New Delhi: The recent reduction and rationalisation of Goods and Services Tax (GST) slabs — bringing them down to two and exempting certain categories, including health and life insurance premiums — had been under discussion for nearly 18 months, Union Finance Minister Nirmala Sitharaman said at an NDTV summit on Tuesday.
Sitharaman stressed that the reforms were not a reaction to the 50 per cent tariffs announced by former US President Donald Trump, which had sparked speculation that GST changes were aimed at boosting domestic demand to offset a potential USD 48 billion export hit.
According to the Finance Minister, deliberations on GST revisions began even before last year’s Union Budget, when Prime Minister Narendra Modi reminded her to focus on relief for the ‘aam aadmi’. At the time, she had presented her eighth consecutive budget, which included income tax rebates for salaried taxpayers earning up to ₹12 lakh.
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“It took time to prepare a worthy package of proposals for the Prime Minister,” she said, noting that she formally approached him with the GST plan only in May this year.
The next hurdle was getting states on board. A crucial GST Council meeting was scheduled for September 3–4, where several states were expected to push back over possible revenue losses and demand compensation, including a fresh ‘sin tax’. However, Sitharaman said the meeting ended in a single day with a unanimous consensus.
“To be fair to state finance ministers, they were supportive of rate rationalisation,” she said.
The Finance Minister also underlined that states have not received compensation since 2022, referring to the GST Compensation Cess. Previously, collections under this cess were redistributed to states and Union Territories to offset revenue losses from the GST regime.
“Currently, the cess is being used to repay loans taken by states and UTs during Covid,” Sitharaman explained. She added that the more sustainable solution lies in improving tax collection efficiency rather than depending on payouts from the Centre.
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