GST 2.0: Experts Push for Lower Slabs, Better Compliance

New Delhi, August 18, 2025 – The Goods and Services Tax (GST), introduced on July 1, 2017, was one of the biggest tax reforms in India’s history. It replaced a complex web of central and state taxes with the vision of creating a unified market under the slogan “One Nation, One Tax.” While GST has helped improve tax collection and reduce inefficiencies, several challenges remain. Industry experts, taxpayers, and policymakers believe that the next wave of GST reforms must focus on simplifying tax rates, boosting compliance, and resolving disputes fairly.

Why Simplifying GST Rates Is Crucial

India’s GST currently has multiple tax slabs – 5%, 12%, 18%, and 28% – along with special cesses on luxury and sin goods like tobacco, alcohol, and aerated drinks.

This multiple-rate structure often creates confusion. For example, a packet of biscuits might attract 18% GST, while bread is exempt. Similarly, footwear priced below ₹100 is taxed at 5%, but above ₹100 it is taxed at 18%. Such distinctions confuse both traders and consumers.
Classification disputes are common. Businesses frequently face notices from tax officials over whether their product falls under one slab or another.

Experts argue that moving towards a two-rate system – one standard rate and one higher rate for luxury/sin goods – would reduce disputes. It would also improve consumer trust because people will clearly understand what they are paying.

Globally, countries with simpler GST or VAT systems have higher compliance and fewer disputes. India can learn from such examples.

Making GST Compliance Easier

One of the promises of GST was reducing the compliance burden. However, many small businesses say the current system still feels complicated.

Businesses must file monthly returns, which becomes a heavy task for micro and small enterprises.
Technical glitches on the GSTN portal add to the frustration. Even large companies complain of server downtime or mismatched invoices.
Fear of penalties discourages smaller traders from registering under GST.

The government has tried to simplify things by introducing QRMP (Quarterly Return Monthly Payment) for small taxpayers and pre-filled returns for some businesses. But experts believe more reforms are needed.

Possible solutions include:

Simplified filing – A single annual return for small taxpayers could reduce stress.
Better IT infrastructure – A stronger, more reliable GSTN system would prevent filing delays.
Educational drives – Many small traders lack awareness about GST benefits and procedures. Training and support can boost voluntary compliance.

Dispute Resolution: A Major Challenge

GST disputes often arise from issues like classification, valuation, and input tax credit (ITC) claims. The problem is not just the number of disputes but also how long they take to resolve.

Currently, many businesses face delays in GST appellate tribunals.
Differing interpretations of the law by state authorities create further complications.
Prolonged disputes discourage investment, especially for multinational companies.

Reforms should include:

Setting up more GST appellate tribunals across the country.
Strict timelines for disposing of appeals.
Independent panels with representation from government, judiciary, and industry experts.

Faster and fairer dispute handling will give businesses the confidence to invest without fear of long legal battles.

Balancing State Revenues and Consumer Interests

A big challenge of GST has been state revenue compensation. Initially, the central government promised states compensation for any shortfall for five years. But after 2022, disputes between states and the Centre increased.

Some states demand higher GST rates to cover revenue gaps. However, this directly impacts consumers, leading to higher prices for essentials and services.

Experts suggest:

Expanding the tax base rather than increasing rates.
Bringing petroleum, electricity, and real estate under GST in a phased manner. This will make the system more comprehensive.
Using technology to detect tax leakages and prevent fake invoicing.

If more businesses comply honestly, revenues will rise without burdening the common man.

Supporting Small Businesses and Startups

Small businesses are the backbone of the Indian economy, but many feel burdened under GST. While larger companies can afford compliance teams, micro-enterprises often struggle.

Notices for minor errors discourage entrepreneurs.
Refund delays hit the cash flow of exporters and startups.
Fear of penalties prevents many from registering.

Reforms should:

Increase threshold limits for mandatory registration.
Offer handholding programs and GST helpdesks.
Simplify refunds for exporters to boost “Make in India.”

By supporting small businesses, GST can become a tool for growth rather than a burden.

Technology: The Future of GST

Technology can be a game changer for GST compliance and enforcement.

AI and data analytics can track suspicious patterns like mismatched invoices and fake companies.
Blockchain could create tamper-proof transaction records, reducing fraud.
Integration with other government systems (like Income Tax and Customs) can prevent tax evasion.

However, experts caution that too much reliance on tech without human oversight may harass genuine taxpayers. A balanced approach is essential.

Consumer Perspective: Transparency Matters

For ordinary citizens, GST reform must mean clarity and fairness.

When the government reduces GST rates, businesses must pass on the benefit to consumers. However, anti-profiteering rules have often been weakly enforced.
Simplifying rates will make bills easier to read. Consumers will know exactly how much tax they are paying.

Transparency builds trust in the system. If citizens see GST as fair and simple, compliance will rise automatically.

Global Lessons for India

Several countries have simplified their VAT or GST systems over the years:

Singapore has a single GST rate of 9%, which is easy to understand and implement.
Australia uses a uniform GST of 10% with very few exemptions.
Canada has federal and provincial GST, but the slabs remain limited.

India can adapt these lessons while keeping in mind its diverse economy and social needs.

The Road Ahead

The government has hinted at major GST reforms in 2025. The upcoming GST Council meetings are expected to discuss rate rationalization, dispute resolution mechanisms, and technology-driven compliance.

If implemented correctly, these reforms could transform GST into a simpler, more efficient, and more transparent tax system. It will strengthen state revenues, improve ease of doing business, and ensure that consumers are treated fairly.