Paper: GS – III, Subject: Economy, Topic: Taxation, Issue: Significance of GST 2.0.
Context:
PM Narendra Modi’s GST reforms have transformed India’s taxation into a “One Nation, One Tax” system. GST 2.0 aims to simplify taxes, reduce burden on citizens, and make taxation an instrument of welfare and development.
Key Highlights:
Evolution of Taxation in India:
| Pre-GST Era | Citizens faced multiple indirect taxes: food, clothing, medicines, education, children’s items.High taxes on common goods: toothpaste, soap, bicycles (17%), sewing machines (16%), cement (29%).Even healthcare (diagnostic kits, medical tests) was heavily taxed.System led to inflation, regressive taxation, and hardship for poor & middle class. |
| GST Reform | Vision of “One Nation, One Tax” realised.Over 300 essential items exempted from GST (e.g., rice, pulses, staples, school supplies).Unified taxation under centralised GST replacing fragmented central & state levies.Businesses gained from ease of compliance, reduced cascading taxes, and expanded market integration. |
Key Features of GST 2.0:
| Achievements of GST 2.0 | Challenges Ahead |
| Reduced tax burden on poor and middle class.Boosted formalisation of economy and expanded tax base.Enhanced ease of doing business and encouraged entrepreneurship.Increased revenue buoyancy and reduced tax evasion.Symbol of New India’s self-confidence. | Complex compliance structure still burdens small businesses.Dependence on indirect taxes can remain regressive if not balanced with direct taxes.Ensuring GST compensation to states remains critical for cooperative federalism.Need to address IT glitches in GSTN and invoice matching. |
Way Forward:
- Further simplify tax slabs and compliance rules.
- Strengthen IT infrastructure for seamless GST filing.
- Balance welfare focus with revenue needs of states.
- Expand tax base through digital economy and formalisation.
- Move towards progressive taxation while keeping essentials tax-free.
Conclusion:
GST 2.0 represents a shift from exploitative to welfare-oriented taxation. It ensures fairness, strengthens economic growth, and embodies the principle of “Sabka Saath, Sabka Vikas, Sabka Vishwas, Sabka Prayas.”
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