- Goods and Services Tax (GST), introduced in 2017, subsumed multiple indirect taxes into a unified system. Envisioned as a “Good and Simple Tax”, it aimed at creating a common national market, improving compliance, and ensuring revenue buoyancy.
- However, Parliament’s Public Accounts Committee (PAC, 2025) highlighted deep-rooted inefficiencies in compliance, compensation to states, and dispute resolution necessitating GST 2.0.
Achievements of GST So Far
- Revenue Buoyancy: Monthly GST collections have crossed ₹2 trillion for two consecutive months (2025).
- Unified Market: Removed cascading taxes, reduced logistics costs, and streamlined interstate trade.
- Digital Transformation: e-way bills, e-invoicing, and faceless compliance improved transparency.
- Boost to Formalisation: Helped widen the tax base with the number of registered taxpayers rising from 65 lakh (2017) to over 1.4 crore (2025).
Persistent Challenges
Rate Structure Complexity
- Current GST has 5 tax slabs (0%, 5%, 12%, 18%, 28%) + cesses leading confusion and litigation.
- Inverted duty structures remain (e.g., textiles, footwear) leading to accumulation of Input Tax Credit (ITC).
Centre–State Tensions
- GST Compensation Fund not audited by CAG for over 6 years.
- ₹32,577 crore dues pending to the states as per PAC report.
- Industrial states like Tamil Nadu and Karnataka face revenue shortfalls.
Compliance Burden
- PAC (2025) flagged unjustified cancellation of registrations (6,353 cases without show-cause notices).
- Refund delays hurt MSMEs and exporters, creating working capital constraints.
Dispute Resolution
- Absence of a functional GST Appellate Tribunal leading to over 19,730 cases pending (₹1.45 lakh crore at stake).
Technical Glitches
- Automated systems lack manual oversight leading to rejected applications without clarity.
- Registration withdrawal/modification is not user-friendly.
Need for GST 2.0
Rate Rationalisation
- Move towards two/three-rate structure (8%, 18%, 40%) for simplicity.
- Shift durable goods (like ACs) from 28% to 18%.
- Merge compensation cess into uniform sin-tax rate.
Support for Labour-Intensive Sectors
- Merit rate of 8% for textiles, food processing, toys, leather.
- Waiver of non-tariff barriers and import duties on single-use inputs.
Ease of Compliance
- Antarang Portal for real-time refunds and grievance redressal.
- Tiered compliance framework for small traders, MSMEs, and corporates.
Transparency in Centre–State Finances
- Regular CAG audit of Compensation Fund.
- Timely release of dues to states.
Institutional Reforms
- Establish GST Appellate Tribunal for speedy resolution.
- Promote alternative dispute resolution (ADR) mechanisms.
Significance of GST2.0:
- Growth Stimulus: Rationalisation reduces business costs, boosts manufacturing and exports.
- Equity: Lower taxes on essentials, cement (housing) supports poor and middle class.
- Green Economy: Lowering GST on EVs to 18% promotes sustainability.
- Global Competitiveness: Simplification attracts foreign investors, enhances Ease of Doing Business.
Conclusion: GST 2.0, through rationalisation, transparency, and institutional reforms, can deliver a simpler, fairer, and more competitive tax system, strengthening revenue while supporting Atmanirbhar Bharat and India’s aspiration to become a $10 trillion economy by 2035.
+1 Value addition:
- Prepare a White Paper on GST 2.0/3.0: including expansion to electricity and real estate.
- Build digital resilience: Build robust IT platforms with real-time monitoring.
- Pending cases: Over 19,730 cases involving tax implications of ₹1.45 lakh crore were pending investigation.
- Registration cancellation issues: Of 14,998 cases studied, show-cause notices were not issued in 6,353 instances, violating legal norms.
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