New Delhi: Finance Minister Nirmala Sitharaman has revealed that the comprehensive overhaul of the Goods and Services Tax (GST) framework, including the reduction and rationalisation of tax slabs, had been under preparation for 18 months before its official rollout. The reforms aim to simplify the tax structure and provide relief to common citizens.
Sitharaman said discussions on the GST framework had begun even before last year’s Union Budget, when Prime Minister Narendra Modi emphasized the need to provide relief for the “aam aadmi”. The reform package was designed to ease the tax burden on middle-class households, following earlier measures that included rebates for salaried taxpayers earning up to ₹12 lakh annually.
The new GST reforms will reduce tax slabs to two and exempt certain items, including premiums for health and life insurance. Sitharaman noted that crafting a “worthy package of proposals” took time, and she formally presented the detailed plans to the Prime Minister in May this year.
A key step in implementing the reforms was securing the cooperation of state governments, many of which were concerned about potential revenue losses. The GST Council meeting held on September 3–4, initially expected to be contentious, concluded in just one day with unanimous approval of the reform proposals.
“To be fair to the state finance ministers, they were on board with rate rationalisation,” Sitharaman said, highlighting the smooth consensus despite initial apprehensions.
Sitharaman acknowledged that states have not received GST compensation since 2022. Previously, the Compensation Cess helped offset revenue shortfalls. She clarified that the cess currently collected will be used to repay loans availed by states and union territories during the Covid-19 pandemic. The Finance Minister also emphasized that improving collection efficiency is a more sustainable way to increase overall revenue.
Addressing speculation that the GST reforms were influenced by global trade developments, particularly the 50 percent tariff imposed by U.S. President Donald Trump, Sitharaman stressed that there was no connection between the two events.
The GST overhaul marks one of the most significant policy revisions since the tax’s introduction in 2017. By simplifying tax slabs, reducing complexity, and providing targeted relief, the reforms aim to make the GST system more transparent, efficient, and citizen-friendly while ensuring long-term fiscal stability.