GST 2.0 is expected to almost triple the items taxed at 5 per cent from 54 categories in GST 1.0 to 149 in the new regime, based on a recent study by FICCI CASCADE.
For rural families, the share of exempted and merit goods in their consumption basket will go up dramatically from 56.3 per cent to 73.5 per cent. In urban families, this proportion is expected to increase from 50.5 percent to 66.2 percent.
As a result, the effective GST burden on rural households is expected to come down from 6.03 per cent to 4.27 per cent, while urban households could witness a drop from 6.38 per cent to 4.38 per cent. This means higher disposable incomes for consumers. According to the study, these shifts could lead to monthly savings of between Rs. 58 and Rs. 88 per capita, which is expected to spur discretionary spending on services, retailing, and small enterprise.
The Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (FICCI CASCADE) of the Federation of Indian Chambers of Commerce and Industry, in association with the Thought Arbitrage Research Institute (TARI), flags in its latest report that GST 2.0 is a revolutionary change. It is supposed to strengthen India's indirect tax regime, simplifying life for households and business operations for companies.
Anil Rajput, FICCI CASCADE Chairman, said, "These changes, when implemented, will have long-term implications, not only simplifying the tax burden on commodities but also curbing the incentive to carry on illicit trade by minimizing the price differentials that fuel it. This will strengthen GST's ability as a growth facilitator as well as a bulwark against the parallel economy."
For businesses, especially MSMEs, GST 2.0 brings in rationalised rates that address distortions due to the inverted duty structure. According to the study, industries that are critical for rural employment and manufacturing will now enjoy reduced, harmonized tax rates.
GST 2.0 will be digital-first too, with risk-based approaches, real-time automatic refunds, and quicker dispute resolution through the newly created GST Appellate Tribunal (GSTAT). This will result in quicker refunds, lower disputes, and smoother formalisation for e-commerce sellers and MSME exporters.
Whereas the report foresees a short-term loss of revenues due to GST 2.0, it underlines that higher consumption, improved compliance, and broader tax net are likely to more than offset the loss in the long run.
Although the report praises GST 2.0 as a milestone reform, it also highlights risks. The creation of a third 40 per cent slab for demerit goods, particularly tobacco, may continue to spur illicit trade.
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