GST 2.0: Journey and Impact on Economic Growth

Abstract India's destination-based indirect tax system, known as the Goods and Services Tax (GST), was put in place to streamline the country's tax system. It lowers the overall tax burden and increases tax system transparency by concentrating on the taxation of goods and services and replacing a number of indirect taxes. The GST went into force on July 1, 2017. This study examines the country's more efficient and organized tax system. The future of the GST in India is examined in this study, especially in light of the implementation of GST 2.0 and its outreach programs for MSMEs and traders. It assesses the impact of GST Network (GSTN) updates on tax compliance and Input Tax Credit (ITC) utilization, as well as improvements in the GST return filing system. The seven pillars of next-generation GST reforms and their anticipated impact on various economic sectors are also covered in the study. The study also examines the Union Budget 2026's goal of achieving Viksit Bharat by striking a balance between inclusivity and economic growth. It covers the government's fiscal roadmap, policy changes, and transparency initiatives, it also emphasizes the importance of fiscal federalism. Secondary data gathered from reports, policy documents, and related sources serve as the study's primary foundation. Key Words: GST Reforms 2.0, GDP Growth, Fiscal Federalism, Economic Growth, GST Council Introduction In India, the Goods and Services Tax (GST) is an indirect tax on the sale of goods and services. It is a tax that is charged at every stage of the supply chain where value is added, and it is a destination-based tax. GST replaced several indirect taxes, including VAT, excise duty, service tax, and other state and central taxes. This made the tax system more unified. The main goal of GST is to make the tax system easier to understand, reduce the amount of tax people must pay, and make it more open. The Government of India runs the Goods and Services Tax (GST) through the Central Board of Indirect Taxes and Customs (CBIC). The GST Council was set up to make sure that the central and state governments work together and follow the rules. The Constitution (101st Amendment) Act, 2016, which changed the Constitution of India to allow for the implementation of GST, created the GST Council on September 15, 2016. This change to the Constitution made it possible to set up a single indirect tax system for the whole country. The highest decision-making body for GST in India is the GST Council. It is in charge of overseeing, regulating, and upholding the nation's GST system. All states and union territories are represented on the council, which is chaired by the Union Finance Minister. It offers suggestions on GST-related tax rates, exemptions, threshold limits, and policy modifications. The GST Council strengthens fiscal federalism and supports the seamless operation of GST in India's democratic framework by ensuring a transparent and balanced tax system through this cooperative mechanism. 1.1 Overview of Indian Indirect Tax System India had a complicated system of several indirect taxes before the introduction of the Goods and Services Tax (GST). The federal and state governments imposed different taxes, including VAT, excise duty, service tax, and others. Customers, producers, and vendors were all severely impacted by this. Confusion, complexity, and higher overall tax rates on goods and services were frequently caused by the existence of multiple taxes. On July 1, 2017, the Indian government implemented the Goods and Services Tax (GST) to streamline the taxation system. Numerous indirect taxes were superseded by GST, which created a single tax system for the entire nation. For the supply of goods and services across India, a single tax structure was put in place in place of several taxes. Different tax slabs were introduced under the GST to categorize goods and services according to their significance and nature. Every product category has its own tax rate. This organized system guarantees that necessities are taxed at lower rates while luxury goods are taxed at higher rates, contributing to the preservation of tax equity. All things considered, the introduction of GST has made the tax system more transparent and effective for both buyers and sellers, simplified the tax structure, and decreased confusion. Under the Goods and Services Tax (GST) system, different tax slabs are applied to goods and services on the basis of categories and importance. The Goods and Services Tax system has mainly four standard tax slabs: 5%, 12%, 18%, and 28%. Goods like basic food items are usually charged at a lower rate of 5%, while other standard goods and services are charged at 12% or 18%. Luxury goods are charged at the maximum rate of 28%. 1.2 New Tax Rates/Slab Rate India has simplified its GST framework to a two-tier tax rate framework, which is applicable with effect from September 22, 2025. This has been implemented following a meeting of the GST Council, which was its 56th meeting. The GST framework has been simplified to GST 2.0. The GST 2.0 framework has been implemented by incorporating two tax slabs, namely 5% and 18%. The 12% and 28% tax slabs have been removed. The essential items, like fresh produce, are included in the nil-rated category. Individual life and health insurance premiums have also been included in the nil-rated category. The 5% merit rate has been incorporated to cover items like packaged food items, basic toiletries, and life-saving medicines. The 18% standard rate has been incorporated to cover all items. Items like TVs, ACs, small cars, cement, etc., which were previously included in the 28% tax slab, are now included in the 18% tax slab. The GST Council has also introduced a 40% tax slab for items like luxury cars, tobacco products, aerated drinks, etc. This has been incorporated to replace items that were previously included in the 28% tax slab, along with cess. Review of Literature Dr. Devarajappa S N(2025): This study reveals the major impact of GST on the health sector and the benefits for the common people on account of GST reforms. N Nirmala Kumari(2025): GST 2.0: A Transformational Step Towards Simplified Taxation and Economic Efficiency in India: This study reveals that the difference between GST1.0 and GST 2.0 it is a growth strategy for businesses. With GST 2.0, businesses are provided with a great opportunity to grow from 2025 and beyond. Government Schemes to Boost GST 2.0 Business Growth. To take full advantage of GST 2.0, business entrepreneurs can partner with government schemes such as PLI, Startup India, CGTMSE, and PMEGP. 6.1 GSTN Goods and Services Tax Network (GSTN) has developed an “Indirect Taxation platform for GST,” which facilitates taxpayers in India to “prepare and file their returns, make payments of their indirect tax liabilities, and perform other compliances.” GSTN provides IT infrastructure and services to Central and State Governments, taxpayers, and other stakeholders to facilitate the i