In an exclusive interview to CNBC-TV18, Finance Minister Nirmala Sitharaman expressed confidence that the much-anticipated GST rate cuts will be implemented on September 22.
She highlighted that the backend systems are ready and key structural adjustments have already been addressed, giving her assurance that the rollout will proceed as scheduled.
Sitharaman also explained that the reform is driven by Prime Minister Narendra Modi’s vision of easing the tax burden on the common citizen. “The Prime Minister emphasised simplifying GST for daily-use items, ensuring small businesses and families are not overburdened,” she said.
The minister described the exercise as rigorous and citizen-focused, aimed at reducing complexity and addressing classification issues that had previously caused litigation and confusion, making the GST system more transparent and equitable for middle-class and low-income households alike.
This is the edited excerpt of the interview.
Q: From the Prime Minister’s vision of making life easier for the common man and reducing their burden, you implemented a major reform in your last budget by cutting income tax rates—a bonanza for the middle class. What was the vision behind this? What did the Prime Minister tell you? How did it come about?
Thank you very much for giving me the opportunity to interact so soon after this major reform measure was approved by the Council. I would like to thank every minister who attended the meeting, the states and the finance ministers who supported it. Without their backing, it would not have seen the light of day.
The Prime Minister had announced it from the Red Fort on Independence Day, but even around eight months prior, he called me for a long discussion on how GST could be revamped—not just in terms of process, but also from the perspective of the common man and tax rates. He asked whether there was a way to simplify it. I agreed to look into it and get back to him.
Around the time of the budget, while discussing various tax-related matters, he reminded me of the work that needed to be done. I assured him that progress was being made and that I would return with a proposal. After the budget session concluded, I informed him that I was close to finalising a proposal and sought his guidance. However, developments in April and May—such as Operation Sindoor—shifted priorities. When the next opportunity arose, I presented him with a detailed outline.
He emphasised that he wanted a simplified way of doing business. He didn’t want small businesses to be burdened with having to sit at computers or hire auditors. He also reiterated the importance of respecting the middle class, the taxpayer, and those who contribute from their salaries. He stressed that indirect tax affects every Indian citizen in some way, and we must be more sensitive to that.
I took his comments seriously, refined the proposal, and that’s how it came to be. For the first time in the history of the GST Council, the Centre has put forward a proposal. Until now, proposals came from Groups of Ministers (GoMs) comprising only state ministers. This is the first time the Centre has participated in a GoM—specifically in the case of the compensation cess, where the Minister of State (Finance) from the central government chaired the group to decide on its closure. A comprehensive GST proposal was presented by the Centre.
It was unique in many ways. Every rule of the Council had to be revisited just to table the proposal. I’m pleased it went through the full process, adhering to every rule, expectation, and legal requirement under GST.
Q: At the heart of this is the common man. Moneycontrol tweeted that this reform also impacts the health of every citizen in India. The Prime Minister responded, linking it to Swasth Bharat. What was the driving motivation behind this bill?
I had to do a dredging, kind of an exercise. Every item under GST—goods or services—had to be examined not just by their codes or names, but regrouped based on daily use and consumption by citizens, especially the middle class and the poor. We also considered items that affect farmers and middle-income households. Because ultimately, daily essentials and items critical to India’s transition from an emerging economy to a developed one—Viksit Bharat—cannot be addressed solely through infrastructure development like bridges and roads. The aspirations of growing families must also be met.
We regrouped items to reflect their importance to poor and middle-class families. Of course, the affluent are included too, but the treatment differs. While discussing this, we also had to address the classification of goods and services. I’ll mention the example of popcorn—though I do so with some hesitation, as I was criticised for it. But it illustrates the problem of classification.
We introduced a system that was certainly an improvement over the pre-GST era, where each state had its own definitions and rates. GST in 2017 was a step forward, but further simplification was needed—hence this exercise.
In the case of popcorn, there was considerable litigation. Courts issued differing opinions, and states lost revenue due to inconsistent classification. Some businesses labelled higher-taxed sugary or chocolate-coated popcorn as salted popcorn to benefit from lower tax rates. This kind of arbitrage had to be eliminated.
