Finance Minister Nirmala Sitharaman revealed on Tuesday that the Goods and Services Tax (GST) Council is close to finalizing a decision on streamlining and reducing tax rates. The review process, which has been underway for nearly three years, is nearing completion. Currently, GST operates under a four-tier structure with tax slabs of 5%, 12%, 18%, and 28%.
Essential items, such as packed food, are taxed at the lowest rate of 5%, while luxury and demerit goods fall under the highest bracket of 28%. To simplify this structure, the GST Council, led by Sitharaman and comprising state finance ministers, established a Group of Ministers (GoM) to evaluate and propose necessary changes.
Speaking at the *India Today-Business Today Post Budget Round Table*, Sitharaman emphasized the importance of a comprehensive review, particularly for daily-use items, to ensure impactful reforms. "The process of rationalizing and simplifying GST rates began almost three years ago. Over time, its scope expanded, and now, the work is nearly complete," she said. She reiterated the original goal of achieving fewer and lower tax rates, expressing hope that the GST Council would soon reach a decision.
Sitharaman's comments follow the recent presentation of the Union Budget 2025-26, which introduced significant income tax relief for the middle class. Addressing speculation, she dismissed claims that the tax cuts were politically motivated ahead of the Delhi Assembly elections, stating that they reflect Prime Minister Narendra Modi's dedication to taxpayers. She also clarified that the government has no plans to phase out the old tax regime.
On the topic of capital expenditure, Sitharaman emphasized that spending has not been reduced but has instead seen a steady increase. The Budget allocated Rs 11.21 lakh crore for capex in 2025-26, accounting for 4.3% of GDP—higher than the revised estimate of Rs 10.18 lakh crore for FY25. She highlighted the consistent rise in capex allocations, from Rs 4.39 lakh crore in FY21 to Rs 10 lakh crore in FY24, underscoring the government's focus on infrastructure development.
The Budget also set a fiscal deficit target of 4.4% of GDP for FY26, while revising the FY25 estimate downward by 10 basis points to 4.8%. Sitharaman reaffirmed the strength of India's economic fundamentals, dismissing concerns about a structural slowdown.
The upcoming GST Council decision on rate rationalization is expected to bring significant changes to the tax framework, aligning with the government's vision of a simpler and more taxpayer-friendly system.
