In News:

The Government of India launched GST 2.0, marking a significant revamp of the Goods and Services Tax framework. Prime Minister Narendra Modi described the initiative as the “GST Bachat Utsav”, highlighting its focus on savings, simplicity, and growth.

Overview

• GST 2.0 represents the most comprehensive reform since the introduction of the Goods and Services Tax in 2017.
• It focuses on rationalising tax rates, reducing compliance burden, and boosting consumption and investment by lowering tax rates on more than 375 items.

Objectives

• Enhance household savings: By cutting rates on essential goods and services, it seeks to leave more disposable income with consumers, thereby stimulating demand.
• Simplify the tax framework: Aligns similar goods under the same slab to minimise disputes and litigation.
• Promote ease of doing business: Reduces procedural complexities and enhances transparency through digital solutions.

Key Features

• Simplified Tax Structure:Moves towards a broad two-slab system—5% (merit rate) and 18% (standard rate)—with a 40% slab for demerit or luxury goods.
• Consumer-Centric Relief:Tax reductions on essential food items, life and health insurance, and beauty and wellness services.
• Technology-Driven Compliance:Introduces digital registration, pre-filled returns, and automated refund systems, including 90% provisional refunds for Integrated Dispute Settlement (IDS) cases.
• Input-Output Correction:Aligns related goods under the same tax bracket to avoid input-output tax mismatches.
• Support for Key Sectors:Rate cuts to encourage investment and growth in textiles, agriculture, construction, and services industries.

Revised Tax Slabs

Significance: GST 2.0 is expected to spur demand, enhance compliance, and boost industrial growth, positioning India’s indirect tax system among the most simplified globally.