India set for major GST overhaul; tax rates likely to fall

As anticipation builds around the 56th GST Council meeting expected in early July, Finance Minister Nirmala Sitharaman has signalled a significant overhaul of the Goods and Services Tax (GST) structure, including potential rate cuts and simplification of the compliance process. In a recent interview with The Financial Express, Sitharaman confirmed that a more streamlined and easy-to-comply GST regime is in the works and that lowering rates is part of the plan.

The finance minister stated that there is active work underway to review the current GST framework, including rate slabs, tax inversions, and the layering of levies. “The time has come for getting some consensus in the GST Council and coming up with a very simplified and easy-to-comply GST. We will be doing it,” she said.

According to Sitharaman, the broader expectation is for goods and services tax rates to come down. “Revenue buoyancy will rise if the rates are low enough,” she said, adding that such a move could stimulate consumption and enhance tax compliance. The restructuring could provide relief to consumers by reducing the cost of goods and services while offering clarity and simplicity for businesses.

Balancing reform with revenue

While the proposed reforms are aimed at reducing the compliance burden and improving transparency, concerns remain about how a lower tax regime might impact state revenues, which heavily rely on GST collections. The government is reportedly working to ensure that the reforms are sustainable and equitable, striking a balance between simplicity and revenue needs.

The conversation about overhaul comes as India approaches the eighth anniversary of the GST launch on July 1, 2017. The tax reform, seen as a watershed moment, replaced a fragmented and complex indirect tax system with a unified structure designed to minimise cascading and compliance costs. Alongside the GST revamp, the Finance Ministry is also looking at further simplification of income tax laws, land monetisation, and financial sector reforms including new bank licences and amendments to the Insolvency and Bankruptcy Code.