Can GST reform boost the economy sustainably, or will it only have a temporary impact?

The Goods and Services Tax (GST) Council has introduced major reforms in the tax structure—changes many experts believe were long overdue.

- By Kishore Kumar Biswas

Since its rollout in 2017, India's GST regime has faced criticism for being complex and inconsistent with global best practices. Ideally, GST should have one or two uniform rates. Instead, India began with five or six slabs (and effectively more, after exemptions), undermining efficiency and creating compliance difficulties.

Frequent tinkering with rules added to the confusion: GST has been amended nearly 590 times. Rule 89 alone was amended 33 times, Rule 96 twenty-nine times, Rule 43 twenty-three times, and Rule 142 eighteen times.

In its September 3 meeting, the Council streamlined the system to two main slabs—5% and 18%—while introducing a 40% “special rate” on sin and luxury goods such as tobacco, SUVs, yachts, and helicopters. The revised rates took effect from September 22.

Finance Minister Nirmala Sitharaman described the reform as “pro-people,” highlighting relief for labour-intensive industries, farmers, agriculture, and healthcare. Prime Minister Narendra Modi called it "GST 2.0-a double dose of support and growth for the nation."

Mixed sectoral responses