When Narendra Modi reiterated GoI's next phase of GST reform that he had announced on August 15 at the ET World Leaders Forum on Saturday with his promise to unleash an 'arsenal of reforms', the signal was clear: time had come for a deeper, more meaningful reform of one of India's most ambitious tax transformations. Since the rollout in 2017, GST has achieved some of its key objectives, such as unifying the indirect tax structure, reducing cascading effect and enhancing compliance. However, GST continues to be a costly, compliance-heavy - and often frustrating - experience for many businesses and consumers.
If GST 1.0 was about integration and establishing a common market, GST 2.0 must be about simplification, fairness and restoring public trust. The system must now evolve into one that not only collects revenue efficiently, but also delivers value by reducing burden, ensuring transparency, and making the taxpayer feel seen, heard and respected. To achieve this, GoI must prioritise the following core areas in the upcoming phase of reforms:
Palpable benefits When tax rates were reduced in Nov 2017, consumers rarely saw gains reflected in their bills, even though anti-profiteering provisions existed. With India now eyeing a 2-slab GST structure - 5% and 18% (with a 40% levy for 'sin goods') - GST 2.0 must ensure that the benefit of tax reduction is passed on to customers by reintroducing anti-profiteering provisions (with proper safeguards to take care of challenges faced earlier) and by fetching real-time data and automated checks.
Penalties for profiteering must be strict, outcomes should be transparent and the process should be tech-driven. Strict enforcement of anti-profiteering provisions will help the system win back consumer confidence.
Timely refunds For exporters and businesses operating under an inverted duty structure, any delay in GST refunds paralyses cash flows. In reality, taxpayers often wait months, or even years, with little recourse or explanation, despite GST rules specifying timelines for refunds.
GST 2.0 must implement a 'refund in 60 days' guarantee, backed by automatic interest payouts in case of delays. Timely refunds will not only improve liquidity for businesses but will also send a strong signal that the system is efficient, responsive and trustworthy.
End retrospective cancellation A major flaw in the current GST system is the retrospective cancellation of supplier registrations. This is frequently used to deny input tax credits to buyers, often long after transactions have been concluded. This undermines confidence, penalises genuine buyers and leads to endless litigation. GST 2.0 must end this practice once and for all.
Unless there is clear evidence of fraud or wilful suppression, retrospective cancellation should not be permitted. Even in such instances, genuine buyers should be protected, and any action against them should only follow after appropriate measures have been taken against the fraudulent supplier. A tax system must be fair and predictable, not a gamble.
Extended time limits Tax authorities routinely invoke the extended limitation period when issuing notices, often treating clerical errors or uncontrollable factors as fraud or wilful suppression. This creates a climate of fear and deters entrepreneurship. GST 2.0 must define clear and stringent criteria for invoking the extended time period, placing the burden of proof on the department.
It must differentiate between genuine mistakes or uncontrollable circumstances - like retrospective cancellation of a supplier's registration - and intentional fraud or suppression. This clarity will not only reduce litigation but also foster a more cooperative, compliance-driven ecosystem.
Going faceless One of the silent, yet transformative, reforms in India's I-T regime has been the introduction of faceless assessments. This has significantly reduced discretion, harassment and corruption. GST must follow suit.
From issuance of notices to hearings and adjudication, the process should be digitised and anonymised, ensuring consistency, fairness and efficiency. Physical interaction should be the exception, not the norm, and limited only to cases involving suspected fraud.
GST 2.0 should represent a milestone of maturity, promoting ease of doing business, reinforcing taxpayer rights and supporting economic development. When consumers experience price reductions in line with tax cuts, businesses receive prompt refunds and are shielded from arbitrary actions, and disputes are resolved fairly and impartially, public trust in the GST system will naturally strengthen.
The updated framework must be viewed as a renewed commitment to fairness, simplicity and trust in taxpayers. Only then can GST evolve from a complex tax mechanism into a catalyst for inclusive and sustainable economic growth.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
If GST 1.0 was about integration and establishing a common market, GST 2.0 must be about simplification, fairness and restoring public trust. The system must now evolve into one that not only collects revenue efficiently, but also delivers value by reducing burden, ensuring transparency, and making the taxpayer feel seen, heard and respected. To achieve this, GoI must prioritise the following core areas in the upcoming phase of reforms:
Palpable benefits When tax rates were reduced in Nov 2017, consumers rarely saw gains reflected in their bills, even though anti-profiteering provisions existed. With India now eyeing a 2-slab GST structure - 5% and 18% (with a 40% levy for 'sin goods') - GST 2.0 must ensure that the benefit of tax reduction is passed on to customers by reintroducing anti-profiteering provisions (with proper safeguards to take care of challenges faced earlier) and by fetching real-time data and automated checks.
Penalties for profiteering must be strict, outcomes should be transparent and the process should be tech-driven. Strict enforcement of anti-profiteering provisions will help the system win back consumer confidence.
Timely refunds For exporters and businesses operating under an inverted duty structure, any delay in GST refunds paralyses cash flows. In reality, taxpayers often wait months, or even years, with little recourse or explanation, despite GST rules specifying timelines for refunds.
GST 2.0 must implement a 'refund in 60 days' guarantee, backed by automatic interest payouts in case of delays. Timely refunds will not only improve liquidity for businesses but will also send a strong signal that the system is efficient, responsive and trustworthy.
End retrospective cancellation A major flaw in the current GST system is the retrospective cancellation of supplier registrations. This is frequently used to deny input tax credits to buyers, often long after transactions have been concluded. This undermines confidence, penalises genuine buyers and leads to endless litigation. GST 2.0 must end this practice once and for all.
Unless there is clear evidence of fraud or wilful suppression, retrospective cancellation should not be permitted. Even in such instances, genuine buyers should be protected, and any action against them should only follow after appropriate measures have been taken against the fraudulent supplier. A tax system must be fair and predictable, not a gamble.
Extended time limits Tax authorities routinely invoke the extended limitation period when issuing notices, often treating clerical errors or uncontrollable factors as fraud or wilful suppression. This creates a climate of fear and deters entrepreneurship. GST 2.0 must define clear and stringent criteria for invoking the extended time period, placing the burden of proof on the department.
It must differentiate between genuine mistakes or uncontrollable circumstances - like retrospective cancellation of a supplier's registration - and intentional fraud or suppression. This clarity will not only reduce litigation but also foster a more cooperative, compliance-driven ecosystem.
Going faceless One of the silent, yet transformative, reforms in India's I-T regime has been the introduction of faceless assessments. This has significantly reduced discretion, harassment and corruption. GST must follow suit.
From issuance of notices to hearings and adjudication, the process should be digitised and anonymised, ensuring consistency, fairness and efficiency. Physical interaction should be the exception, not the norm, and limited only to cases involving suspected fraud.
GST 2.0 should represent a milestone of maturity, promoting ease of doing business, reinforcing taxpayer rights and supporting economic development. When consumers experience price reductions in line with tax cuts, businesses receive prompt refunds and are shielded from arbitrary actions, and disputes are resolved fairly and impartially, public trust in the GST system will naturally strengthen.
The updated framework must be viewed as a renewed commitment to fairness, simplicity and trust in taxpayers. Only then can GST evolve from a complex tax mechanism into a catalyst for inclusive and sustainable economic growth.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
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