The rationale behind the landmark GST reforms of India has been illustrated by Finance Minister Nirmala Sitharaman, citing how categorised disputes lead to litigation, revenue losses, and confusion for both businesses and states.
FM Sitharaman, in an interview, revisited the much-debated “popcorn example,” which she said demonstrates the classification difficulties that troubled the earlier GST structure. “Why am I saying hesitation? Because I was pilloried on it. But that tells you the problem of classification. In the case of popcorn, it led to litigation, courts coming up with different interpretations and states losing revenue. Because of different classification, people tried to show sugary, chocolate-coated popcorn as salted popcorn, since the latter had lower tax,” she expressed.
GST Structure Simplified
A sweeping reform has been approved by the GST council, rolling out a two-slab tax structure and scrapping the 12% and 28% brackets. The essentials had already moved into lower slabs, and merely the chosen products encountered higher impositions.
Sitharaman cited that the exercise was about rate rationalization, and for “regrouping goods and services from the perspective of daily-use items consumed by citizens, especially middle-class and poor families.” She also added that farmers and households must be eased under the classification loopholes that businesses exploited earlier.
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“GST in 2017 was an improvement over the pre-GST era, when each state had its own definitions and rates. But it still required simplification. With this exercise, we have regrouped and cleansed the system of anomalies, doubts, duplications and interpretative issues,” she stated.
Goods and Services Covered by 99%
Finance Minister, under GST, roughly 99% of all goods and services now come in three simplified categories – 0%, 5%, or 18%. Only 1% of items, categorised as “sin goods,” are charged with higher tax rates.
“Daily-use items or those necessary for India’s transition from an emerging economy to a Viksit Bharat cannot be overburdened by tax arbitrage. This reform ensures fairness and clarity,” Sitharaman stated.
From September 22, 2025, the new structure shall come into force and is anticipated to lessen litigation, improve compliance, and enhance revenue predictability for states.
