GST 2.0: Expectations & reality

The “One nation, one tax” dream is about to get a big shakeup. Prime Minister Narendra Modi’s Independence Day announcement of a revamped GST 2.0, with a bold new 40% slab, has set off expectations of cheaper goods and simpler compliance.

- Shivaji Sarkar

Like its predecessor, GST 2.0 risks becoming less about rationalisation and more about revenue protection. The new GST structure proposes four slabs — 0%, 5%, 18% and 40% — scrapping the existing 12% and 28% categories for process simplification. Finance Minister Nirmala Sitharaman professes that the new regime would mark the beginning of lower prices in consonance with the government’s move to keep inflation under check.

Merging the 28% slab into 18% will make items like air-conditioners, washing machines, dishwashers, and small cars cheaper. Tractors and some construction contracts may also move to the 5% bracket, providing relief to farmers and infrastructure. Similarly, services like insurance, already burdened with 18% GST, may find reprieve though the government is keen on zero tax on health and life insurance policies.