Union Finance Minister Nirmala Sitharaman has indicated that the Goods and Services Tax (GST) Council is in the final stages of reviewing the current tax structure, with a projected reduction in GST rates. Speaking at the Economic Times Awards for Corporate Excellence in Mumbai, Sitharaman emphasized that the ministerial group assigned to this task has made significant progress and is now nearing completion. She mentioned that the proposals would be reviewed once more before being presented to the federal indirect tax body for final approval, likely at the Council’s upcoming meeting.
“We are very close to making a final decision on some key aspects, including reduction and rationalization of tax rates, as well as revising the number of tax slabs,” she stated. Sitharaman pointed out that current GST rates are already lower than they were when the indirect tax regime was first introduced in 2017.
The GST Council, which is chaired by the Union Finance Minister and includes state ministers as members, has progressively lowered tax rates since the system was implemented. Sitharaman highlighted that the revenue-neutral rate at the time of GST’s introduction was around 15.8%. A revenue-neutral rate refers to a GST rate that ensures the government collects the same revenue as before the tax system was introduced, without increasing costs for consumers.
“Since GST was rolled out, we have already brought that 15.8% rate down to 11.4% by 2023, indicating a reduction in tax rates. So the hint that you are looking for is that rates will decrease further,” Sitharaman assured.
In addition to discussing tax reforms, Sitharaman urged industries to engage more actively with the government regarding investment, particularly as private sector investments have remained concentrated in only a few sectors of the economy. She also refrained from commenting on concerns related to foreign institutional investors selling off stakes in Indian stock markets due to the increased capital gains tax, as the budget session in Parliament is still ongoing. The session is set to resume on March 10.
The Finance Minister increased the long-term capital gains tax from 25% to 12.5% in the July 2024 budget. She acknowledged that economic sentiment plays a crucial role in determining India’s growth rate. While India is currently projected to grow at about 6.5-6.7% in FY26, Sitharaman expressed confidence that stronger investor confidence could drive growth to 8% in the next fiscal year. She reaffirmed that India remains the fastest-growing major economy, maintaining a steady growth rate of 6.5-7% in the post-COVID years across all sectors.
Addressing concerns over the dumping of foreign goods into India, Sitharaman recognized that aggressive tariff measures are being used to curb the issue. However, she cautioned against completely stopping imports, which often provide low-cost raw materials for small manufacturers. She stressed the importance of consulting all stakeholders, including small businesses, before implementing anti-dumping measures.
The Finance Minister also revealed that the Union Commerce Ministry is currently reviewing multiple Free Trade Agreements (FTAs) signed in the past, particularly with Japan, South Korea, and ASEAN nations. She noted that many of these agreements were concluded hastily and contained vague language, leading to an influx of foreign goods into Indian markets with minimal regulation.
“We are seeing a surge of imported goods that cannot be effectively regulated due to these FTAs. Tariffs do not impact them because the agreements provide exemptions,” Sitharaman explained.
She emphasized that ongoing trade negotiations are incorporating lessons from previous agreements to ensure that India’s interests are safeguarded. Strengthening India’s position in trade deals, increasing the number of bilateral agreements, and ensuring precise legal language to prevent disputes are now key priorities for the government.
Sitharaman also criticized the World Trade Organization (WTO), stating that it has been ineffective in resolving trade disputes. Given the challenges in global trade regulations, she stressed the need for clearer and stronger bilateral agreements to protect India’s economic interests amid increasing tariff uncertainties.