Background
On 15th August 2025, during India’s 79th Independence Day address, the Hon’ble Prime Minister outlined a bold vision for the future of India’s tax system. At the heart of this vision lies GST 2.0—a next-generation framework aimed at simplicity, transparency, and citizen-centric compliance.
Key Pillars of Reform
1. Structural Corrections
- Inverted Duty Structure: Plan to align input and output GST rates, expand refund eligibility, and ease liquidity pressures in sectors like textiles, edible oils, and footwear.
- Classification Issues: Streamlining goods vs. services disputes to cut down litigation.
- Stability & Predictability: Long-term clarity on tax rates to improve business planning.
2. Rate Rationalisation
- Moving from four slabs (5%, 12%, 18%, 28%) to just two main slabs:
- 5% for essentials and mass-consumption goods
- 18% for most other goods
- 40% slab reserved for sin/luxury goods (tobacco, pan masala, luxury cars, etc.).
- Likely impact: lower prices on items like fruit juices, ghee, toys, mobiles, while high-end goods shift from 28% to 18%.
3. Ease of Living (Compliance Simplification)
- Digital registration, reducing delays in verification.
- Pre-filled GST returns to reduce mismatches and disputes.
- Automated, faster refunds to improve working capital flows, especially for MSMEs and exporters.
Analysis
- Reforms target anomalies (e.g., inverted duty) that have burdened industries for years.
- Two-rate structure would simplify compliance and boost demand.
- Digitisation will reduce manual intervention, lower compliance costs, and improve trust in the system.
Key Takeaway
If implemented well, GST 2.0 could transform India’s tax regime into a simpler, predictable, and globally benchmarked system. It strengthens the Atmanirbhar Bharat vision, promises relief to businesses and consumers, and sets India up as a model for tax reform in emerging economies.
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(The author is a practicing advocate, Co-Founder and Legal Head of RB LawCorp.
He specializes in GST law. Suggestions or queries can be directed to
ashsharma@rblawcorp.in. The views expressed in this article are strictly
personal.)
