GST Reform: Bold And Long Overdue
The India Commentary view
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By Our Editorial Team
First publised on 2025-09-05 07:00:47
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The India Commentary view
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Eight years after its chaotic rollout, Goods and Services Tax has been given the overhaul it desperately needed. The old four-slab maze has been scrapped for a three-tier structure - 5% on essentials, 18% on most goods and services, and 40% on luxuries. At last, the system looks rational, fair, and easier to understand.
Relief Where It Matters
For ordinary families, this is real relief. Groceries, medicines, and school supplies now carry lower taxes, while healthcare and insurance have been fully exempted. These cuts ease the pressure on middle - and lower-income households, where every rupee counts. Importantly, the reform ends the bizarre anomalies that turned GST into a joke - like taxing similar food items at different rates.
A Rare Consensus
The political achievement is no less significant. States - especially in the east and northeast - were reluctant to give up the 12% and 28% slabs, fearing revenue losses. Yet, after tough negotiations and firm assurances of compensation, they came on board. That unanimity shows the GST Council can function as a true federal forum, not just another arena of bickering. Without such consensus, this reform would have stalled like so many before it.
The Real Tests Ahead
Still, the risks are substantial. In the short run, revenues will take a hit worth billions. The gamble is that lower rates will spur consumption and investment, broadening the tax base over time. But if retailers hoard the gains or compliance remains a nightmare, the benefits may never reach consumers.
Equally worrying is administration. Simplified slabs don't mean simplified processes. Small firms continue to face refund delays, complex filings, and bureaucratic obstacles. Unless these are addressed, GST's credibility problem will persist.
Execution Will Define Success
This reform is a milestone - proof that India's tax system can evolve through political will and cooperative federalism. But it is also a reminder that bold announcements are the easy part. Implementation is where reforms succeed or fail.
India has waited nearly a decade for GST to deliver on its promise of simplicity and fairness. With this new structure, the foundation is finally in place. What matters now is ensuring the gains are felt quickly and last long.
