GST 2.0: A Transformational Shift in India’s Tax Framework

• The Goods and Sales Tax (GST) Council’s clearance of GST reforms has transformed India’s indirect tax framework.

• The Confederation of Indian Industry (CII) has been advocating for GST 2.0 since December 2024, highlighting the need for rate rationalisation, simpler classification, and reduced compliance friction.

• The reforms have collapsed the old four-slab structure into a simpler set: a low rate of around 5% for essentials, 18% as the standard, and 40% for luxury and sin goods.

• Procedural simplifications have been introduced, including stock adjustments without complete relabelling, clearer classification norms, faster refunds, and easier compliance for small firms.

• For consumers, the benefits are direct and visible, with goods that previously attracted 12% or 18% tax now face 5% or less.

• For industry, particularly MSMEs, the gains go deeper, with input costs declining, litigation reducing, and compliance burdens lightening.

• The CII is engaging with authorities on labelling and packaging adjustments to ensure smooth transition.

• The economy is expected to see multiple ripples, including a boost in consumption, moderate inflation, improved margins for MSMEs, less capital tied up in compliance delays, and a clearer tax regime.

• The CII will work on capacity-building for smaller firms and strong feedback loops to ensure that tax cuts are not “captured” upstream and that consumers actually pay less.

• The trust between government, industry, and consumers is the bedrock of the success of this reform.

Tax reform India is important topic for Civil service exam (WBCS).

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