GST 2.0: A tax reform that could deliver a more competitive India

A structural rework of this tax regime would serve people well and also boost the country's economy

- CHANDRAJIT BANERJEE is director general, Confederation of Indian Industry.

The announcement of next-generation goods and services tax (GST) reforms by India's Prime Minister Narendra Modi on the occasion of our 79th Independence Day is a landmark moment for the nation.

Eight years after the historic implementation of GST, which subsumed a complex web of indirect taxes into a unified system, this reform is ready for its second phase. The new agenda, centred on a structural revision aimed at rate rationalization and ease of living, promises to further consolidate India's economic transformation and deepen the foundations of Atmanirbhar Bharat. It is in this spirit that the Prime Minister has heralded GST 2.0.

GST 2.0 would not only address long-standing challenges, but also position India's indirect tax architecture well to meet the aspirations of a fast-growing economy that is seeking to expand its global footprint.

One of the pressing concerns over the current GST regime has been inverted duty structures in several sectors, where inputs attract higher taxes than final products. This anomaly has resulted in the accumulation of unutilized input tax credits, raising costs for industry and creating distortions in value chains. By promising to correct these structures, the government has signalled strong support for domestic value addition, competitiveness and 'Make in India.'