New Delhi: While the Union government’s move to rationalise and reduce the rates of Goods and Services Tax (GST) for several sectors is welcome, the National Democratic Alliance-led government should apologise to the people of India for implementing multiple and high GST rates for eight years, said former Union finance minister P. Chidambaram. 

On July 1, 2017, the Union government implemented the Goods and Services Tax (GST) laws, replacing several Central and State taxes. Under this system, goods and services were categorised into different tax slabs — 5%, 12%, 18% and 28%. But though presented as a ‘good, simple tax’, GST has come under fire for several reasons including its complexity, and “burdening domestic taxpayers and professionals with compliance hurdles”, per a report by Frontline.

On September 3, the GST Council under the Union finance ministry made several recommendations at its 56th meeting at New Delhi. It suggested that GST be rationalised and reduced for several products and services, and that some products be exempted from GST entirely – such as individual life and health insurance policies. For instance, it suggested reducing GST from 18% or 12% to 5% on items such as hair oil, soaps, shampoos, toothbrushes, toothpastes, bicycles, tableware, kitchenware and other household articles.

‘Rightly called Gabbar Singh Tax’

“Finally, wisdom has dawned on the central government…The tax structure is now closer to a good and simple tax that several political parties, businesspersons, institutions and individuals (including me) had advocated in the last eight years,” Chidambaram, who also served as the Union minister for home affairs from 2008 to 2012 wrote.

In a commentary for the Indian Express, Chidambaram said that in the last eight years alone, the Union government had used multiple GST rates “to exploit and extract the last paise from the consumers”. 

He added that in the first part-year (July 2017 to March 2018), the Union government collected about Rs 11 lakh crore; and then, Rs 22 lakh crore in 2024-25.

“Every paise earned by consumers through their hard work was sucked by the government through GST — it was rightly, and derisively, called Gabbar Singh Tax. High GST rates was one of the reasons for low consumption and rising household debt. It is elementary economics that reduction of taxes will boost consumption,” he wrote.

However, if a GST of just 5% on products such as toothpaste, hair oil, butter, infant napkins, pencils, notebooks, tractors, sprinklers works today, why was it bad in the last eight years, Chidambaram asked: “Why did people have to pay exorbitant taxes for eight years?”

The government should offer an apology to the people of India for implementing such high GST rates, he said. 

More reforms required

While a reduction of GST rates is good, it is “only the beginning” and the Union government must implement several more reforms, Chidambaram wrote.

According to the former finance minister, the government must prepare states, producers and consumers for a single GST rate (with more exemptions, if necessary) and re-write the Acts and Rules of the GST in simple language and “scrap the gobbledygook” that currently exists.

Simpler forms and returns are a must and the government should also “drastically reduce” the frequency of filings under the GST, he said.

The government must also simplify compliance with the law such that small traders or shopkeepers should not need the services of a chartered accountant. Chidambaram also recommended that the GST laws be de-criminalised and that violations must only be met with “appropriate monetary penalties”.

Finally, he recommended that the government must “instill into the tax collectors that producers and traders are central to the economy, and they are not enemies to be slain by the tax collector”.

He added that he hoped that it would not take another eight years for the union government to implement these reforms.

The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.