GST 2.0: A Tax reform that could deliver a more competitive India

Paper: GS-III, Subject: Economy, Topic: Taxation, Issue: Reforms needed in GST.

Context:

GST (2017) subsumed multiple indirect taxes into one unified system. PM during 79th Independence Day (2025) announced a structural rework of GST aimed at simplification, rationalization, and supporting Atmanirbhar Bharat.

Key Features of GST 2.0

1.    Rate Rationalization

• Move towards a simplified two-rate structure:
  • One standard rate.
  • One merit rate (with limited exceptions).
• Benefits: reduces complexity, improves compliance, strengthens system integrity.

2.   Focus on Essential Goods

• Tax cuts on essential goods providing relief to common man, farmers, MSMEs.
• Enhances affordability, boosts consumption and demand.

3.   Simplification & Compliance

• Greater ease for small businesses and startups.
• Technology-driven measures aiming at:
  • Seamless registration.
  • Unified filing.
  • Automated assessments.
• Faster refunds for exporters and sectors under stress.

4.   Dispute Resolution

• Alternative mechanisms to reduce litigation.
• Faster, consensus-based dispute resolution.

5.   Transparency & Fairness

• Eliminates distortions related to inverted duty structures.
• Ensures fairer tax framework across sectors.
• Promotes domestic value addition, competitiveness, and ‘Make in India’.

Benefits of GST 2.0

Challenges in Implementation

• Success depends on effective Centre–State coordination through GST Council.
• Need for sector-specific solutions such as for MSMEs, exporters.
• Must balance rate rationalization with revenue sustainability.

Way Forward

• Ensure broad-based stakeholder participation in decision-making.
• Enhance digital infrastructure for compliance and monitoring.
• Promote industry–government collaboration to refine tax policies.
• Gradually align GST with global best practices while retaining India’s needs.

Conclusion: GST 2.0 promises to deliver a simpler, fairer, and more competitive tax system. If implemented effectively, it can strengthen revenue, reduce costs, and boost both industry and household welfare, paving the way for India’s growth as a global economic powerhouse.

https://www.livemint.com/opinion/online-views/gst-2-0-reforms-narendra-modi-goods-and-services-tax-rate-rationalization-atmanirbhar-bharat-make-in-india-viksit-bharat-11755419131792.html#:~:text=A%20structural%20revision%20of%20this,fairer%20and%20more%20competitive%20India.&text=This%20is%20a%20Mint%20Premium,Subscribe%20to%20enjoy%20similar%20stories.

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