Home Minister Amit Shah on September 19 described the latest Goods and Services Tax (GST) reforms as one of the biggest economic changes in independent India, calling it a “multi-dimensional reform” and the first of its scale since independence.
In an exclusive interview with Network18 Group Editor-in-Chief Rahul Joshi, Shah said the sweeping tax cuts announced under GST 2.0 would bring relief across sectors while increasing public confidence in governance. “Tax has never been lower.. GST reforms will benefit a lot of areas. It is a big step which has increased the confidence of people. If people pay tax and the tax base widens, then the government reduces tax to benefit people,” Shah said.
The Home Minister noted that more than 395 items have seen their GST rates reduced following buoyant revenue collections, with daily-use essentials brought down to either zero or five percent. “In some sectors, to boost exports, the GST was reduced. On sectors relating to health, employment, farming, GST was reduced,” he emphasised.
Investment Boost
Shah added that the reforms would have a cascading positive effect on the economy. “I have full faith that GST revenue will not be reduced. Investment will increase, consumption will get a boost, manufacturing will get a boost, exports will increase, prices will reduce. Multi-dimensional and every sector will benefit with the GST reforms. It is a very big reform,” he said.
Reflecting on the journey of the indirect tax regime, the Home Minister pointed out that GST had been debated since the tenure of former finance ministers P Chidambaram and Pranab Mukherjee, but never implemented due to lack of consensus with states. “Congress tries to say that GST was their idea, but if it was their idea why wasn’t it implemented? States opposed it because resources of states would be reduced. To compensate, states used to ask for a guarantee from the Centre, which Congress did not give. When Narendra Modi became Prime Minister, the guarantee was given. The Centre promised that states’ tax growth rate would be almost double, which was promised and fulfilled. The states agreed to GST reforms because the Centre agreed to and fulfilled the promise,” he explained.
He further emphasised that GST had brought about a structural transformation of the tax system by integrating 16 types of levies – ranging from octroi and excise to entertainment and sales tax – into one framework. “Pan-India, the e-way bill was formed. Over 200 reforms have happened since GST was implemented to end the teething problems. India’s GST revenue increased from Rs 80,000 crore to Rs 2 lakh crore. It increased trust of people and businesses,” Shah said.
Earlier, Amit Shah launched Network18’s coffee table book “Modi at 75”, which brings together 75 defining moments from Prime Minister Narendra Modi’s political journey.
GST 2.0
The 56th GST Council meeting has simplified the tax structure into just two slabs of 5 percent and 18 percent. Household essentials such as soaps, toothpaste and Indian breads now attract either zero or five percent GST. In healthcare, life-saving drugs and critical medicines have seen rates reduced from 12 percent to either nil or five percent.
GST on two-wheelers, small cars, televisions, air conditioners and cement has been lowered from 28 percent to 18 percent. The farming sector, too, has benefited with GST on farm machinery and irrigation equipment cut from 12 percent to 5 percent. At the same time, the government has retained a 40 percent tax on tobacco, pan masala, aerated drinks and luxury goods to safeguard revenues and discourage harmful consumption.
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