GST 2.0: A reform that has gone deeper than expected

The Goods and Services Tax (GST) Council has finally spoken its mind about the GST 2.0 package of reforms mooted by the Centre and earlier adopted by the Group of Ministers (GoM) tasked with the work of rate rationalization.

- VIVEK JOHRI

Going by reports, the discussions were full-throated and the endorsement unanimous. The council deserves plaudits for not dithering in blessing such a comprehensive reform agenda with far-reaching effects, despite concerns about a likely 'loss' of revenue.

Looked at closely, the agenda reflects the work of not one, but three GoMs, the other two being on the compensation cess and on life as well as health insurance.

This decision has been hailed by stakeholders and commentators with equal enthusiasm for good reason. At the outset, the relief offered by way of rate cuts is deeper and much more extensive than expected.

The exercise has not been confined to the mere abolition of two rate slabs—12% and 28%—and the re-slotting of those goods and services in the 5% or 18% slabs. Goods and services have also been shifted from the 18% slab to 5% where necessary. In the realm of indirect taxes, changing the categorization of individual goods or services from one rate slab to another is usually frowned upon as arbitrary. This is far from it. What has been attempted in this instance has three very clear policy underpinnings.