GST 2.0: Assessing Structural Reforms and Their Impact on Businesses in India

Abstract

The Direct taxation has shifted significantly with the introduction of the Goods and Services Tax (GST) and the introduction of GST 2.0 is a reflection of the attempts of the government to perfect this system with the prevailing industry apprehensions. This paper assesses the structural reforms which have been proposed under GST 2.0 and analyses the implication of the reforms on businesses in different sectors. Some of the main changes addressed in the research include simplified levels of filing returns, better input tax credit processes, rationalization of tax levels, better digital compliance application and strategies to fight tax evasion. The study determines the effect of these changes on the operational efficiency, compliance cost, working capital management and the overall business confidence using a mix of secondary data, policy analysis, and industry reports. Results show that GST 2.0 has made the process of accounting easier to the small and medium enterprises with more predictable filing schedules and simplified documentation requirements. More intensive integration of technology especially in both e-invoicing and real-time data validation has raised the level of transparency and minimized cases of credit misfit, which are favourable to compliant firms. Nevertheless, some obstacles still exist, such as industry-related ambiguity, reliance on digital infrastructure, and transition issues that businesses face in rural areas. Big organizations are reporting to have enhanced supply chain effectiveness and increased transparency in their tax planning processes, whereas smaller organizations still need more simplification and assistance. In sum, GST 2.0 can be discussed as one of the major steps towards the stabilization of the Indian indirect tax ecosystem. The reforms have led to an increase in compliance, expansion in tax base and increased operational uniformity among states. However, the success of GST 2.0 in the long-term will rely on the feedback-based changes, capacity building of the administration, and long-term cooperation between the policymakers and the industry stakeholders. This paper identifies the necessity of additional specific reforms so as to make the tax system to be accommodative, predictable and business friendly in the face of a fast-changing economic scenario.