FM Sitharaman Pitches Next-Gen GST Reforms To Aid Common Man, MSMEs

The minister underlined that the reforms are built on three core pillars—structural changes, rate rationalisation, and improving ease of living.

According to the finance ministry, the GoMs will deliberate over two days on the proposals, which mark a significant restructuring of GST levies.

Source : Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman told a Group of Ministers that the Centre is working on next-generation GST reforms aimed at strengthening India’s Aatmanirbhar vision.

Sitharaman said the Government is committed to forging a broad-based consensus with states on the reforms. Sitharaman added that changes in GST rates will be designed to provide relief to the common man, farmers, the middle class, and MSMEs, PTI reported.

The minister underlined that the reforms are built on three core pillars—structural changes, rate rationalisation, and improving ease of living.

Union Minister for Finance and Corporate Affairs Smt. @nsitharaman today addressed the Group of Ministers (GoMs) constituted by the GST Council on Compensation Cess, Health & Life Insurance, and Rate Rationalisation at Vigyan Bhawan, New Delhi. Union Minister of State for… pic.twitter.com/hMRFOCwXBF

— Ministry of Finance (@FinMinIndia) August 20, 2025

Speaking at a meeting of three Groups of Ministers (GoMs) tasked with rate rationalisation, insurance taxation and compensation cess, the finance minister stressed that the Centre’s approach is rooted in cooperative federalism. She noted that the government is keen to build consensus with states in the coming weeks before rolling out the reforms.

“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,” Sitharaman said, adding that wider discussions with states will be crucial for a smooth implementation.

According to the finance ministry, the GoMs will deliberate over two days on the proposals, which mark a significant restructuring of GST levies.

Two-Tier Structure Proposed

The reform package seeks to replace the existing four-tier structure of 5, 12, 18 and 28 per cent with a simplified two-rate framework of 5 per cent and 18 per cent. Additionally, a special higher slab of 40 per cent has been proposed for a limited set of 5–7 items, including so-called ‘sin goods’.

Currently, essential goods and food items are taxed at either zero or 5 per cent, while luxury and demerit goods fall in the 28 per cent bracket, often with an additional cess. The proposed shift is aimed at reducing complexities, addressing the inverted duty structure, and streamlining compliance for businesses.

Address to GoMs

Sitharaman’s address to the GoMs lasted around 20 minutes, during which she outlined the contours of the reform blueprint and explained the rationale behind moving towards a leaner rate structure. The finance ministry later highlighted in a post on X (formerly Twitter) that the Centre is committed to implementing these reforms in consultation with states.

If consensus is reached, the overhaul could mark the most significant transformation of GST since its launch in 2017, aligning taxation with the government’s vision of simplicity, efficiency and self-reliance.

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