• Source:JND
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GST Reform:  From the ramparts of the Red Fort, Prime Minister Narendra Modi, in his Independence Day address, delivered a clear message: “The middle class has to be given big relief.” The clear directive from PM Modi set the stage for a major change in Goods and Services Tax (GST), eight years after it was introduced.

The 56th GST Council meeting on Wednesday brought down tax rates on daily-use items, educational supplies, electronic appliances, agricultural inputs and other sectors, offering a major relief to the middle class. Union Finance Minister Nirmala Sitharaman said that PM Modi has been pushing for this change for eight months. However, the biggest challenge was getting the support of states ruled by Opposition leaders, including West Bengal, Kerala, Punjab and Karnataka.

The GST Council meeting, planned for two days, finished in just one, and things moved faster than expected as the Opposition-ruled states agreed to the GST reduction, NDTV reported. “There was no disagreement,” Sitharaman told the media.

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The idea for GST restructuring was mostly in place, with the Council having a good idea what was working and what wasn’t in terms of tax slabs. For six months, Sitharaman and her team had been holding meetings and studying what changes were needed in the tax system.

How Did The GST Reform Come Into Effect?

The major GST reforms that will come into effect on September 22 did not come easily. Several opposition-ruled states protested strongly as they were worried about losing revenue, NDTV quoted sources as saying. Some states, like Bengal, protested in the GST council meeting on Wednesday.

The 56th Council meeting held at Vigyan Bhawan was scheduled to conclude at 7 PM. However, it stretched late into the night till 9:30 PM as efforts continued to get every state on board. The Council wanted to make sure that the states would not lose revenue from these changes. The aim was to benefit the middle class and the federal system.

Sitharaman reassured the states, saying that the GST collection belongs to the Centre and the states. “If states lose revenue, the Centre does too,” she said. She further promised the states that their interests will be taken care of.

Punjab and West Bengal agreed to the GST changes earlier in the meeting, sources told NDTV. Bengal Chief Minister Mamata Banerjee utilised the moment to gain political points ahead of state elections, highlighting that some of the reforms matched her demands from eight years ago.

However, Karnataka and Kerala stood adamant until the very end. They wanted a clear assurance from the Centre regarding compensation for revenue loss. They even asked to postpone the decision to the next day.

As the deadlock dragged on, Chhattisgarh Finance Minister OP Chaudhary said that if Kerala and Karnataka were not ready, the Council should settle the matter with votes.

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The decisions in the GST Council are taken by consensus. In the past, votes were only needed for issues like the 28 per cent GST on lottery. However, when Chaudhary insisted repeatedly, Sithraman agreed, though reluctantly. At that point, West Bengal intervened and convinced Karnataka and Kerala. With that, the long council meeting came to an end, and the new GST reforms were announced.