GST 2.0: Need Concrete Plan, Dispute Resolution Mechanism To Support Switch

The Council is set to meet today and tomorrow to thrash out GST 2.0. Not only are the tax rates expected to be reduced and structure streamlined, other important steps to ensure ease of compliance are also on the anvil.

The meeting will take place amid the imposition of a whopping 50 per cent tariff on Indian exports to the US, and the Government’s push to boost domestic consumption to counter its impact.

Prime Minister Narendra Modi, on August 15, already announced a reduction and rationalisation of GST rates before the festive season kicks in this year.

Why The Worry?

The proposed lowering and simplification of the tax structure should have come as a festive bonanza for the industry, but several firms and other stakeholders are rather worried.    

While lowering of rates is much needed, the Central Board of Indirect Taxes and Customs (CBIC) will need to roll out a concrete plan at the earliest to ensure that the transition is seamless and does not lead to confusion, which could potentially damage businesses.

A hasty rollout of the new structure could also lead to problems related to inverted duty — where the tax levied on raw materials is higher than that on the finished product — something that has been causing problems for industries.

“Businesses will need to swiftly re-price products, reconfigure ERP and billing systems, and address stock already in the supply chain,” Manoj Mishra, Partner and Tax Controversy Management Leader, Grant Thornton Bharat, told The Secretariat.

Mishra added that a hurried rollout is possible, but “it risks creating confusion, unless backed by prompt notifications, clear transition rules, and system preparedness”. The announcements on tax cuts need to be urgently followed up with necessary legal and compliance support to weed out complications, which impact the micro, small, and medium enterprises (MSMEs) the most. 

The proposed tax rejig will mark the biggest structural reform since the launch of GST on July 1, 2017. A time lag in the announcement of tax cuts and CBIC's rollout of the fine print and policy measures to support the exercise is critical. 

“Minimising the gap between Council announcements and CBIC notifications will be key to ensuring that the intended benefit of rate cuts flows quickly to consumers without triggering compliance disputes or operational disruption,” Mishra noted.

GST Hurdles Pose Challenges

In 2024, the GST Council met only thrice. At the time of the launch, it was decided that the Council would hold its meeting once a quarter to thrash out issues.  

Earlier, speaking to The Secretariat, former CBIC chief Najib Shah said that an effective mechanism to resolve disputes promptly is critical. “Disputes have been piling up, and this causes worries for businesses. This is one area that needs immediate attention,” Shah said.

Although the GST process was meant to simplify the indirect tax structure of the country, taxpayers have found it complex and challenging. Frequent changes in the tax structure have caused confusion, leading to disputes.