PM's open letter: GST reforms will add up to ₹2.5 trn in savings for people

Oppn-ruled states demand compensation for loss of revenue

In an open letter to citizens that he posted on social media on Monday evening, Prime Minister Narendra Modi reiterated that the income tax cuts and the “next generation GST reforms” will add up to savings of nearly Rs 2.5 trillion for the people, and asked citizens to celebrate the “GST Savings Festival”, which coincides with the festival season, by buying and selling swadeshi products, which he said will help many families earn their living and create job opportunities for the youth.

 

The PM urged “state governments to encourage industry, manufacturing and improvement of investment climate.” He emphasised that the next generation GST reforms will “boost savings”, “directly benefit every section of the society”, “encourage greater growth and investments and accelerate the progress of every state and region”.

 

 

The PM said the reforms will strengthen India’s local manufacturing base to pave the way towards Aatmanirbhar Bharat.

 

“Our small industries, shopkeepers, traders, entrepreneurs and MSMEs will also see greater ‘Ease of Doing Business’ and ‘Ease of Compliance’. Lower taxes, lower prices and simpler rules will mean better sales, less compliance burden and growth of opportunities, especially in the MSME sector,” he said.

 

The PM, as he did during his Sunday’s address to the nation, again asked people to support products that are ‘Made in India’, “products that have the sweat and toil of an Indian involved in their making, irrespective of the brand or the company that makes them.”

 

To shopkeepers, Modi said, “Let us proudly say - what we buy is swadeshi. Let us proudly say - what we sell is swadeshi.”

 

Chief ministers of the National Democratic Alliance (NDA) ruled states welcomed the GST rate cuts, with Andhra Pradesh CM N Chandrababu Naidu announcing that his government will undertake a month-long awareness campaign, where it will hold 65,000 meetings, to spread awareness among the people about the benefits of the “GST 2.0 reforms”. He said the GST rate cuts will benefit Andhra Pradesh to the tune of ₹8,000 crore.

 

However, in Kolkata, West Bengal CM Mamata Banerjee accused the Centre of having passed on the financial burden on to the states, and taking “undue credit” for it.

 

Banerjee, after inaugurating a Durga Puja pandal, said that though the state is set to incur ₹20,000 crore as revenue loss due to the lowering of GST, she welcomed the decision saying it will benefit the common man. “How will we get the money in the wake of the ₹20,000 crore revenue loss?" she asked.

 

In Mysuru, Karnataka CM Siddaramaiah asked whether the PM, who collected excessive GST for eight years, will return all of that to Indians. He accused the PM of “deceiving” Indians.

 

In Hyderabad, Telangana CM A Revanth Reddy demanded that the Centre compensate the states for five years for the loss of revenues. Addressing a press conference, Reddy said that when GST was introduced, the Centre had promised to compensate for revenue losses if the tax growth rate fell below 14 per cent, and the Centre should fill the gap if revenue falls due to the change in slabs. The state government had earlier said that it estimated it would lose about ₹7,000 crore in revenue annually.

 

Earlier in the day, while on a visit to Arunachal Pradesh, where he laid foundation stones for projects worth ₹5,100 crore, the PM interacted with shopkeepers and traders in its capital, Itanagar.

 

In Delhi, some of the Union ministers fanned out in its markets. Finance Minister Nirmala Sitharaman interacted with shopkeepers and traders in East Delhi, and her ministerial colleagues, J P Nadda and Ashwini Vaishnaw did so in Amar Colony in Lajpat Nagar and R K Puram markets, respectively.

 

Addressing a press conference at the Bharatiya Janata Party headquarters here later in the day, Vaishnaw said the government is vigilant on whether the benefits of the GST rate cuts are being passed on to the consumers, and warned of strict action against errant traders and shopkeepers.

 

The GST rate cuts have come amid the US imposing stiff sanctions on Indian goods. Vaishnaw said the GST reforms will lead to a consumption boom, drive demand, which will trigger investments, create jobs and boost economic growth. Vaishnaw said the latest GST rate cuts will add at least Rs 20 trillion to the GDP.

 

The minister also compared the high tax rates during the rule of the Congress-led UPA government slamming it for terming GST as “Gabbar Singh Tax”, when these during the UPA years were “Gabbar Singh ke bade dada” (the grandfather of Gabbar Singh).

 

In his open letter, the PM said daily essentials such as food, medicines, soap, toothpaste, insurance and many more items will now either be tax-free or fall in the lowest 5 per cent tax slab. Goods that were earlier taxed at 12 per cent have almost entirely shifted to 5 per cent. “It is greatly heartening to see various shopkeepers and traders putting up then and now boards which indicate taxes pre-reforms and post-reforms," Modi said in his letter to the people.

 

In the last few years, 250 million people have risen above poverty and formed an aspirational neo-middle class, he said.

 

“Further, we have also strengthened the hands of our middle class with the massive income tax cuts, which ensure zero tax up to the annual income of Rs 12 lakh,” he said, adding that people’s household expenses will reduce and it will be easier to fulfil aspirations such as building a home, purchasing a vehicle, purchasing appliances, eating out or planning a family vacation.

 

Modi said the GST united the nation economically. “’One Nation, One Tax’ brought uniformity and relief. The GST Council, with the active participation of both Centre and states, took many pro-people decisions. Now, these new reforms take us further, simplifying the system, reducing rates and putting more savings in the hands of the people,” he said.

 

Asserting that the collective goal of the people is Viksit Bharat by 2047, Modi said that in order to achieve it, walking on the path of self-reliance is imperative.