While regrouping items for families’ daily needs, we also tackled the classification issue. For me, it was a fascinating and rigorous exercise. It consumed a lot of time—time that could have been spent elsewhere—but it was absolutely worthwhile. It brought in a much-needed sensitivity: citizens view these matters in a particular way, and revenue should not be the sole consideration. That perspective guided us.
Q: You’ve done two monumental things: you’ve put more money into the hands of the consumer by cutting income tax for the middle classes, and you’ve rationalised GST. Will this finally move the needle on consumption?
100% because there’s more money given already through the income tax cut and the rates are coming down. The citizen now has a choice to meet his aspirations and his expectations. He cannot say, “Look, I have the money because the income tax is reduced, but these items are beyond my affordability”. Now everything has come down. I’ll give you this number which is important. 99% of all the goods and services which are touched by GST are now either in zero or in, 5% or in, 18%. There is nothing beyond so that 1% is what makes for the demerit goods, which popular parlance says ‘sin goods’. So that is the extent to which we have cleansed the system of anomalies, doubts, duplications and any interpretative issues.
Q: This will also lead to higher investment. It will fire up investments as well.
A: Obviously, with consumption going up, there’s a potential for capacities to grow, investments to grow.
Q: Now, the combined tax revenue impact of this is about ₹1.2 lakh crore. Do think that there will be a certain revenue buoyancy as well in the coming years to make up for this?
Every economic theory that one studies says that.
Q: Have you seen that in the past?
At least the moment the income tax reduction happened, you heard people very clearly coming out – I have met up with a lot of individuals coming from different strata of the society, saying I’ll have more money to send my son to this particular college. My daughter is already doing engineering. I’ll be able to fund her for higher studies and things like that. From ordinary citizens who are leading their lives either working in a small store or driving a car, taxi and so on. It has an immediate psychological effect that ‘I can do this’, which was beyond my affordability, and therefore, there will be a buoyancy in terms of revenue.
Q: Any impact on capital spending or fiscal deficit?
I wouldn’t think so. At this moment, I can say with confidence, capital expenditure of the government will not come down. It will be completed, as stated in the budgetary planning time, the budget estimate time, and so with the fiscal deficit. And this is the last point of my gliding path, I will adhere to it.
Q: Will petroleum products and alcohol continue to be outside the ambit of GST?
A: Yes, the current proposal doesn’t include it.
Q: You don’t see that happening in the near future?
A: Not in the immediate future.
Q: Let’s move to a few broader economic questions as well. With GST rationalisation, inflation is likely to come down quite naturally. Does it make a case for further repo rate cuts in the future?
Not my domain. We’ll have to see how the RBI assesses for itself.
Q: September 22 is a tight deadline. Are you confident you’ll be able to roll this? Is the backend ready?
Yes, the backend was mentally prepared, and many structural things have already started getting corrected, reset and so on. It is with the agreement of these GST and related technology managing team related issues that we have had a discussion with them, and they have clearly given me the confidence that, yes, they will be rolling it out on September 22.
Q: Rahul Gandhi, who earlier called it Gabbar Singh Tax, has now been talking about one nation, one tax. On the other hand, former Finance Minister P Chidambaram said that it is eight years too late. How do you react to all of this?
Being in the opposition, they have to say something. When the popular response has been so overwhelming for an opposition to try to take some credit out of it, but yet, with a hesitation that the credit should not be completely given to the government, is quite understandable.
But I would want them to ponder that neither could they bring it in because they couldn’t win the confidence of the states, nor could they truly and literally understand how the mechanism works. After all, the GST Council has members from Congress party, finance ministers from Congress ruling states are there, but I have a feeling the Congress High Command, as they call it, doesn’t do its homework to understand that the way in which this wonderful organisation works -the GST Council – and therefore, at one point in time, they call it Gabbar Singh Tax, another point in time saying, “Oh, this is fine, but it should have come earlier”.
