On the occasion of the 79th Independence Day, Prime Minister Shri Narendra Modi reiterated the transformative impact of the Goods and Services Tax (GST), implemented in 2017, calling it one of India’s landmark economic reforms. The Prime Minister highlighted the government’s focus on ushering in the “next generation of GST reforms” aimed at benefitting the common man, farmers, middle class, and micro, small and medium enterprises (MSMEs), as part of the broader vision of building an Atmanirbhar Bharat.
The Central Government has presented its detailed reform proposal to the Group of Ministers (GoM) constituted by the GST Council. The reforms are structured around three pillars — structural reforms, rate rationalisation, and ease of living — with the objective of simplifying the GST framework, reducing disputes, and ensuring greater stability in the tax system.
Pillar 1: Structural Reforms
The proposed structural reforms aim to address long-standing issues in GST implementation:
- Inverted Duty Structure Correction: Aligning input and output tax rates to minimise the accumulation of unutilised input tax credit, thereby supporting domestic manufacturing and value addition.
- Resolving Classification Disputes: Streamlining rate structures to reduce ambiguities and litigation, and promoting uniformity across sectors.
- Stability and Predictability: Ensuring long-term clarity on GST rates and policy direction to boost industry confidence and facilitate better business planning.
Pillar 2: Rate Rationalisation
The Centre’s rate rationalisation plan focuses on making GST simpler and more equitable:
- Reduction of Taxes on Common and Aspirational Goods: Aimed at enhancing affordability and boosting consumption across socio-economic classes, particularly for essential and aspirational goods.
- Fewer Tax Slabs: Moving towards a simplified two-slab GST structure — standard and merit — with special rates reserved only for select items.
- Utilising Fiscal Space Post-Compensation Cess: With the end of the GST compensation cess, the government now has greater flexibility to adjust rates for long-term fiscal sustainability.
Pillar 3: Ease of Living
Recognising the need to reduce compliance burden and improve taxpayer experience, the government proposes:
- Seamless Registration: Technology-driven, time-bound registration processes for small businesses and startups.
- Pre-Filled Returns: Minimising manual interventions and reducing mismatches through automated, pre-filled GST returns.
- Faster Refunds: Automated and expedited refund processes for exporters and taxpayers affected by inverted duty structures.
Cooperative Federalism at the Core
The Centre emphasised its commitment to working closely with States to build a broad-based consensus before implementing the reforms. The GST Council will deliberate on the GoM’s recommendations in its next meeting, with the aim of enabling early adoption within the current financial year.
“India’s GST must evolve into a simple, stable, and transparent tax system — one that strengthens the formal economy, supports inclusive growth, and enhances ease of doing business,” the Prime Minister stated.
With these reforms, the government aims to reinforce GST’s role as a driver of economic growth, while ensuring that the benefits reach every segment of society.
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Mariya is the Senior Editor at Juris Hour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
