Finance Minister Nirmala Sitharaman, in an exclusive interview to CNN-News 18, spoke about the rationale behind the goods and services tax (GST) reforms. Explaining the classification process, she spoke about the “popcorn example”, for which she was “pilloried”.
The GST Council has approved a new two-slab structure, scrapping the 12% and 28% brackets, easing rates on essentials, and imposing higher levies on select products.
“But even as we were talking about this, we were talking about the classification of goods and services. I, without any hesitation, will bring that example of the popcorn. Why am I saying “hesitation”? Because I was pilloried on it. But that tells you the problem of classification. We brought in a system no doubt, but it was an improvement over the pre-GST era, where every state defined its own and had its own rate and so on. So, GST in 2017 was an improvement over what was earlier, but it still required some more simplification. And that’s why this exercise. And in the case of the popcorn, it led to a lot of litigation, courts coming up with different kind of voices, and states losing revenue. Because of the classification being different, people chose to have the higher-taxed sugary chocolatey popcorn shown in as a salted popcorn—because that has only very little tax on it,” she said.
“So, this arbitrage because of classification had to be overcome. Even as I’m grouping for families—their day-to-day items—this thought of what problems classification was causing also had to be addressed,” the FM said.
Sitharaman said that every item, which comes under GST — goods or services, had to be looked at. “Not just by their codes, not just by their names, but (the task was) to regroup them from the point of view of daily-use items, which is consumed by citizens, middle-class, the poor in particular. And then you looked at those which are going to hit the farmers, those which are going to hit the middle-class and so on. Because, eventually, daily-use items or items which are necessary for this transition of India from an emerging developing economy to a Viksit Bharat cannot be on the back of just the approach of more bridges, roads, some contracts for works and so on—the aspirations of the growing families will have to be met too. So, we had to regroup the goods and services in such a way—okay, this is essential for the families, poor middle-class families…”
“Ninety-nine percent of all the goods and services, which are touched by GST, are now either in 0 or in five or in 18. There’s nothing beyond. So, that 1% is what makes for the demerit goods, which is popularly known as sin goods. So, that is the extent to which we have cleansed the system of anomalies, doubts, duplications and any interpretative issues,” said Sitharaman.
