Finance Minister Nirmala Sitharaman on Sunday said the next-generation Goods and Services Tax (GST) reforms introduced earlier this month have simplified the tax structure and resolved long-standing classification disputes that plagued the earlier GST regime.
Speaking at ‘Tax Reforms for Rising Bharat’, a conclave of trade and industry associations organised by the Chennai Citizens’ Forum, Sitharaman highlighted that disputes over GST classification had often ended up in arbitration, with courts in different states offering inconsistent interpretations. “Business people didn’t really understand the exact bracket under which an item fell,” she noted.
She recalled that officials from Uttar Pradesh had pointed out in one of the previous GST Council meetings that items within a same food category are taxed at different rates. She cited the example of popcorn. “If popcorn is sold by a small street side hawker, it has no tax today and will have no tax tomorrow. But if it’s packed and branded as namkeen, salted popcorn attracts 5% GST and caramel popcorn 18%. We explained this but it led to a lot of social media backlash then,” she said.
Sitharaman stressed that such anomalies have now been eliminated under GST 2.0. “Not just food items, the classification problem has been resolved across all product categories. Goods of the same type are now taxed at the same rate,” she said. Under the latest reforms, all food items either fall under the 5% bracket or are exempt.
Major Rate Cuts Under GST 2.0
The 56th GST Council, in a landmark decision on September 3, scrapped the 12% and 28% slabs and abolished the compensation cess, streamlining the structure to make goods and services more affordable. Rates on over 300 items—including dairy products, medicines, insurance, and consumer goods—were reduced to either 5% or nil. The new rates will apply from September 22.
“About 99% of all goods previously taxed at 12% have now come down to 5%. The positive impact of GST will be felt across all products people use from morning till night,” Sitharaman said. She added that FMCG majors such as HUL, Godrej, and Dabur have assured the government that the benefits of rate cuts will be passed on to consumers.
On concerns about bureaucracy, the minister pointed out that the administrative machinery had been crucial in enabling reforms. “In the last eight months alone, we introduced income tax exemption up to ₹12 lakh, simplified the Income Tax Act, 1961, and rolled out a simplified GST regime. GST 2.0 is a system-cleaning reform,” she said.
Faster Refunds, Simpler Registration
Addressing industry complaints about delayed refunds, Sitharaman said the new law provides for automatic provisional refunds of 90% of claims, while GST registration for new businesses has been simplified and reduced to three days. “The system has been reformed, classification issues have been resolved, and the majority of goods are now under 5% GST. Therefore, GST 2.0 is a system-clearing reform,” she reiterated.
She outlined five principles behind GST 2.0: ensuring rate cuts cover daily-use items, benefiting poor and middle-class consumers, supporting farmers, lowering input costs for MSMEs, and strengthening sectors critical to economic growth.
Several leading trade and industry associations—including CII, FICCI, Hindustan Chamber of Commerce (HCC), and Insurance Brokers Association of India (IBAI)—participated in the conclave, acknowledging the benefits of GST rate cuts while also flagging industry concerns.
Source from: https://www.financialexpress.com/policy/economy-gst-2-0-a-system-cleaning-reform-says-fm-nirmala-sitharaman-3977621/
