GST 2.0: Simple and Fair

The Journey

The Goods & Services Tax (GST) implemented in July 2017, is the biggest tax reform in the indirect taxation in India and marked a revolutionary step in India’s economic history. It subsumed a complex web of indirect taxes (levied both by center & states like, Central Excise Duty, Service Tax, Customs Duty, Additional Duties, CST, VAT, Octroi, Entry Tax, Purchase Tax, Luxury Tax, Entertainment Tax etc.) into a unified, destination based taxation system, thus replacing old indirect tax system. GST consolidated most of these central & state taxes into a single, unified tax. The mantra of GST is “one nation, one tax, one market’’; it aimed to streamline taxation, eliminate cascading effects, and foster unified market. Over eight years, GST has enhanced the tax base & boosted revenue collection – from a taxpayers base of around 65 lacs in 2017, the number touches over 1.50 crore registered business today and monthly revenue has crossed Rs.2.10 lacs crore in April, 2024 alone- while enhancing digital compliance through common electronic platform GST Portal managed & maintained by GSTN

(Goods & Services Tax Network) without any physical interface between taxpayer & tax administrator. While it has achieved significant successes during past 8 years in formalizing the economy and creating a common national market, the journey has been punctuated by operational challenges & complexities. However, over this period, GST has undergone significant transformations, moving from initial teething problems to a more mature tax system. The financial years 2024-25 & 2025-26 have been particularly eventful, marked by several important amendments, compliance challenges, and policy shifts aimed at refining the tax structure.

The key developments in these eight years of GST are broadly divided into three phases with initial implementation phase (2017-2019) for introduction of a unified tax system replacing multiple indirect taxes, establishment of GST council as the governing body for taking decisions, phased implementation of periodical return filing system and gradual expansion of tax base. The 2^nd Consolidation Phase (2019-2022) was with introduction of e-Invoicing in a phased manner initially started for large & medium taxpayers, implementation of QRMP scheme for small taxpayers, rationalization of tax rates & slabs and introduction of stricter compliance measures to improve compliance rate from taxpayers. The 3^rd one is called the maturity phase (2022-2025) with enhanced focus on technology driven compliance, expansion of e-invoicing to small taxpayers and introduction of GST Amnesty schemes and strengthening of anti-evasion measures.

The Reforms

The concept of GST 2.0 represents the next evolutionary phase, aimed at refining the existing framework into a more simpler, more efficient, and taxpayer friendly regime. The primary object of GST 2.0 is to simplify the tax structure itself. The current multi-tiered tax rate system (0%,5%,12%,18% & 28%) has been a source of confusion and classification disputes. A key proposal & main objective is to rationalize these multiple tax slabs into a simpler, three rate structure; a merit rate for essential goods, standard rate for the majority of goods & services, and a demerit rate for sin & luxury goods.

This will definitely reduce compliance burdens, minimize ambiguities, and make the system more equitable & efficient. A major thrust of GST 2.0 will be on technology integration and automation. The vision extends the success of GST Network (GSTN) by leveraging advanced technologies like Artificial Intelligence (AI) & Machine Learning (MI). The next generation system aims to automate GST Returns filing and refund process further, moving towards truly a faceless and frictionless assessment. The technology could be used pre-populate returns, flag discrepancies in real-time , and combat fraudulent Input Tax credit (ITC) claims more effectively, ensuring revenue protection. Built on three pillars - Structural reforms, rate rationalization , and procedural simplification-

GST 2.0 transforms the regime into citizen-centric, growth oriented framework. At its core is a simplified two slab tax rate structure; 5% for essentials & intermediates, 18% for most goods & services ( replacing the 12% and 28%) slabs. The compensation cess, introduced post-2017 to aid states during revenue shortfalls, will phase out by March, 2026, freeing resources for broader economic levers. Nil GST rate now applies to critical essentials UHT milk, paneer, Indian breads (roti, chapatti, khakra), soaps, toothpastes, erasers, and even Individual life and health insurance policies. Packaged foods like juices, butter, nuts, pasta and medical supplies (oxygen concentrators, diagnostic kits, bandages) drop to 5% slashing grocery bills by upto 13% for households.

