Finance Minister Nirmala Sitharaman discusses the goal of GST reforms

Ahead of the council meeting, Finance Minister Nirmala Sitharaman expressed that GST reforms aim to completely unlock the economy and bring transparency, offering major support to small industries.
Finance Minister Nirmala Sitharaman. (Photo: X/@PIBIndia)

Source: aajtak

Under the leadership of Finance Minister Nirmala Sitharaman, the GST Council meeting is scheduled to take place from September 3 to 4, 2025, in New Delhi. Following Prime Minister Modi's announcement regarding GST on August 15, this meeting is considered quite significant. It's anticipated that discussions around the GST reform, to be implemented around Diwali, could lead to tax reductions on numerous essential items.

Officials have hinted at the possibility of a two-tier system in the new GST model. One category for essential goods might fall between 0-5%, and another for most items could range from 12-18%. Additionally, harmful products like tobacco and gutkha could face a ‘sin tax’ as high as 40%.

Prior to this meeting, a statement from Finance Minister Nirmala Sitharaman has surfaced. Speaking at the 120th Foundation Day event of City Union Bank, Sitharaman underscored that the goal of GST reforms is to make the economy 'completely open and transparent' while reducing compliance burdens, especially on small businesses.

A Significant Boost for Small Enterprises

She shared that Prime Minister Narendra Modi has formed a task force for next-generation reforms, aiming to simplify rules, reduce costs, and build a facilitative ecosystem for startups, MSMEs, and entrepreneurs. The initiation of next-generation GST reforms, meetings for which are scheduled tomorrow and the day after, promises to further reduce burdens and accelerate the growth of small businesses.

She highlighted the extensive role banks play in advancing India's vision for a developed nation by 2047, which includes extending credit, supporting infrastructure, and ensuring timely funding for MSMEs and populations currently without banking services.

What Are Experts Saying About GST Reforms?

Brijesh Gandhi of NPV & Associates suggests that GST 2.0 will integrate the current 5%, 12%, 18%, and 28% slabs into a streamlined system. Essential goods may attract 5% GST, most goods 18%, and luxury or 'sin' items might bear 40% GST.

Brijesh Gandhi, a partner at NPV & Associates LLP, mentioned that the GST 2.0 reforms simplify the present tax structure by merging the 5%, 12%, 18%, and 28% slabs into a more efficient system.

Potential Price Reductions

He further noted that items like toothpaste, umbrellas, sewing machines, and small washing machines have moved to the 5% tax bracket. Meanwhile, high-GST items like electronics, air conditioners, TVs, small cars, and two-wheelers might shift from the 28% slab to the 18% slab. This reduction could make these items more affordable.

He additionally mentioned a possible reduction in cement tax from 28% to 18%, which could provide relief to the construction sector. Agriculture, textiles, health, and life insurance could benefit from lower input costs and tax exemptions.

You might also like