GST 2.0 A landmark overhaul

India's Goods and Services Tax (GST) regime is undergoing its most significant transformation since its inception in 2017.

- DIPAK MONDAL @New Delhi

Dubbed GST 2.0, this comprehensive set of reforms, announced after the 56th GST Council meeting on September 3, aims to simplify the tax structure, ease compliance, boost consumption, and fuel economic growth ahead of the festival season. The changes come into effect from September 22.

We break down for you the key changes, their implications, and the challenges that lie ahead.

The genesis: A promise from Red Fort The journey to GST 2.0 began with a promise. In his Independence Day address, Prime Minister Narendra Modi announced from the ramparts of the Red Fort his government's intent to usher in next-generation GST reforms by Diwali. Terming it as a gift to the nation, the PM pledged reforms that would reduce the tax burden on the common man and provide a direct boost to economic activity. This set the stage for the GST Council's decisive meeting on September 3, where months of deliberation by a Group of Ministers (GoM) on rate rationalisation were finally put to work.

In an interview to a media house, Finance Minister Nirmala Sitharaman said the seeds of the major overhaul were sowed by Prime Minister Narendra Modi during a conversation eight months ago, when he asked her to do something with the GST rules (for ease of doing business) and later with the rates.

Three-pillar approach The reforms were based on three core pillars—structural changes, rate rationalisation and ease of living and doing business.

The structural changes include addressing long-standing issues like the inverted duty structure (where inputs are taxed higher than finished products) and resolving classification disputes. Rate rationalisation involves moving from a complex multi-slab system to a simplified two-rate structure for the vast majority of goods and services; and ease of living and doing business involves implementing process reforms to make compliance simpler, faster, and more predictable for businesses, especially MSMEs and exporters.