Finance Minister Nirmala Sitharaman Pushes for GST Reforms: Reduced Rates & Simplified Compliance

New Delhi (The Uttam Hindu): Nirmala Sitharaman held a meeting with the Group of Ministers of States on GST reforms on Wednesday. During the meeting, the Group of Ministers of States were informed about the government's plans for comprehensive reforms in the GST system. These reforms include reduction in tax rates and reducing the compliance burden for businesses.

The proposal states that the central government is planning to reduce GST rates from the current four categories of 5%, 12%, 18% and 28% to mainly two categories of 5% and 18%. At the same time, a suggestion to apply a special rate of 40% on sin goods (which are considered harmful to society) is also included. The Group of Ministers constituted on Insurance Taxation and Compensation Cess will discuss the Center's 'next generation' GST reforms for two days. According to the news, in his address of about 20 minutes, the Finance Minister put forward the need for these reforms and the benefits from it to the representatives of the states. This meeting will last for two days, in which topics like rate rationalization, tax on insurance and compensation cess are being discussed. The GoM related to the insurance sector is considering reducing the GST rates on health and life insurance premiums. At the same time, the compensation cess group will give suggestions about its future, especially at a time when the deadline for repaying the loan is ending.

Finance Minister Nirmala Sitharaman on Wednesday said the next-generation GST reforms are a step towards making India self-reliant and the central government is looking to build a consensus with the states in the coming weeks. She said the Centre's proposal on GST reforms is based on three pillars -- structural reforms, rationalisation of rates and ease of living. According to an SBI Research report, if these proposals are implemented, it could lead to a revenue loss of about ₹85,000 crore annually for the government. If the new rates come into effect from October 1, the loss in the current fiscal could be around ₹45,000 crore.

Let us tell you that currently GST is levied at the rate of 5, 12, 18 and 28 percent. Food and essential commodities are taxed at the rate of zero or 5 percent, while luxury and demerit goods are taxed at the rate of 28 percent, on which cess is also levied.