'Citizens matter, revenue not consideration': Sitharaman on GST rate cuts

Union Finance Minister Nirmala Sitharaman has said that the GST reforms did not consider the loss of revenue but only considered the welfare of citizens.

In an interview with Network 18, Sitharaman said that as many as many 99 per cent of goods and services have been brought under 0 per cent, 5 per cent, and 18 per cent slabs, and only 1 per cent are in the higher 40 per cent slab, meaning rates have been reduced for overwhelming majority of goods and services.

Sitharaman said that even though the GST regime had improved the pre-GST indirect tax regime, the GST regime still had a complicated classification of goods and services that often led to litigation and unhealthy choices by consumers. She said the need to simplify such a system was a major motivation behind reforms.

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Giving the example of popcorn, Sitharaman said that the complex classification “led to a lot of litigation, courts coming up with different kind of voices, and states losing revenue because of the classification being different”.

Sitharaman further said, “People chose to have the higher taxed, sugary, chocolatey popcorn, shown as a salted popcorn, because that has only very little tax on it. Such a classification had to be overcome. So even as I’m grouping for families, their day-to-day items, this thought of what the classification is causing as a problem also had to be addressed.”

Sitharaman went on to say that “revenue is not the consideration” in such exercises and only concerns about citizens are.

LIVE: Finance Minister @nsitharaman speaks exclusively to Network18 Group Editor-in-Chief @18RahulJoshi https://t.co/DLB96ydDXF

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Previously, the Union government has projected that Rs 48,000 crore of revenue would be foregone with GST rate cuts. However, Sitharaman said that the benefits of GST rate cuts and other steps like the income tax cuts outweigh concerns about foregone revenue.

Independently, economists have said that the consumption and spending surge induced by GST and income tax cuts could raise the GDP growth by up to 0.6 per cent, meaning that the blow of US President Donald Trump’s tariffs could be more than halved.

Analysts have said that Trump’s 50 per cent tariffs could drag down India’s GDP growth this by up to 1 per cent. The Union government has said that around 60 per cent of Indian exports to the United States to the tune of $48 billion could be affected by tariffs.