NEW DELHI, Feb 4: Finance Minister Nirmala Sitharaman announced on Tuesday that the GST Council is on the verge of making a significant decision regarding the restructuring of Goods and Services Tax (GST) rates and the number of tax slabs. According to Sitharaman, the review process is almost complete, and the Council will soon finalize whether to reduce the number of tax slabs and lower the applicable rates.
Currently, India follows a four-tier GST system with slabs set at 5%, 12%, 18%, and 28%. The highest rate of 28% is applied to luxury and demerit goods, while essential items, including some food products, are taxed at the lowest rate of 5%. The proposed changes by the GST Council aim to simplify and rationalize the tax structure, potentially making it more efficient and taxpayer-friendly.
Sitharaman, who chairs the GST Council, emphasized that work on reforming GST rates had begun nearly three years ago, with the creation of a group of ministers (GoM) tasked with reviewing the existing tax slabs and recommending changes. The review’s scope was later expanded, and Sitharaman stated that the process is now nearing completion.
She further explained that it is crucial for the Council to thoroughly examine the impact of GST rates, particularly for essential goods that affect everyday consumption. “It is important that we don’t miss this opportunity to reduce the number of rates and lower the rates themselves,” Sitharaman said, reiterating the original intention behind the GST reform to create fewer, lower tax slabs.
The Finance Minister expressed confidence that the GST Council would soon arrive at a decision on these crucial changes. She noted that it was important to move forward with the rationalization process to streamline the tax system for the benefit of the common people and to ensure that any opportunity to simplify the structure is not overlooked.
The announcement came just days after Sitharaman presented the Union Budget for 2025-26, which also included significant income tax relief for the middle class. In her address at the India Today-Business Today Post Budget Round Table, she emphasized that the economic fundamentals of the country remain strong and that there is no structural slowdown in the economy. She also responded to speculations, asserting that the tax relief measures were in line with the government’s commitment to taxpayers and were not influenced by political considerations, including upcoming Delhi assembly elections.
Additionally, Sitharaman dismissed rumors about any plans to abolish the old tax regime, reassuring taxpayers that both the new and old tax structures would continue to coexist.
On the topic of capital expenditure, the minister highlighted that the government’s capex plans have not been reduced. In fact, capital expenditure for fiscal 2025-26 is projected to reach Rs 11.21 lakh crore, which constitutes 4.3% of the GDP, marking an increase from the Rs 10.18 lakh crore allocated for FY25. This demonstrates the government’s commitment to infrastructure development, with capital expenditure steadily rising from Rs 4.39 lakh crore in FY21 to Rs 11.21 lakh crore in FY26.
The Union Budget also set a fiscal deficit target of 4.4% of GDP for FY26, while the fiscal deficit for FY25 was lowered by 10 basis points to 4.8% of GDP. This underscores the government’s focus on maintaining fiscal discipline while ensuring continued investment in the country’s economic growth and infrastructure development.