These are clearly statements coming from people who have not spent time to understand how post-independence one institution, which has been created a constitutional body, if I am right, this is the only one that has been created post-independence. We have spent eight years, but has delivered so much in terms of revenue, in terms of uniting this country, in terms of making ease of doing business a reality, and is now coming up quickly in succession, within eight years, with a second-generation reforms to understand it and then to comment would help the government not stray comments, which doesn’t get into the details.
Q: This has been widely hailed as one of the dramatic reforms of this government. Obviously, ‘yeh dil mange more’, so what next? The Prime Minister has set up two official-level committees on next-gen reforms. Two groups of ministers have also been formed, headed by Amit Shah and Rajnath Singh. What can we expect in the coming months? What is the idea going forward? How do you look at reforms in the bigger picture?
Quite a lot of work was done on the next set of reforms, which we need to undertake, even prior to the 2024 Lok Sabha elections. Some departments, like ours, moved faster. Other departments are also moving quickly, whether it is on environment-related issues, sustainability-related issues, or opening up to the private sector in areas that have traditionally been the domain and privilege of the government. These are areas where a lot of action is happening. Various departments are moving, science and technology is moving very fast, particularly in semiconductors and other fields.
That is a big area of reform, which these two committees will look at, along with the committee headed by former Cabinet Secretary Rajiv Gauba. I expect reforms will now have to trickle down, rather than remain only in the domain of the Union government. The state governments are also moving towards reform on many fronts, but the third layer of India’s democracy — the urban local bodies and the panchayats — is where the next forceful action has to happen. Otherwise, the speed with which we want to move India, and the aspirations that need to be met for people to live in a fairly developed society and country, will not be achieved. Our citizens’ aspirations must be met, and for that we have to take the reform agenda not just to the Centre and states, but also to the third layer.
Q: As I move to discussing the GDP numbers for quarter one, just before that, another last question on GST. How will you ensure that you pass on the benefit to consumers? We’ve seen anti-profiteering measures in the past. How do you plan to tackle this? Is there a way the government is looking at it?
At the moment, there isn’t any particular mechanism that I can say we have, but I am certainly seized of the question, which is also coming from many citizens. They are saying, “It’s great that you’ve done this, it’s great that you’re bringing in this kind of drastic cut in taxes, but how will you ensure that we benefit from it, and how will you ensure it doesn’t disappear on the way?”
We’ll have to keep talking with the industry. We’ll have to nudge them. I’m glad that, in the case of the insurance sector, the public sector insurance companies have come forward to openly say that they will indeed pass the rate cuts to citizens taking insurance. I’m sure the private sector would also do it in insurance, and so with other sectors.
Q: Coming to Q1 GDP, the numbers are heartening at 7.8%. At a time when President Trump said that India is a dead economy, how do you react to something like that?
I may not be able to comment on a foreign head of state’s remark. But in India, one line I keep repeating several times, probably even when I met you earlier, is this: it is the cynics within India who worry me. It is the naysayers within India who worry me.
Assume somebody — a head of state — has said it. When we are building India together, do we really need to carry those tales or observations and repeat them here? Saying, “Oh, so-and-so has said India is a dead economy. We knew it. This is happening, that is happening.” India requires its citizens to be respected. They are toiling, struggling, and working to build their families, their economies and their personal wealth. At a time when we are creating more opportunities, do we need naysayers to borrow such observations?
Be it as it may, even if it comes from a head of state, do we need our own people to use these expressions? It undermines not the government, but our citizens’ efforts. A responsible opposition, I wish, wouldn’t repeat such lines. I would rather react to what our own people are saying than to a head of state elsewhere.
Q: A five-quarter high number, I think it gives us a lot of confidence.
And also inflation is coming down — drastically coming down.
Q: But it brings us to a related point, which is on tariffs. Now that tariffs with the US are at 50%, what is the likely impact on GDP going forward? There are various estimates by consultancies, from 10 basis points all the way to 100 basis points. Where do you really see the impact?
With reforms like this, many of those effects should be offset. It is never a situation of one fixated point. It’s a dynamic situation where you move from one to another, with new players and new factors coming into play in the scheme of things. The GST reforms will help people understand they can buy more with the same amount of money that earlier bought them less.
