Union finance minister Nirmala Sitharaman on Thursday described the GST rate rationalisation as a “classic example of a virtuous cycle” that could drive higher consumption, fresh investments, job creation, and a wider tax base — ultimately paving the way for further tax cuts in the future.

“With GST rates coming down, consumption can go up. The more the demand, the companies which are selling these products will have to invest more and produce more. More production will lead to more jobs, which means the tax base will widen because more people will have income to buy things and pay taxes. That will lead to a foundation for even lesser taxes,” Sitharaman said at an interactive session in Calcutta.

The minister also engaged with industry leaders earlier in the day at a programme in Delhi, where Tata Sons chairman N. Chandrasekaran asked what more the government expected from industry.

Responding, Sitharaman said the Centre had already moved in line with industry expectations — delivering on tax reforms, ease of doing business, FDI liberalisation, and investor-friendly policies.

“Today I have a basket of things on which the government has delivered… I hope there is no more hesitation for the industry to invest further, expand capacities, and produce more in India. And what else is required by the government to do, spell them out,” she said.

One rate

At the 56th meeting of the GST Council earlier this month, the existing four-tier rate structure was streamlined into two slabs — 5 per cent for essential and commonly used goods, and 18 per cent for the rest. This replaces the 12 per cent and 28 per cent categories, making nearly 400 products cheaper, ranging from soaps, shampoos, and groceries to cars, tractors, and air-conditioners.

Sitharaman, however, said the economy is not yet ready for a transition to a one-rate structure. “First of all, we did not want four rates. But were we ready to get into one rate as yet? Not yet. Maybe sometime in future,” she said.

Process reform

Sitharaman stressed that GST reforms go beyond rate rationalisation to include significant process improvements.

“Many MSMEs feel that refunds take a lot of time. We looked into ways that can be cleaned up. In the next-gen GST, 90 per cent of refunds will be automatically given. Only 10 per cent will be kept for making sure that there are no false claims,” she said.

Additionally, the government has proposed an optional simplified GST registration scheme with automated approval within three working days for low-risk applicants.

Bengal benefit

Sitharaman underlined the timing of the reforms, just ahead of Durga Puja, saying the rationalisation would benefit Bengal’s key industries, boost festive consumption, and support local craftsmanship. She highlighted that products such as Nakshi Kantha (embroidered textiles), Malda’s mangoes, Darjeeling tea, jute bags, hosiery, and ready-made garments would directly gain from the lower rates.