Finance Minister Nirmala Sitharaman has said that the recent GST reforms go beyond mere rate reductions and are designed to make compliance easier for businesses while reducing costs for consumers.
In an interview, the Finance Minister explained that the revamp includes simplified procedures, faster refunds and quicker company registrations. Under the new framework, 90% of refunds will be processed within a fixed timeline, while business registrations will be completed within three days.
Simplified Product Classification
Effective September 22, 2025, the reforms will also eliminate ambiguity in product classification by grouping similar goods under the same tax rate.
For example:
- Salted popcorn - whether loose or pre-packed - will now attract 5% GST.
- Earlier, pre-packed popcorn was taxed at 12% and caramel popcorn at 18%.
- Cream buns have been moved to the 5% slab, down from 18%.
Nearly 400 products, including soaps, shampoos, cars, tractors and air conditioners, will become cheaper. Additionally, health and life insurance premiums for individuals will be exempt from GST.
The new structure retains just two main slabs - 5% for essential items and 18% for most other goods and services, with a 40% rate reserved for luxury and sin goods. Daily essentials like bread, milk and paneer remain tax-free.
A "People's Reform"
Calling the revamp a "people's reform," Sitharaman stressed that it impacts all 140 crore Indians.
"There is not going to be one family that is without this positive impact of GST. Household bills will come down, and aspirational purchases like cars and appliances will be more affordable," she said.
The Finance Minister added that this would create a "virtuous cycle" of higher consumption and stronger economic growth.
Monitoring Industry Response
Sitharaman said she would personally monitor industry practices to ensure that benefits are passed on to consumers. "From September 22, my focus will be to check whether reductions are being implemented and, where they are not, to engage with industry to ensure compliance," she said.
Impact on Inflation
On inflation, the Finance Minister reassured that it is already under control and that the tax cuts would further encourage spending. "There is no doubt about it," she added.
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