GST 2.0 |ForumIAS

Source: The post GST 2.0 has been created, based on the article “A nudge to Businesses ” published in “Indian express” on 9 September 2025. GST 2.0

UPSC Syllabus Topic: GS Paper- 3- Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.Context:. Eight years post GST launch, the Government of India is implementing GST 2.0, aimed at simplifying tax structures, enhancing compliance, and supporting long-term revenue growth rather than short-term collection maximisation.

Objectives of GST 2.0:

Simplification of Tax Structure: Streamline GST rates into a simpler slab system (5%, 18%, and 40% for “sinful” and luxury goods).
Ease of Doing Business: Reduce compliance burden on small and medium enterprises (SMEs).
Long-term Revenue Growth: Encourage voluntary compliance and broaden the tax base instead of focusing on immediate revenue maximisation.
Encourage Formalization: Integrate more businesses into the formal economy through targeted reliefs and simplified processes.

Key Features of GST 2.0:

Rate Rationalization: Collapse multiple rates (5%, 12%, 18%, 28%) into simplified slabs of 5%, 18%, and 40% for luxury and demerit goods.
Targeted Reliefs: Special provisions for small businesses (monthly output tax liability under ₹2.5 lakh) to reduce compliance costs.
Technological Integration: Voluntary simplified registration and procedural reforms through the GST Appellate Tribunal (GSTAT) to resolve disputes.
Sectoral Focus: Higher rates on tobacco, aerated drinks, and luxury goods to align public health and revenue objectives.

Potential Impact

Economic: Expected to boost compliance and revenue collection over time, reduce tax disputes, and support ease of doing business.
Social: Taxing “sinful” goods like tobacco may positively affect public health by reducing consumption.
Business: SMEs and exporters benefit from simplified compliance, faster refunds, and lower procedural hurdles.
Implementation Risk: Requires meticulous coordination; past international experiences (e.g., Malaysia) show that poorly implemented reforms can disrupt businesses.