GST 2.0 reforms: From 4 slabs to 2, simpler tax system ahead

In the last eight years since GST was released, the focus was to expand the compliance and tax base. With the average monthly GST collections in the FY25 and a tax base that exceeds 1.5 Crore, the Prime Minister has come for ‘new generation GST reforms’, as explained on the Independence Day.Now we are ready for GST ratio rationalization, 5%, 12, 18 and 28, four main ratio plates, 5% and 18 will lead to two plates (with a few ‘sin’ products subject to 40%). This means that most products below 12% can attract a lower rate of 5% (including many food and home products) and 28% can be reduced to 18% (including cement and cars). Since more than 70% of the collections come from 18% category, government will significantly increase consumption and economic activity without much affecting its revenues. It will also reduce disputes on product classification and simplify the overall tax structure.
As the new ratio structure is shaped, the GST Council should ensure that it does not form a ‘reverse task’ structure, and if so, the laws are changed to allow the accumulated loans to return. The industry will also need to follow any changes in the ‘anti -complex’ provisions in force until March 31, 2025. In any case, market forces should ensure that the benefits of GST cuts are transferred to consumers.
An exciting Diwali lies in front of us for all of us!