Q. Let me begin with a broader question. What was the vision behind this? What did the prime minister tell you? How did it come about?
Well, the prime minister did announce it from the Red Fort on Independence Day. But about eight months ago, he called me and had a long talk about how GST can be… you know… revamped. Both from the point of view of the process and also for the common man, the tax rates… Is there a way in which we can make it simpler? I agreed that I will go into it and come back to him.
Then around the Budget, when we were talking about the many tax-related issues, he reminded me about the work which had to be done. And I assured him again that the work was progressing, and I’ll come back. So, sometime after the Budget session of Parliament, I said I’m somewhere close to giving him a proposal, on which he can guide me further and so on. And then a bit later, much later, because, you know, the developments of May, when Operation Sindoor happened, the priorities have been on many different grounds. When the next opportunity came, I gave him a detailed description. He said, I just want, as I said at the first meeting, a simplified, not simplistic, way of doing business.
So, I don’t want small people, small businesses sitting at the computer, getting the auditor to do it. And also, like the way we did in the Budget, respecting the middle class, respecting the taxpayer, respecting people who are the ones paying tax out of their salaries. We need to do something for the day-to-day indirect tax, which falls on every Indian citizen in some way or the other. This tax is something that touches the lives of every citizen. And, therefore, we need to be a lot more sensitive. So, I went back with this comment. And that’s how this proposal came. And for the first time in GST’s history, Council’s history, the Centre came up with a proposal.
Till now, it used to be the Group of Ministers, which consisted only of state ministers. It’s the first time, both in the case of the compensation cess, where the MoS Finance, Central government, was the chair, to decide how to handle the closure of the compensation cess, and a comprehensive proposal as regards the GST was being given by the central government. So, it is unique in many ways. Every rule of the house, of the Council, had to be looked at afresh. I’m glad it went through the whole grind and didn’t ignore any rule or expectation or the law of the GST.
Q. At the heart of this is, obviously, the common man. So, what was the driving motivation behind this Bill?
See, I had to do a dredging kind of exercise. Every item that comes under GST, goods or services, had to be looked at—not just by the codes, not just by the names, but to regroup them from the point of view of daily use items, which are 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... we need more development, bridges, roads, some contracts for works, and so on. But also the aspirations of the growing families will have to be met.
So we had to regroup them in such a way, okay, this is essential for, let’s say, the families, poor middle-class families. Of course, the rich will come in. So what do we do as a treatment for it? But even as we were talking about this, we are talking about the classification of goods and services. I, without any hesitation, will bring that example of popcorn. Why am I saying hesitation? Because I was pilloried on it. But that tends to the problem of classification, where we brought in a system, no doubt, which was an improvement of, 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 then the case of the popcorn. It led to a lot of litigation, courts coming up with different kinds 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 salted popcorn because that has only very little tax on it. So, this arbitrage, because of the classification, had to be overcome.
So even as I’m grouping for families, their day-to-day items, this thought of what the classification is causing as a problem also had to be addressed. For me, it was a fascinating exercise. It was rigorous, it took a lot of my time, but I think this was an absolutely rewarding exercise, because you brought in that temperament, which is so important, that the citizen looks at these things in one particular way, revenue is not the consideration. That helped us.
Q. So now that you’ve done two monumental things. You have put more money in the hands of the consumer, with the income tax cut, and now rationalisation of GST. Will it now finally sort of move the needle on consumption?
Hundred percent, because there is more money given already, through the income tax cut. The rates are coming down. The citizen now has a choice to meet his aspirations and his expectations. He cannot say, look, I have the money because the income tax is reduced, but these items are beyond my affordability. Now everything has come down. I’ll give you this number which is important. Ninety-nine percent of all the goods and services which are touched by GST are now either in zero, or in five or in 18 percent [rate cut slabs]. There is nothing beyond. That 1 percent is what makes for the demerit goods, which popular parlance calls sin goods. That is the extent to which we have cleansed the system of anomalies, doubts, duplications, and any interpretative issues.
Q. So this will fire up investments as well?
Obviously. With consumption going up, there is a potential for capacities to grow, investments to grow.
Q. Now the combined tax revenue impact of this. You know, earlier your income tax cuts, and this is about `1.2 lakh crore. Do you think there will be a certain revenue buoyancy as well in the coming years to make up for this?
Every economic theory that one studies says that.
