal honesty. Instead, the government demands gratitude.
• Mandate pass-through. A legally binding mechanism should ensure rate cuts translate to price cuts within fixed timelines. Current monitoring of 54 items is inadequate.
• Simplify compliance. Filing returns, claiming refunds, and classification rulings must be automated and user-friendly. For small businesses, compliance should not require professional tax consultants.
• Strengthen federalism. Compensation to states must be timely, formula-based, and transparent. Otherwise, trust in cooperative federalism erodes further.
• Offer partial restitution. While full refunds for past over-taxation are fiscally impossible, targeted compensation – say, lower rates for low-income essentials – could signal goodwill.

Without these measures, GST 2.0 risks being remembered not as genuine reform but as political theatre.

The trajectory of GST reveals deep pathologies in Indian governance:

• Image over substance. Policy is framed as spectacle rather than service.
• Centralisation of credit. Even in a federal scheme, the Prime Minister monopolises glory.
• Electoral timing. Major corrections are reserved for politically opportune moments.
• Weak institutions. Instead of empowering the GST Council as a robust, transparent body, decisions are refracted through partisan spin.

Most importantly, the episode reveals how Indian citizens are treated as subjects rather than stakeholders. They are asked to celebrate relief from injustices they should never have borne.

From utsav to reckoning

The GST rationalisation of 2025 is welcome. It simplifies the structure, reduces distortions, and offers relief. But to call it a festival is cynical. It is not a gift; it is an overdue correction. For eight years, citizens and small businesses were overtaxed, harassed by compliance, and deprived of rightful relief. That burden cannot be erased by branding the correction as an “Utsav.”

If democracy means anything, it must include accountability for economic governance. Citizens should celebrate not because their leaders condescend to offer them relief, but because systems are designed to serve them from the start.

Modi’s attempt to recast failure as generosity is politically clever but morally bankrupt. The true festival will arrive only when governments stop looting through design flaws, admit errors honestly, and treat citizens as participants rather than spectators.

This article went live on October first, two thousand twenty five, at three minutes past seven in the evening.

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