Journey of Transformative Expansion
The Goods and Services Tax (GST), a landmark reform in India's economy, marks its eighth anniversary today. Over the past eight years, GST has streamlined tax administration, eliminated cascading taxes, improved interstate trade, and formalised the economy, becoming a hallmark of India's ambition to create a seamless, scalable, and sustainable economy.
As GST enters its ninth year, industry stakeholders and experts have identified several key next-phase reforms and priorities for GST in India, often referred to as GST 2.0. These reforms aim to make GST not just structurally sound but also empathetic to the needs of businesses across sizes and sectors.
One of the primary focuses is on expanding the tax base. A major focus is on including petroleum and electricity under GST to broaden the tax net and increase revenue efficiency. Another priority is rationalising the rate structure to reduce the number of tax slabs and create a more balanced and simpler rate structure. This reform aims to reduce confusion, classification disputes, and improve ease of compliance for businesses.
Improved dispute resolution, streamlining audits and investigations, and broadening input tax credit eligibility are also identified as essential steps to make GST more agile and business-friendly. Strengthening and streamlining GST dispute resolution mechanisms is a priority to reduce litigation and improve tax certainty. Simplifying and harmonising audit procedures across tax administrations to make compliance less burdensome has been highlighted by industry. Expanding the scope of input tax credits with minimal restrictions will help businesses optimize working capital and reduce cascading taxes.
Managing the GST compensation cess phase-out is another key concern. With the scheduled end of the compensation cess by March 2026, stakeholders are debating how to secure state revenues and possibly adjust cess rates on demerit goods like tobacco and luxury vehicles to bridge gaps.
Enhancing export liberalisation is identified as a top priority reform, emphasizing measures to facilitate exports under GST to boost India’s trade competitiveness. Continued efforts on automation in GST compliance such as auto-population of tax returns, locking of return forms, and stricter deadlines for filing returns aim to improve accuracy, transparency, and reduce mismatches or fraud.
Industry leaders across sectors have praised GST for making compliance more predictable and aligned with business realities. The formalisation of the economy has expanded the tax base, strengthened fiscal health, and empowered small and medium enterprises (SMEs). According to a Deloitte survey, 85% of industry respondents now view GST positively, up from 59% in 2022.
Initiatives such as the Quarterly Return Monthly Payment (QRMP) scheme, simplified registration, reduced tax collected at source (TCS) rates, and streamlined investigation and audit guidelines have been implemented to benefit MSMEs. Faster and more seamless registration and refund processing are identified as necessary improvements for GST.
GST collections have surpassed `2 lakh crore per month on several occasions, signifying improved compliance and economic resilience. The story of GST is the story of India's ambition to create a seamless, scalable, and sustainable economy, with potential to fuel domestic investment, power business expansion, and further India's journey towards self-reliance, innovation, and global integration.
- To further enhance the seamless and sustainable economy, stakeholders are focusing on expanding the GST tax base by including petroleum and electricity under its ambit, aiming to broaden the tax net and increase revenue efficiency.
- In an effort to create a more balanced and simpler rate structure, there's been a priority set to rationalise the GST rate structure, which aims to reduce confusion, classification disputes, and improve ease of compliance for businesses.
- Strengthening and streamlining GST dispute resolution mechanisms, simplifying and harmonising audit procedures, and expanding input tax credit eligibility are identified as essential steps to make GST more agile, business-friendly, and efficient, thus empowering businesses to optimize working capital and reduce cascading taxes.