Q. Have you seen that in the past?
Well, at least the moment the income tax reduction happened, you heard people very clearly coming out and saying… I mean, I have met up with a lot of individuals coming from different strata of society saying, I have more money to send my son to this particular college; my daughter is already doing engineering, I’ll be able to fund her higher studies, and things like that. And from ordinary citizens, who are leading their lives, either working in a small store or driving a car, taxi, and so on. It has an immediate psychological effect that I can do this which was beyond my affordability. And, therefore, I think, there will be a buoyancy in terms of revenue
Q. Any impact on capital spending or fiscal deficit?
I wouldn’t think. At this moment, I can say with confidence that the capital expenditure of the government will not come down. It will be completed as stated in the budgetary planning time, the Budget estimate time. And so, with the fiscal deficit, and this is the last point of my gliding path, I will adhere to it.
Q. Will petroleum products and alcohol continue to be outside the ambit of GST?
Yes, the current proposal doesn’t include them.
Q And you don’t see that happening in the near future?
Not in the immediate future.
Q. September 22 is a tight deadline. Are you confident you’ll be able to roll this? Is the back-end ready?
Yes, the back-end was mentally prepared. And many structural things have already started getting corrected, reset, and so on. It is with the agreement of these GST and related technology managing team related issues that we have had a discussion with them. And they have clearly given me the confidence that they will be rolling it out on September 22.
Q. Rahul Gandhi, who earlier called it Gabbar Singh Tax, now has been talking about one nation, one tax. On the other hand, former Finance Minister P Chidambaram said that it is eight years too late. How do you react to all of this?
Well, being in the Opposition, I think they have to say something, when the popular response has been so overwhelming, to try to take some credit out of it. Yet, with a hesitation that the credit should not be completely given to the government, it is quite understandable. But I would want them to ponder that neither could they bring it in because they couldn’t win the confidence of the states, nor could they truly and literally understand how the mechanism works. After all, the GST Council has members from the Congress party, finance ministers from Congress-ruled states are there. But I have a feeling the Congress high command, as they call it, doesn’t do its homework to understand the way in which this wonderful organisation works, the GST Council.
And, therefore, at one point in time, they called it Gabbar Singh tax, at another point in time saying, ‘Oh, this is fine, but it should have come earlier’. These are clearly statements coming from people who have not really spent time to understand how post-Independence, that one institution which has been created, a constitutional body. If I’m right, this is the only one which has been created post-Independence.
It has spent eight years, but has delivered so much in terms of revenue, in terms of uniting this country, in terms of making the ease of doing business a reality. And it’s now coming up quickly in succession within eight years with the second-generation reforms. To understand it and then to comment would help the government, not stray comments which do not get into the details.
Q. This has been widely hailed as one of the dramatic reforms of this government. Obviously, Dil Maange More. So, what next?
Quite a lot of work was done about the next set of reforms which we need to undertake, even prior to the 2024 Lok Sabha elections. And then some departments moved, like ours moved faster. There are other departments which are moving faster as well, whether it is looking at the environment-related issues, sustainability-related issues, opening up for the private sector sectors which have been the domain of the government. These are things where lots of action is happening. Various departments are moving. Science and technology is moving very fast. IT is moving very fast; IT as in semiconductors and other things.
I expect reforms will have to now trickle down, rather than remaining as the domain of only the Union government. State governments are somewhat also moving towards reforming on very many scales. But the third layer of India’s democracy, the urban local bodies and the panchayats, is where the next forceful action has to move. Otherwise, the speed with which we want to move India and the aspirations to be met in India for people to live in a society, live in a country which is fairly developed, and our citizens get their aspirations met… I think we have to take the reform agenda not just to the states, but also to the third layer.
Q. How will you ensure that you pass on the benefit to the consumers? We have seen anti-profiteering in the past. So, how do you plan to tackle this? Is there a way in which the government is looking at it?
At the moment, there isn’t any particular mechanism that I can say I have. But I certainly am seized of the question, also coming from many citizens, who are saying it is great that you have done this, it is great that you are bringing in this kind of a drastic cut in taxes, but how will you ensure that we benefit from it? And how will you ensure that it is not going to disappear on the course to reach us? We will have to keep talking with industry, we will have to nudge them. We will have to.
I’m glad that in the case of the insurance sector, the public sector insurance companies have come forward to openly say that they will indeed pass on the rate cuts to the citizens—those who are taking the insurance for themselves. So, I’m sure the private sector would also do it in insurance, and so with other things.
Q. They are expecting them to announce that they will pass on the benefit?
Many of them are doing.
First Published: Sep 15, 2025, 13:57
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