GST 2.0: A Landmark Reform for a 'Viksit Bharat'
UPSC Relevance
Prelims: Indian Economy (Fiscal Policy, Taxation - GST, GST Council, GST Slabs, Inverted Duty Structure, GSTAT); Indian Polity and Governance (Constitutional Bodies - GST Council, Finance Commission).
Mains:
General Studies Paper 2: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure (Functioning of GST Council, State compensation).
General Studies Paper 3: Government Budgeting; Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Inclusive growth.
Key Highlights from the News
GST 2.0 reforms are a direct attempt to address the criticisms and complexities that arose after the 2017 GST implementation.
It has the dual objectives of increasing domestic consumption, which is a major driver of India's economic growth, and making it easier to do business to attract investment.
Objectives and Potential Benefits vs. Challenges of GST 2.0:
Benefits:
For Consumers: Lowering the price of essential goods will help reduce the cost of living for common people.
For Industry & MSMEs: A simplified tax structure will reduce compliance burden. Resolving the inverted duty structure will improve working capital.
For the Economy: Increased consumption will accelerate economic growth. A simpler tax structure will attract foreign investors.
For Governance: The establishment of GSTAT will help resolve tax disputes quickly.
Challenges:
Revenue Loss for States: With the 5-year compensation period ending, these tax reliefs will adversely affect state revenues.
Fiscal Implications for Centre: The central government's revenue will also decrease in the short term. This could potentially increase the fiscal deficit.
Passing on the Benefits: Companies must ensure that the benefit of tax relief is passed on to consumers. This requires a strong monitoring mechanism.
Balanced View: GST 2.0 is a decisive and bold step in India's indirect tax structure.
It is likely to benefit both consumers and industries.
Simplifying the tax structure, resolving issues like inverted duty structure, and establishing GSTAT will be a significant asset for the country's long-term economic growth.
However, the success of these reforms will depend on their implementation.
Concerns regarding state revenue loss are expected to be resolved by the 16th Finance Commission.
If the benefits of tax relief reach the common people and the new system is efficiently implemented, it will be a major leap towards the goal of "Developed India."
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