Centre to build consensus with state governments on GST reforms: FM Sitharaman
Finance Minister Nirmala Sitharaman outlined India's next-generation GST reforms, aiming to achieve an AatmaNirbhar Bharat. Key proposals include a simplified two-rate structure (5% and 18%), a higher sin tax, and rate rationalization. The government is seeking consensus with state governments on these reforms, emphasizing cooperative federalism.
New Delhi: Nirmala Sitharaman said the next generation of GST reforms is a step forward towards making India AatmaNirbhar, and the Union government is looking to build consensus with state governments in the upcoming weeks. The central government is proposing GST reforms on the basis of three pillars—structural reforms, rate rationalization, and ease of living, she said.
In a meeting with GoMs (Group of Ministers), Nirmala Sitharaman addressed the ministers' group on GST rate restructuring, insurance taxation rate, and on the issue of GST compensation cess. FM further said, "emphasized 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 #AtmanirbharBharat." The GoM meeting will be carried out for the next two days, deliberating on the issue of the Center's 'next-gen' reforms.
"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, as quoted by PTI.
The GoM meeting address by the FM lasted for about 20 minutes, during which she explained the union government proposal and motives to usher in the reforms.
Proposed Two-Tier GST reform
The central government has proposed the GST rate restructuring. Prime Minister Narendra Modi made an announcement of the proposed GST reform on Independence Day, 15 August. The proposal aims to reduce the slabs into two rates, viz., 5 percent standard rate and 18 percent merit rate. Reports also indicate that a special tax rate of 40 percent on a select few sin goods items like tobacco, gambling, etc. is to be levied.
Presently, there exist four slabs under GST, viz., 5 percent, 12 percent, 18 percent, and 28 percent. The GST is one of the important sources of government. In FY25, GST collection reached an all-time high of Rs. 22,08,000 crore (US$ 257 billion), registering a 9.4% YoY growth, as per an official press release from the government on June 30, 2025.