The news of the ‘GST Bachat Utsav’ descended upon the nation with the predictable fanfare of a government press release. For those that have spent years tracing the labyrinthine corridors of India’s tax reforms, the announcement felt less like a new dawn and more like a rewind. The phrase ‘Savings Festival’ itself is an exquisite piece of political theatre, a rhetorical flourish that attempted to recast a policy correction as a grand public celebration. But the truth lies somewhere in between.
It was hard to forget the chaotic launch of the Goods and Services Tax back in 2017. Even as Prime Minister Narendra Modi hailed the new tax regime as a “Good and Simple Tax”, things were not quite that simple. The vision was that of a unified national market, a single tax replacing a cascade of state and central levies.
The reality, however, had been far messier. Small businesses, the very backbone of the Indian economy, had grappled with complex digital compliance and changing rules. Consumers, too, had often found themselves confused by the new rates, with many essential items unexpectedly falling into higher tax brackets. The promise of a simpletax had quickly given way to the gnawing complexity of multiple slabs, exemptions, and bureaucratic hurdles.
For years, the opposition had relentlessly attacked the new system. They dubbed it a “Gabbar Singh Tax,” a nod to the iconic villain from the film Sholay. The argument posited was that the GST regime is a punitive, anti-poor measure that squeezed the common man for every rupee. The government, in turn, had stood its ground, defending the policy as a necessary, if sometimes difficult, step towards a modern, transparent economy. The rates, they insisted, were a work in progress, subject to future rationalization, but the core structure was sound.
And then, as a new festive season approached, a new narrative emerged. The GST Council, under the government’s direction, announced a series of rollbacks and rationalizations. The changes were a significant simplification, moving from a four-slab system to a two-rate structure of 5% and 18%, with a new, higher 40% slab for luxury and sin goods. Tax rates on everything from essential kitchen goods to household electronics were being lowered. Small cars, two-wheelers, and cement, which had previously been in the highest 28% bracket, were now reduced to 18%.
The Prime Minister, in his address, declared that these changes were a gift to the people, a testament to the government’s commitment to boosting household savings and encouraging festive spending. But after years of charging higher taxes, and incepted under PM Modi’s stewardship, the ‘GST Bachat Utsav’ should not be seen as mere celebration. These policy changes are a direct acknowledgment of the system’s flaws, where corrections were long overdue.
The new policy had different impacts on different economic players. For small businesses and MSMEs in labor-intensive sectors like textiles, footwear, and handicrafts, the rate reductions to 5% are a welcome relief, easing their cost of production and potentially boosting their export competitiveness.
For larger corporations in the consumer electronics and automotive sectors, the rationalization is a massive opportunity. These businesses had been facing a period of stagnant sales as consumers, anticipating the tax cuts, had deliberately put off major purchases. This pent-up demand is now ready to be unleashed.
This pre-announcement lull had been a particularly painful period for the auto industry. As soon as whispers of the GST rationalization began, vehicle sales plummeted. Dealers were stuck with old inventory, and consumers either canceled bookings or held off on new ones. The industry, from manufacturers to showroom salespeople, was caught in a strange limbo; a self-inflicted market slowdown caused by the anticipation of a future benefit, with some manufacturers opting to get out ahead by offering the GST benefits beforehand in an attempt to spur sales.
It was a bizarre dynamic: a government announcing a positive change, only for the market to briefly collapse in anticipation of it. Now, with the new rates official, automakers were celebrating with significant price cuts, turning the previous dip into a springboard for the festive season.
For small businesses, which form the beating heart of Indian entrepreneurship, the initial complexities of GST surely slowed down the gears of industry. Now, years later, the same government announcing a tax cut with a flourish of benevolence is a welcome move, but it does not erase years of struggle for some.
For the consumer, the situation is equally muddled. To give one example, think of a young couple, or a family in any setting of urban India. While India’s healthcare system is one of the most price competitive in the world, and of high quality, accessibility is still unequal. This makes health insurance a must for Indians. In fact, even Bollywood celebs understand its importance. And yet, taxing health insurance at 18% was excessive, adding a needless price barrier to something that is absolutely an essential service and safety net. To have it rolled back now is a welcome move, but it was very long overdue.
This is the central paradox. The GST, a brainchild of the current government, had been allowed to operate with its original, cumbersome structure for years. It had been defended tooth and nail against all criticism. Now, with elections on the horizon and the looming threat of inflation, the government is performing a strategic U-turn. The very act of rationalizing the tax structure, a move that should have been a continuous, silent process, was being repackaged as a grand event, a public service, a grand gift, a festival.
In some quarters, the Utsav is showcased as a victory lap, but it is a race that the government itself had designed and run for so long. The ‘GST Bachat Utsav’ is an economic event of note, but it is not the gift in plain sight it is purported to be.
