September 12, 2025
Nirmala Sitharaman said GST reforms were planned 18 months ago and not triggered by recent US tariffs
The overhaul included exemptions on health and life insurance premiums as part of broader rate rationalisation
The reforms were in discussion before the last Union Budget, following the Prime Minister’s call for relief for citizens
The GST Council reached consensus on the two-tier structure in a single day despite expectations of prolonged debate
Finance Minister Nirmala Sitharaman said the Goods and Services Tax (GST) reforms were not a reaction to the 50% tariffs recently announced by US President Donald Trump but had been under preparation for more than a year. Speaking at an NDTV summit, she explained that the overhaul of GST slabs, including exemptions for health and life insurance premiums, had been under discussion for 18 months.
The Minister recalled that the reforms were conceived even before the previous Union Budget, when the Prime Minister had urged relief for the common citizen. She dismissed speculation that the changes were prompted by concerns of a potential USD 48 billion impact on Indian exports to the United States, emphasising that the groundwork had been laid much earlier.
Sitharaman said it took time to put together a comprehensive proposal, which she presented to the Prime Minister in May. The reforms were first discussed within the government and then taken to the GST Council. A meeting scheduled for September 3 and 4, expected to see prolonged debate on state compensation, concluded in a single day with consensus on adopting the new two-tier structure.
She acknowledged the role of state finance ministers, noting that they were supportive of rate rationalisation. Addressing concerns over revenue, she pointed out that the compensation cess for states had ended in 2022. Current cess collections, she explained, are being used to repay loans taken during the Covid-19 crisis.
The Minister stressed that improving tax collection efficiency is now the way forward. She underlined that the Centre cannot be expected to indefinitely fund states, remarking that it was not “sitting with a huge suitcase to pay everyone.”
Source: Economic Times