Industries have been speaking about tariffs and their impact. The government has designed something for itself, and we will come out with measures to handhold those hit by the 50% US tariff. This has been said earlier. I met delegations in Chennai recently and repeated it — the government is working on it.
Q: Will they be allowed to sell in India? Or how do you plan to address their concerns?
There is a package that consists of many different ways in which we want to help them. We’ll wait for the Cabinet to clear it, but there is something coming to help them so that this tariff shock is something they can face. Suddenly having to look for newer markets is also a challenge, but we will help them out.
Q: Is there a sense in the government that this could be a slightly longer haul?
We hope not, but we really can’t leave our exporters high and dry, saying it’s going to change sooner. We will work with them.
Q: Will we also continue to buy Russian oil?
Yes, that has been made very plain and simple. Whether it is Russian oil or anything else, it is our decision to buy from the place which suits our needs, whether in terms of rates, logistics, anything. So, where we buy our oil from especially being a big-ticket foreign exchange related item where we pay so much, highest in terms of import, we will have to take a call which suits us best. So, we will undoubtedly be buying.
Q: Another question about the officials of the Trump Administration have been using really hurtful language against India, saying that we are Brahmins for profiteering at the expense of ordinary Indians or calling the Ukraine Russia war, Modi’s war, or us as Kremlin’s laundromat. How do you see all this? How do you react to something like this?
Very much the same principle, as I said earlier. It can be hurtful. It is one thing for a foreign government, Head of State, or an official, or anybody, to say all that. The global diplomatic world is astonished that that kind of an expression is being used against India, and that will have people in the diplomatic arena to respond or to deal with. But what hurts me more is when those very expressions are being justified in India. I mean dirty, unwashed Indians, you don’t understand what this expression means – this is how this is explained. Who wants these explanations from Indians? Who wants us to know better, and who are these people explaining to us? This expression is used to this context. I am outraged by that. I don’t want explanations to justify that.
Whether I am going to have to deal with them, stand up and challenge them or retort is a different story. But Indians quoting those words and telling us, – oh, you dirty Indians, you don’t know this colonial justification of the language that is being used against Indians, against such countries which have come out of its colony and from its empire and stood up to build its own country with its own self confidence. And, even now, when we are talking about Atmanirbhar, it’s not just in terms of producing everything in your country. It’s also about the self-respect. As much as you want everything produced in India for Atmanirbharta, you should have something of a self-respect. If somebody is saying, all of us in one voice should respond to it, rather than have a few of us justify it by saying, don’t you understand it? Are you a part of the imperialist – I am outraged more by that.
Q: The opposition is picking up this and making it their own narrative, like the dead economy was picked up by Congress.
And even for this, Brahmins are the ones who are benefiting out of it? Oh, you Indians, you don’t understand this Russian oil purchase is to help Brahmins to benefit of it and you are being fooled – exactly the same divide and rule principle which the British used here, which the imperialist used here, and even today, you have the friends of the imperialist telling us, no, no, the expression Boston Brahmins is this and not that.
I want Indians to think for ourselves. I want those Indians who are now defending that language to get up and say, we are free from you all now for over 75-80 years, we will mind our business. We will take care of ourselves, refrain from using these words – should have been that voice. That not being the voice and then to teach us saying, don’t the meaning of this expression, outrageous.
Q: Any plans to liberalise FDI or FBI regulations further?
I do not want to give a headline, but certainly we are looking at every aspect of reform.
Q: This is probably the right time to assure foreign investors to invest in India. What are some of the steps that we should take that would, you know, give them this confidence, this one was a big one in itself, but going forward?
First thing, our institutions, such as Parliament, should debate issues. Should question the government on the proposals, on the policies, on the government’s actions. That gives confidence to people saying India’s democracy literally discusses these issues. Without that, the government can go about doing what is right for the public, but the institution of the parliament is not being used for its prime purpose. Why is it important? It gives a feeling that both the opposition and the ruling parties are talking on issues instead of holding placards and standing in the house if there is a meaningful discussion, it will convey a lot about the policy strength, that is one thing.
