GST 2.0: A Leap Towards Tax Simplification and Market Formalisation
The government's introduction of GST 2.0 aims to ease household tax burdens, empower MSMEs, and propel India closer to a unified tax regime. It seeks to triple 5% taxed items and improve exempt goods' share, boosting consumer purchasing power. Despite initial revenue loss, long-term benefits include expansion of the formal economy.
- Country:
- India
The government's announcement of GST 2.0 promises significant changes for the Indian taxation landscape. A report by FICCI's CASCADE suggests that the overhaul will triple the number of items taxed at 5%, a shift that is expected to alleviate the tax burden on households and foster formalisation among businesses.
Rural and urban households will benefit from a substantial rise in the share of exempt and merit goods in their consumption, translating into more disposable income and fueling a boost in discretionary spending on services and local businesses. Meanwhile, GST 2.0 aims to simplify tax rates and address distortions affecting MSMEs, empowering them in the process.
Although the reform may initially result in revenue losses, enhanced compliance and increased formal sector participation are anticipated to offset this. Indirect tax collections have surged under GST 1.0, signaling a broader push towards formal economic participation. By reducing arbitrage and dampening illicit trade, GST 2.0 aims to strengthen consumer safety and bolster legitimate businesses.
(With inputs from agencies.)
Google News