FM Nirmala Sitharaman Says Next-Gen GST Reforms to Bring Relief to Common Man, MSMEs

New Delhi: Union Finance Minister Nirmala Sitharaman on Wednesday said that the rate rationalisation exercise would provide greater relief to the common man, farmers, the middleclass and micro, small and medium enterprises (MSMEs). Ensuring a simplified, transparent and growth-oriented tax regime with the next-generation GST reforms, she also said that next-generation GST reforms is a step towards making India Atma Nirbhar.

The finance minister also said that the central government would build consensus with states in the coming weeks. “The Centre’s proposal on GST reforms is based on three pillars-- structural reforms, rate rationalisation and ease of living,” she said after meeting a group of ministers (GoMs) here in the national capital.

The finance minister met with GoMs for a short duration (about 20 minutes) on rate rationalisation, insurance taxation and compensation cess. She also emphasised that the proposal by the central government is with a vision to usher in the next generation of GST reforms in India's journey towards becoming Atmanirbhar Bharat.

The three GoMs will, over two days deliberate on the Centre’s next-gen GST reforms under which tax will be levied at 5 and 18 per cent rates. A special 40 per cent rate has been proposed on 5-7 items, including sin goods. “The Central Government remains committed to building a broad-based consensus with the States in the coming weeks to implement the next generation of GST reforms in the spirit of cooperative federalism,” the finance ministry said in a post on X.

The rate rationalisation GoM was mandated to suggest changes in slabs and rates and also remove duty inversion faced by certain sectors. However, Bihar deputy chief minister Samrat Choudhary said that GoM proposed an exemption on health, life insurance premium from GST, but some states differed. The GoM on GST rate rationalisation is scheduled to meet again on August 21.

As per an SBI Research report, the proposal, if implemented, could result in revenue loss of about Rs 85,000 crore a year. For the current fiscal, the loss to revenue is estimated at Rs 45,000 crore assuming the new tax rates are implemented from October 1.

Prime Minister Narendra Modi had announced the rollout of the GST reforms by Diwali this year. The Centre’s proposal, once approved by the GoMs will be placed before the GST Council, comprising ministers from Centre and all states, in its meeting next month.

The GST is currently levied at 5, 12, 18 and 28 per cent. While food and essential items are either at nil or 5 per cent rate, luxury and demerit goods are in 28 per cent slab, with a cess on top of it. The finance minister’s address to the GoMs was for about 20 minutes during which she elaborated on the Centre's proposal.