Second, our regulatory institutions and I have said this before, but I will repeat it here, regulatory institutions should not go to the extent of micro-managing. I want businesses to do their business. They have powerful boards that run them, and the regulator, in consultation with the stakeholders, should allow them to function. Of course, keep a watch and do a soft touch regulation. If regulators across the board, I am not talking just of the finance domain regulators all over should have an open minded approach, a soft touch approach, above all, not micromanage businesses.
Q: Private investment has been a topic of discussion. How do we revive animal spirits for the private sector to invest? This has been a discussion that we’ve been having over the course of many interviews. And you’ve also been exhorting the private sector. How do we get about it?
I think, to be fair to them, they are moving in and they are taking decisions about how they want to expand. I see a significant change, and I see that enthusiasm now in wanting to understand how things will move in the industry. And I’m sure they are conscious that opportunities lie in India, and they should do things.
Q: How would you react to India’s sovereign rating by S&P, which has gone up? High time, would you say?
Yes. And it is a result of a lot of work done by the Department of Economic Affairs, the Chief Economic Adviser, who have been persistent with talking with them, giving them adequate data-based information. And their conversations have, today, shown us the result.
And I am glad that they are doing it. They should continue doing it with other agencies also, because with our growth being with what it is, with our fiscal macroeconomic fundamentals being what they are, with our inflation being under control, with our foreign exchange growing, with our stock market being so buoyant, it is difficult to understand how parameters of similar and comparable nature elsewhere attract a much better rating, whereas ours don’t. And conversely, parameters which are worse than ours seem to have better ratings. Just can’t explain it. So, the work of the DEA and the CEA is well cut out in this regard; they will have to work with agencies.
Q: You’re right about all the macro indicators looking up, but revenue growth for corporate India has remained tepid. How do you explain that, GDP, on one hand, is growing at 7.8% so what accounts for this?
I think it’s also a question of how they are deploying their resources and how they’re learning out of it. Businesses will also have to look at the way in which their risk-taking capacities can increase, and that’s what is going to be the prime mover in terms of revenues for businesses. But that’s a business call. It’s not for me to say.
Q: India and China are now mending sort of fences. So, right now, it is at the level of resuming the flights and giving visas to each other. But what could be the next steps? How could we make the Chinese markets more accessible to Indian companies? There is a huge deficit of $100 billion here. So how do we do that?
There’s just a lot of work to be done in that area. There’s no hiding it. We need to have trade conversations, market access conversations, and non-tariff barrier conversations with the Chinese. Unless we do that, and unless there is a true engagement, and not a procrastinating engagement. You may talk as much as you want on these issues; I have done it myself, and to arrive at a conclusion takes a lot of time with the Chinese.
Market access is something which has not been realised despite our almost decade-long engagement with the Chinese. In between, everything had come to a halt. But on both these issues, there should be meaningful conversations; otherwise, the very products that we want to export to China go through a different destination, to China. But why can’t it go directly?
Q: And will it also be reciprocal? Press Note 3 prevents investments from China to India. So would you look at doing something about that as well?
As it is, I think in one or two cases, particular cases, we have relaxed some of them. And in those sectors where the technology has come in, and the technicians and also the experts had to come to see the projects through, we have not allowed these experts to come. That is now changed. In some sectors, people are coming in. Their projects are already on the ground.
Q: So India will be open to that idea?
Of course.
Q: You’ve ushered in the boldest trip reforms. I say this in , every interview that we do because – corporate tax cut was a phenomenal sort of move. Then after that last budget, we have income tax rates going down. Now GST 2. So, one thing that we probably haven’t seen enough is on private disinvestment. What would you say to that? You did sell Air India. But after that, things have been slow.
You will see action in that also.
Q: This year?
Yes.
Q: Any deadline for strategic stake sale in IDBI Bank?
No, I think the Department of Investment and Public Asset Management (DIPAM) secretary has already spoken about it. IDBI Bank is moving quite fast, and I expect it to be concluded this financial year.
Q: Any more banks, which could then be looked at after this?
I wouldn’t say any more banks. I’m not negating anything but yes, more disinvestments.
