Finance Minister Nirmala Sitharaman has urged companies to pass on the benefits of reduced GST rates to consumers, while revealing that the government is working on a relief package for exporters impacted by US tariffs.
In an interview, Sitharaman said that the GST reforms, rolled out on Prime Minister Narendra Modi's direction, were designed to benefit the common man, farmers and small businesses. She pointed out that several companies, including state-run insurers and a major automobile manufacturer, have already announced price reductions to reflect the tax cuts.
"We are keeping a close watch on prices and MPs have informed me that they are monitoring the situation in their constituencies as well. From September 22, my entire focus will be on ensuring that the benefits are passed on," the Finance Minister said.
GST 2.0 to Boost Consumption and Growth
The new GST rates, effective September 22, 2025 coinciding with the start of Navratri and the festive season, reduce taxes on 375 goods and services, leaving only 13 sin and luxury goods in the highest bracket.
The reforms, described as GST 2.0, are aimed at simplifying the tax structure, boosting consumption and driving economic growth. Sitharaman also assured that the government intends to bring stability and certainty to the GST regime, avoiding frequent changes in rates.
While opposition-led states flagged concerns over revenue loss during the GST Council meeting, Sitharaman countered by stating:
"It's not true that only states are losing revenue. The Centre is equally impacted. But when money flows into people's pockets, can I only worry about revenue? That is not possible."
CBIC Chairman: Industry Must Ensure Compliance
Echoing the Finance Minister's views, Sanjay Kumar Agarwal, Chairman of the Central Board of Indirect Taxes and Customs (CBIC), emphasized that industries must ensure full transmission of GST benefits to consumers.
He explained that businesses should:
- Update their systems to reflect the new rates from September 22,
- Ensure that invoice values reflect reduced tax rates, and
- Avoid withholding any benefits accrued due to tax cuts.
The CBIC chief confirmed that the department is monitoring pre- and post-rate cut price trends and may intervene if non-compliance is detected. However, he expressed confidence that most industries would voluntarily pass on the benefits.
Addressing Sector-Specific Concerns
- Insurance sector: While concerns remain over the withdrawal of input tax credit (ITC) on exempt policies, Agarwal said the Rs 8,000 crore relief from revenue implications should be fully passed on to policyholders.
- Automobile dealers: Compensation cess credits lying in dealer accounts cannot be used for GST payments but remain usable against cess liabilities.
- Sin goods (tobacco, pan masala, etc.): GST on these products will remain at 40%, supplemented by other duties to maintain the same tax incidence until compensation cess repayments are completed.
Conclusion
With GST 2.0 reforms, the government hopes to refuel consumer demand during the festive season, while ensuring certainty and stability for businesses. The Finance Minister's directive to industries highlights the government's commitment to ensuring that tax reforms directly benefit end consumers rather than being absorbed by corporates.
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