{"id":64763,"date":"2025-09-23T11:24:50","date_gmt":"2025-09-23T05:54:50","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=64763"},"modified":"2025-09-23T11:24:50","modified_gmt":"2025-09-23T05:54:50","slug":"gst-2-0-rate-rationalisation-and-structural-reforms","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/gst-2-0-rate-rationalisation-and-structural-reforms\/","title":{"rendered":"GST 2.0 &#8211; Rate Rationalisation and Structural Reforms"},"content":{"rendered":"<h2 style=\"text-align: justify;\"><b>GST 2.0 Latest News<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The <\/span><b>Goods and Services Tax (GST)<\/b><span style=\"font-weight: 400;\">, India\u2019s landmark <\/span><b>indirect tax reform<\/b><span style=\"font-weight: 400;\"> launched in July 2017, has <\/span><b>undergone multiple tweaks<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The latest round of reforms, effective September 22, 2025, termed \u201c<\/span><b>GST Bachat Utsav<\/b><span style=\"font-weight: 400;\">\u201d by the Prime Minister of India, aims at <\/span><b>simplifying the rate structure.<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This will resolve classification disputes, correct inverted duty structures, and boost household consumption.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Key Features of GST 2.0<\/b><\/h2>\n<ul>\n<li><b>Rate rationalisation:<\/b><span style=\"font-weight: 400;\">\u00a0<\/span>\n<ul>\n<li><span style=\"font-weight: 400;\">Transition from a 4-slab system (5%, 12%, 18%, 28%) to a 2-slab system &#8211;\u00a0<\/span>\n<ul>\n<li><b>Merit rate:<\/b><span style=\"font-weight: 400;\"> 5% (516 items, mostly food items, agricultural machinery, medical devices).<\/span><\/li>\n<li><b>Standard rate: <\/b><span style=\"font-weight: 400;\">18% (640 items, industrial goods, small cars, bikes).<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><b>Special slabs:<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">0.25% for rough diamonds, semi-precious stones.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">1.5% for cut and polished diamonds.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">3% for precious metals like gold, silver, pearls.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">40% for sin\/de-merit goods like pan masala, tobacco, aerated beverages, yachts, luxury cars.<\/span><\/li>\n<li><b>12% slab abolished<\/b><span style=\"font-weight: 400;\">, except for bricks (retained under special composition scheme).<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Services covered:<\/b><span style=\"font-weight: 400;\"> Exemptions and cuts &#8211;\u00a0<\/span>\n<ul>\n<li><b>Life and health insurance<\/b><span style=\"font-weight: 400;\"> \u2013 exempted from GST (earlier 18%).<\/span><\/li>\n<li><b>Hotels <\/b><span style=\"font-weight: 400;\">with per day tariff rate of below or equal to Rs 7,500 have seen a cut in GST rate to 5% without ITC (input tax credit) from 12% with ITC earlier.<\/span><\/li>\n<li><b>Salons, spas, wellness services<\/b><span style=\"font-weight: 400;\"> \u2013 reduced from 18% to 5%.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Passing benefits to consumers:<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">The Finance Ministry has asked its officers in the field to <\/span><b>compile monthly data reports<\/b><span style=\"font-weight: 400;\"> on price change of commodities pre and post-GST rate rationalisation.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">These reports will be compiled by the Ministry <\/span><b>for the next six months<\/b><span style=\"font-weight: 400;\"> in a bid to ensure that <\/span><b>the benefits get passed on to the consumers<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Economic Rationale of GST 2.0<\/b><\/h2>\n<ul>\n<li><b>Boost to household consumption:<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">Lower GST rates are expected to <\/span><b>increase disposable income, spur demand, and incentivise investments.<\/b><\/li>\n<li><span style=\"font-weight: 400;\">The government aims to offset revenue loss from cuts on over 375 items through higher consumption.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Correcting Inverted Duty Structure (IDS):<\/b>\n<ul>\n<li><span style=\"font-weight: 400;\">IDS occurs when the<\/span><b> input tax rate <\/b><span style=\"font-weight: 400;\">(on raw materials or services) is <\/span><b>higher than the output tax rate<\/b><span style=\"font-weight: 400;\"> (on the finished product), leading to capital blockage.\u00a0<\/span><\/li>\n<li><b>Example<\/b><span style=\"font-weight: 400;\">: If textile fabric attracts a 12% GST (input tax), but the finished garments attract only an 5% GST (output tax), this creates an IDS.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">Relief provided by <\/span><b>aligning <\/b><span style=\"font-weight: 400;\">many inputs and outputs into the same slab.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Implementation and Compliance Reforms<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Simplified registration<\/b><span style=\"font-weight: 400;\"> \u2013 more technology-driven and time-bound.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Pre-filled returns <\/b><span style=\"font-weight: 400;\">to minimise manual errors and mismatches.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Automated refund process<\/b><span style=\"font-weight: 400;\"> for exporters and IDS cases.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Amendment to CGST Act 2017 (Section 54(6))<\/b><span style=\"font-weight: 400;\">: This will provide for 90% provisional refund for IDS cases, similar to zero-rated supplies.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Challenges<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Revenue concerns:<\/b><span style=\"font-weight: 400;\"> For Centre and States despite expected consumption boost.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>IDS issues<\/b><span style=\"font-weight: 400;\">: Persist in bicycles, tractors, fertilisers, textiles, corrugated boxes, etc.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Enforcement gap<\/b><span style=\"font-weight: 400;\">: No legal provision to prevent profiteering, reliance on monitoring only.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Way Forward<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Address residual IDS issues and ensure benefit transfer to consumers through stricter anti-profiteering mechanisms.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Strengthen state finances<\/b><span style=\"font-weight: 400;\"> via improved compliance and digital monitoring.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Periodic slab reviews<\/b><span style=\"font-weight: 400;\"> to maintain balance between revenue neutrality and ease of business.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Enhance trust-based compliance<\/b><span style=\"font-weight: 400;\"> by sustaining tech-enabled registration, return filing, and refunds.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Conclusion<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>GST 2.0 marks a major restructuring <\/b><span style=\"font-weight: 400;\">of India\u2019s indirect tax regime, focusing on simplification, boosting consumption, and improving compliance.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">While it promises relief to households and businesses, addressing challenges will <\/span><b>determine the long-term success of these reforms<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><b>Source: <\/b><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/gst-2-changes-consumers-industry-10264788\/\" target=\"_blank\" rel=\"nofollow noopener\"><b>IE<\/b><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>GST 2.0, the latest round of reforms, effective September 22, 2025, and termed \u201cGST Bachat Utsav\u201d, aims at simplifying the rate structure.<\/p>\n","protected":false},"author":19,"featured_media":64785,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[2497,60,22,59],"class_list":{"0":"post-64763","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-gst-2-0","9":"tag-mains-articles","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/64763","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=64763"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/64763\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/64785"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=64763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=64763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=64763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}