New Delhi [India], September 9 (ANI): The reduction and rationalization of Goods and Services Tax (GST) slabs—bringing them down to two and exempting certain items, including premiums for health and life insurance—were 18 months in the making, Union Finance Minister Nirmala Sitharaman said at an NDTV summit on Tuesday.
She stressed that the reforms were not a response to the 50 percent tariffs announced by US President Donald Trump, countering speculation that the revisions were designed to spur domestic demand and offset the potential USD 48 billion impact on exports to the United States.
Sitharaman explained that discussions on the GST overhaul began even before last year’s Union Budget, when Prime Minister Narendra Modi reminded her of the need to provide relief for the “aam aadmi.” At that time, while presenting her eighth consecutive budget, she announced tax relief for the middle class, including rebates for individuals earning up to Rs 12 lakh.
According to the Finance Minister, it took time to put together a comprehensive proposal. “It took time to work out a worthy pack (of proposals) to present to the PM,” she said, adding that she was able to approach Modi with the GST revision plans only in May.
The first step in implementing the reforms was bringing state governments on board. A contentious GST Council meeting was scheduled for September 3 and 4, where states unhappy with potential revenue losses were expected to demand compensation, including a second “sin tax.” However, Sitharaman said the meeting concluded in one day, with unanimous consensus on the reforms. “To be fair to state finance ministers, they were on board with rate rationalisation,” she noted.
At the same time, Sitharaman highlighted that there has been “no compensation (for states) since 2022.” The reference was to the Compensation Cess, which previously provided funds to states and union territories to offset revenue losses from the GST framework. “The cess being collected right now will go into repaying loans availed (by states and UTs) during Covid,” she explained.
On improving revenue, the Finance Minister emphasized that the focus should be on better collection efficiency. “It is not as if the Centre is sitting with a huge suitcase to pay everyone,” she remarked. (ANI)
About The Author
