GST 2.0 Reforms

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Context:

At the 56th GST Council meeting major reforms were announced to simplify rates, ease compliance, and strengthen dispute resolution, marking the launch of GST 2.0.

Relief to Consumers and Key Sectors

Essential Goods Rationalisation: Daily-use products such as soap, toothpaste, hair oil, packaged foods, and kitchenware have been moved into lower tax brackets, easing household expenditure and stimulating demand.
Housing and Infrastructure Boost: Reduction in GST on cement and construction inputs supports the “Housing for All” mission, lowers project costs, and benefits allied industries like steel, paints, and sanitaryware.
Healthcare Access Expansion: Life-saving drugs and critical medical devices are placed under nil or 5% GST, reducing treatment costs and strengthening India’s role as a global hub for affordable medicines.

Support for Exporters and MSMEs

Correction of Inverted Duty Structures: Long-pending anomalies in textiles, fertilizers, and renewables have been resolved, enhancing global competitiveness and reducing import dependence.
MSME Empowerment: The Simplified GST Registration Scheme with automated approvals within three days reduces compliance costs, encourages formalisation, and facilitates market expansion for small businesses.
Trade Facilitation: Removal of refund thresholds on low-value consignments aids exporters, while clarifications on intermediary services and post-sale discounts reduce litigation and align tax rules with business practices.

Institutional and Global Significance

GSTAT Operationalisation: The Goods and Services Tax Appellate Tribunal ensures timely and fair resolution of disputes, strengthening confidence in India’s indirect tax regime.
Streamlined Two-Rate Structure: Adoption of a merit rate (5%), standard rate (18%), and limited de-merit rate (40%) aligns India’s GST with global best practices and enhances ease of doing business.
Signal to Global Investors: Policy predictability and simplified structures position India as a competitive investment destination, reinforcing its role in reconfigured global supply chains.

Practice Question:

“Critically examine the significance of GST 2.0 reforms in strengthening India’s tax framework, with special reference to their impact on consumers, MSMEs, and global competitiveness.” (250 words)

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