GST ignores state's economic realities: MPCC chief
Source: Chronicle News Service

Imphal, August 08 2025: Manipur Pradesh Congress Committee (MPCC) president K Meghachandra said that the state is likely to face grave situation following the passage of the amendment to the State Goods and Services Tax (GST), in Parliament on Thursday, asserting that the "one-size-fits-all" approach of GST has failed to address the needs of small, landlocked and socio-economically fragile states like Manipur.

In a statement issued on Friday, Meghachandra recalled that the implementation of GST in 2017 marked a major shift in India's taxation system with the aim of creating a unified tax structure, but the regime has posed significant challenges for states whose economic and infrastructural conditions differ vastly from mainland India.

He said that after eight years, it is evident that GST does not serve Manipur's interests and has created multiple disadvantages for its economy, traders and consumers.

The Congress MLA said that GST stripped states of the power to levy independent taxes like VAT or entry tax, which for Manipur means a loss of financial flexibility at a time when local needs demand tailored economic policy.

The state's inability to design its own tax regime, he added, has weakened its capacity to respond to its unique challenges.

The MPCC president said that GST has hurt local industries, artisans and farmers who earlier benefited from tax exemptions.

Items like handloom products, bamboo crafts and other small-scale goods, which form part of Manipur's economic identity, now fall under taxable categories, raising prices and reducing competitiveness.

Meghachandra also pointed to the digital divide, stating GST is an on-line-based system while many parts of Manipur still struggle with poor internet connectivity and limited digital literacy.

This makes compliance a burden for small traders, shopkeepers and rural entrepreneurs who lack the infrastructure to meet GST requirements.

He accused the Centre of failing to make timely GST compensation payments, despite its commitment to cover revenue losses of states for five years.

Such delays, he said, have hurt Manipur's already fragile fiscal health.

Applying the same tax rates across metropolitan cities and remote hill districts ignores logistical and economic hardships faced by regions like Manipur, Meghachandra said.

Higher transportation costs and lack of economies of scale increase the burden on traders and consumers alike, he contended.

He also criticised the neglect of special category needs, saying Manipur, as part of the Northeast, has unique socio-political and geographical challenges that the GST frame-work does not address, consequently creating a sense of exclusion and economic injustice.

While GST aims for national economic integration it must not come at the cost of equity and federal principles.

For Manipur, he said, the current model has resulted in increased hardship for small businesses, higher consumer prices, diminished state revenue and autonomy, weak digital compliance and systemic neglect of local economic conditions.

He called upon the Central Government and the GST Council to review and amend the GST framework with a region-sensitive approach, restore fiscal space for small states, ensure timely compensation payments, introduce simplified compliance mechanisms for small traders and create differential tax slabs for economically backward and geographically isolated states like Manipur.

"It is time the voice of Manipur is heard in the GST debate," Meghachandra said.

It may be mentioned here that the latest GST data underscores the deepening economic strain in Manipur, where prolonged unrest, repeated highway blockades and disrupted supply chains have combined to stifle commercial activity.

Since the outbreak of ethnic conflict in May 2023, trade through key corridors has slowed sharply, contributing to the steep 36 per cent year-on-year fall in GST revenue - from Rs 68 crore in July 2024 to Rs 43 crore in July this year - despite a 50 per cent jump in registered taxpayers from 6,006 to 9,044 over the same period.

Prolonged internet restrictions have further constrained businesses dependent on online transactions, timely tax filings and digital marketplaces, while the lingering effects of COVID-19 continue to weigh on recovery.

Between April and July, pre-settlement SGST receipts in Manipur rose only 5 per cent, from Rs 152 crore to Rs 161 crore, whereas post-settlement SGST, including the state's share of the IGST pool, dropped 13 per cent from Rs 439 crore to Rs 383 crore.

In contrast, neighbouring Nagaland and Arunachal Pradesh recorded 21 per cent growth in post-settlement SGST during the same period, highlighting the severity of Manipur's economic slowdown.

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