The auto sector, small cars & buses, two-wheelers having less than 350 cc engine, three-wheelers, and parts shift to 18% from 28%. Exporters benefit from faster refunds and low-risk registration process, improving cash flow in a destination-based taxation system. By making essentials affordable, it empowers the poor and middle class; by supporting manufacturing sector, it aligns with self-reliance. Industries like Mahindra & Mahindra, Luminous Power have already pledged to pass on benefits, amplifying consumer savings during festivities.

Compliance is another critical area for reform. The complex interplay of different GST Returns (GSTR-1,GSTR-2A/2B,GATR-3B etc.) would be streamlined. The focus will be on strengthening the invoice matching system (IMS) to be more real-time and automated, ensuring that ITC is availed only when the supplier has duly paid the tax. This would enhance the transparency, accuracy and trust in the system while reducing the compliance burden for honest taxpayers. The much awaited GST Appellate Tribunal (GSTAT) Portal has finally been launched on 24^th September by the Hon’ble Finance Minister of India to expedite resolution of disputes between businesses and the tax department and ensure fairness in delivering justice with the operationalization of GSTAT, businesses will be able to file their cases on the Portal and these will be taken up for hearing December, 2025 onwards.

Since we are now in the ninth year of GST, the taxpayer must hope for reduced unnecessary litigations & retrospective demands, mandatory issuance of proper & speaking orders for transparency, faster resolution of all pending appeals before appellate authorities, improved ITC reconciliation mechanisms and simplified compliance procedures. The last years amendments and changes in GST law, especially those related to Amnesty Scheme, e- invoicing, ISD mechanisms, QRMP schemes etc. demonstrate the government’s efforts & sincerity to balance enforcement with taxpayer’s facilitation to ease of doing business. As the system matures, the focus should shift towards greater predictability, transparency, responsibility and ease of compliance to fully realize GST’s potential as business – friendly tax regime. The GST is not all about paying tax or filing tax returns, but timely compliance under GST Law is equally important for all taxpayers.

In conclusion, GST 2.0, launched on September 22, 2025 following the 56^th GST Council meetings held on September 3^rd & 4^th, simplifies India’s multiple tax structure from four slabs (5%,12%,18%,28%) to a simple two-tier system (5% & 18%), with 40% special rate for luxury and sin goods only. This biggest ever reform in indirect taxation in India will significantly impact the common man, fuel demand for affordable products & improve living standards. It is not about a complete overhaul but a necessary and logical maturation of existing tax regime. It envisions a system defined by simplicity, technological empowerment, and broader inclusivity. The true hero of this success story has been the federal institution, The GST Council. Its 56 meetings stand as a shining example of the cooperative federalism, where center and the states actively participating and come together to iron out complexities, rationalize tax rates, and simplify procedures based on all stake-holders’ feedback. Initiatives, like the introduction of e-invoicing, IMS, the new GST Returns System, Refund Procedures, and relentless focus on reducing complex costs highlight this adoptive and responsive nature.

By addressing the teething problems of initial rollout and embracing a future-ready approach, GST 2.0 has the potential to unlock the full economic potential of the tax, simplify compliance, reduce costs, boost businesses especially for MSMEs, fostering a more robust and competitive economy. The lower rate of tax on essentials drives demand, while streamlined processes and seamless flow of ITC enhance competitiveness. The digital first approach with every process, from registration to returns filing, audit to assessment, and refund to reimbursement happening online has minimized human interface and promoted ease of doing business. The short term transition challenges exist, but long-term growth and formalization are significant gains and the businesses must pass-on all the benefits of this revolutionary 2.0 tax reforms to the consumers.

 Hamid H. Ganai, designated as All India Master Trainer in GST, presently working as State Taxes Officer in Srinagar