Statement by Shri C. S. Setty, Chairman, IBA & SBI on GST rationalization

Mumbai, September 08, 2025:  As India continues to financially transform and drive towards becoming the third largest economy, the shift to a simplified two-tier GST structure of 5% and 18% with 40% on sin goods marks a landmark in its indirect tax reforms. It creates a clutter-free, next-generation GST that is simpler, more transparent, and citizen-centric.

Household goods earlier taxed at 12% and 18% now fall under 5% category, which will provide tangible relief in the form of lower costs on essentials and higher disposable incomes. With greater spending power, demand and credit expansion will rise, driving economic growth. In a similar vein, the insurance sector stands to benefit with lower premium and thus better protection coverage and larger insurance penetration.

The reduction is also expected to soften headline CPI as mass consumption goods get cheaper. Businesses too stand to gain from a simpler regime resulting in lower compliance costs and improved competitiveness.

The short-term revenue loss from lower GST rates is expected to be recouped through higher consumption and stronger economic activity, having a positive effect on GDP growth and fiscal health in the coming quarters.

The implications are both immediate and long-term as this initiative consolidates GST into a truly citizen-friendly and growth-oriented GST 2.0.