Q: We’ve seen that since June this year, the yield on 10-year bonds has risen 30 basis points, to more than 6.5%. Are you concerned about rising borrowing costs?
Yes, I won’t say I’m concerned, but I’m observing it. It is not affordable, and also at a time when interest rates are otherwise low, bond deals becoming unsustainably high has a big bearing on the government, not just our union government; states are also up against odds.
Q: Also, your fiscal math?
My fiscal math is, as of now, absolutely fine.
Q: We are again near an election. Bihar elections are coming up, and before every election we have seen all political parties dole out freebies. We have discussed this in previous encounters as well. Does this worry you — state after state promising welfare schemes, doling out freebies, how does it all really add up for a country like ours?
I think I’ll speak for all finance ministers. It is a very, very difficult thing to have a scheme approved and also budgeted for. It is not wrong, and I would approve of that, because that at least takes the view of the legislature, makes it public how they are financed, and therefore brings in that responsibility to keep your revenue generation equally attended to. But what most often happens — not so much with Prime Minister Modi’s leadership, but generally — is you give away a promise. Once you have to fulfil it, you are searching and scrambling for resources. And if you are an opposition-ruled party, it is very quickly an arsenal in your hand to say the central government is not giving me money. That’s the biggest unsustainable argument. I’m more tempted to say bogus argument, because you give a promise, you win the election, you come to power, and then you are not able to fund it. Why would you want to throw the blame at somebody else, particularly the Union government? This kind of recklessness in dealing with public finance has got to be discouraged. There is no doubt about it.
Q: India holds about $227 billion of US Treasury securities. It also holds a lot of gold in its reserves. Should we diversify away from US Treasuries for reserves?
To some extent, I think the Reserve Bank of India has already started doing it. I wouldn’t want to divulge more by saying how they are doing it, but I think the Reserve Bank has taken a very considered decision, and they have also purchased gold. So, I think the Bank is competent, and they are taking a fine call on it.
Q: One more question was on the decision to ban online gaming, which came as a surprise to many, especially after years of heavy investment in that business. What was the thinking behind this? How do you assure people of consistency in decision-making at a time like this?
What is so special about a time like this?
Q: What I meant was that a lot of investments had come into the sector.
We have not banned games which are for recreational purposes. Online games for these things are not banned. It is only when you start betting with money. And why? Not because we want to say we don’t like it. It’s a question of the number of people who came to us saying families are getting absolutely shaken up, their monthly bills are shooting up, and children cannot be controlled from the temptation.
Many children, in fact, I wouldn’t mind saying this: a finance minister once met me in a very different context and narrated an incident from his own family. His grandson, a very good, well-groomed child, once used his credit card for a genuine family requirement. Post that, another day, he picked up the card and said he wanted to just do something. They said all right, because they never suspected this child of being into games or betting. The boy used the card and played, gave it back, and probably did it two or three more times. That month there was a phenomenal increase in the bill.
When the grandfather sat up and checked, the grandson told him that it was all free, that he didn’t spend any money. So, the methodology is: they say it’s free, you get in, and for the duration of time that you play, some kind of charge is applied. Then it tempts you to go into another round, and another. The child, an adolescent, was under the impression he was playing a free game, but he ended up paying through his nose.
That is a classic example. Many people approached us, the PMO and so on, and said, “This is ruining our country, ruining our youth. Please do something.” That is where this bill has come from.
Q: The rupee is at an all-time low against the dollar. Does it concern you?
I have said this, and I will have to repeat it. It is only against the dollar that the rupee is highly volatile, whereas the rupee is not affected similarly by other currencies. And there are countries, in emerging markets and even developed ones, whose currencies against the dollar are weakening. So, it is an issue at that level, about volatility as a result of the strengthening dollar. It’s not the rupee weakening. I know I’ve been trolled immensely for saying this, but this is the truth.
Q: For profitable companies with over ₹1,000 crore turnover, 2% of their profits go into CSR. At a time like this, when MSMEs are facing problems because of tariff issues, etc., is there any thought to relook at this, at least for a little while?
Nothing before me as yet. If there’s anything, I’ll tell you, but there’s nothing.
