[Answered] The success of GST 2.0 hinges on a bedrock of trust. Examine the governance measures required to build confidence among the government, industry, and consumers for a well-oiled tax system.

Introduction

India’s “Goods and Services Tax (GST), hailed as the biggest tax reform since Independence, contributes nearly 28% of total revenues (Economic Survey 2024), yet its legitimacy depends fundamentally on stakeholder trust.”

Trust Deficit in GST 1.0

1. Multiplicity of slabs and disputes: 4-rate structure caused “classification litigations” and inverted duty structures, disproportionately burdening MSMEs.
2. Compliance overload: Small businesses lacked capacity to handle frequent filings and refund delays.
3. Consumer disconnect: Savings from rate cuts were not always passed on; inflation persisted in essentials.

These issues eroded confidence in the tax architecture, demanding a governance reset in GST 2.0.

Governance Measures to Build Trust in GST 2.0

Institutional Credibility and Transparency

1. Simplified rate structure (5%, 18%, 40%) reduces ambiguity, curbing disputes and improving predictability.
2. GST Council functioning must be federal, participatory, and data-driven, preventing perceptions of central dominance.
3. OECD’s “Best Practices for Consumption Taxes” stress policy stability as a trust-enhancing mechanism.

Consumer Confidence

1. Anti-profiteering enforcement: Ensure firms pass on rate cuts, monitored via DGAP and consumer forums.
2. Price transparency: Mandated disclosure on labels showing “pre- and post-GST price” during transition.
3. Inflation moderation: RBI projects that simplified GST could lower CPI by ~0.3–0.4%, benefiting middle- and lower-income households.

Industry Confidence

1. Ease of compliance: Faster refunds, “One Nation, One Return” system, and GSTN digitisation for automated reconciliation.
2. Litigation minimisation: Pre-ruling authorities, real-time classification guidance, and risk-based audits.
3. Level playing field: MSMEs given simplified quarterly filing, stock adjustment relief, and targeted capacity-building programs (via CII, FICCI).

Government Confidence & Fiscal Sustainability

1. Revenue neutrality: Though short-term loss is projected at “₹70,000–80,000 crore” (CRISIL 2025), buoyancy will recover through higher compliance, consumption, and formalisation.
2. Robust IT backbone: Strengthening GSTN, plugging invoice mismatches with AI-driven analytics (NITI Aayog 2025 report).
3. Feedback loops: A statutory GST Dispute Redressal Authority and periodic rate rationalisation review to resolve bottlenecks.

Citizen–State Compact

1. Trust through fairness: Taxpayer charter ensuring respect, accountability, and grievance redress.
2. Awareness campaigns: CII’s ongoing awareness drives exemplify public-private trust-building.
3. Social contract logic: As per Amartya Sen’s idea of “participatory development,” legitimacy arises when citizens see tangible benefits in reduced costs and better services.

Way Forward

1. GST 2.0 must integrate technology-driven monitoring, continuous dialogue with industry, and citizen-focused accountability.
2. Success hinges on predictability, transparency, and participatory governance—ensuring trust is not merely promised but institutionally secured.

Conclusion

As it is being observed cooperative trust determines systemic success; GST 2.0 can deliver inclusive growth only if governance ensures fairness, transparency, and shared gains.