GST Rate Cuts: A Political Ploy Undermining Federalism and Welfare

When Prime Minister Narendra Modi used the national platform of the Independence Day address to announce reductions in GST rates, bypassing the GST Council, it was not merely a breach of federal decorum — it was a calculated political move. This was not a decision driven by sound economics or concern for the common man, but an act of fiscal authoritarianism driven by BJP’s desperation in the upcoming Bihar elections.

What we are witnessing is not economic reform but electoral populism — corporate populism disguised as relief for the masses.

GST Reforms: Undermining the States, Centralising Power

From the very beginning, GST was imposed on the states as a compromise — a promise of cooperative federalism that quickly eroded into fiscal centralization. The latest round of rate cuts comes at the expense of state revenues, directly undermining the capacity of states like Kerala to fund essential services such as education, healthcare, and welfare.

For BJP-ruled states that don’t invest in public welfare, the impact is negligible. But for states that uphold the constitutional mandate of social justice, these cuts are a death knell. What is more alarming is the Prime Minister taking it upon himself to announce tax policy in a ceremonial speech. The GST Council — a constitutionally mandated forum — was bypassed for political spectacle. This sets a dangerous precedent. Modi didn’t just announce a tax cut. He declared that states no longer matter.

The Great Corporate Giveaway

Let’s be clear — this is not a tax cut for the poor. It is a subsidy for the rich, cleverly packaged for electoral gain. In 2018, the Modi government first slashed GST rates ahead of the general elections. Now, facing public discontent and a weak footing in Bihar, it is repeating the same trick.

What happened in 2018? Nothing. Prices didn’t fall. Companies kept the extra margins. The Kerala State GST Department conducted a study of 25 major companies: the result was crystal clear — hardly any of them passed on the benefit to consumers. Instead, they quietly pocketed the profit.

And today? There is no Anti-Profiteering Authority. No oversight. No mechanism to ensure that the supposed relief ever reaches the consumer. This is a corporate free-for-all sanctioned by the state. The idea that tax cuts help the common man is a dangerous myth — a lie peddled by the same corporate media that thrives on government advertising revenue.

India’s GST Rates: Not High, Not Complex, Just Mismanaged

Another convenient lie floated by the government is that India’s GST rates are “too high” or “too complex”. This is false. India’s effective GST rate is now below 10% — among the lowest in the world. The average rate in BRICS nations is 14.1%. In the EU, it’s over 21%. India has fewer rate slabs than Brazil or even Canada. The problem isn’t the number of slabs — it’s the constant tinkering, driven by short-term politics and lobbyist pressure, that creates uncertainty. What was supposed to be a stable, predictable system has been turned into a political toolkit for the BJP’s electoral adventures.

The Myth of Consumption-Led Growth

Modi’s economic managers insist that tax cuts will boost consumption, which in turn will increase tax revenues. This is economic superstition, not policy. In 2018, despite rate cuts, GST revenues remained stagnant. The promised 14% revenue growth for states never materialised — we got just over 11%.

If reducing taxes increased consumption so easily, why hasn’t it worked anywhere else? Even post-COVID global data shows the opposite — tax cuts hurt revenue without stimulating meaningful growth, especially in economies with high inequality, where the poor are too burdened to spend and the rich just hoard.

This is trickle-down economics in saffron robes — and it has failed.

Let’s talk about who gets hurt

Not the Ambanis and Adanis — for whom a few percentage points off GST is a windfall. Not the upper middle class — for whom tax breaks mean bigger TVs or second cars. It is the ordinary worker, the unemployed youth, the rural poor, and the marginal farmer who suffer when state governments are starved of funds. It is the child in a government school, the patient in a public hospital, the elderly woman depending on a social pension — these are the people who pay the real cost of these so-called “reforms.”

The BJP’s fiscal policy is not just regressive — it is openly hostile to the idea of a welfare state. Their aim is clear: dismantle the public sector, weaken state governments, and transfer wealth to the top 1%.

India’s GST was meant to be a unifying step forward for fiscal India. Instead, it has become a tool for political manipulation and economic centralisation. The recent GST cuts are not just ill-timed — they are economically reckless, socially unjust, and politically authoritarian.

This is not the path to growth. It is the road to a corporate oligarchy, paved by a government that claims to speak for the poor while acting entirely in the interest of the rich. The time has come to call this bluff for what it is — a betrayal of federalism, a threat to welfare, and a gift-wrapped bribe to the ruling class.