A Game-Changer for India’s Growth and Inclusivity

The much-anticipated Goods and Services Tax (GST) 2.0 marks a defining moment in India’s economic journey. Far beyond a fiscal adjustment, it is a bold reform aimed at catalyzing domestic consumption, stimulating private investment, and accelerating GDP growth. Coupled with earlier cuts in income tax rates, the GST rationalization comes at an opportune time, reinforcing the government’s focus on higher capital expenditure and sustained economic momentum.

For long, industry and consumers have called for simplification of the multiple GST slabs. CII has consistently advocated for reforms such as a two-rate structure (with a separate rate for demerit goods), correction of inverted duty structures in manufacturing, reduced compliance for MSMEs, and greater certainty on tax rates. We are pleased that over 90% of these recommendations have been adopted through simplification and rationalization measures.

A key strength of this reform lies in its equity-focused design. By making GST more progressive, the government has ensured that the tax burden does not fall disproportionately on lower-income groups. The timing, just ahead of the festive season, demonstrates an astute understanding of consumer behavior and economic cycles, aimed at amplifying consumption and generating a strong multiplier effect.

Equally important is the transition from GST 1.0 to GST 2.0, which addresses many initial challenges. Simplification of registration, clearer classification norms, and easier compliance are game changers. These measures will enhance compliance rates, safeguard revenues, and reduce costs for businesses.

The ripple effects will be most visible in manufacturing, logistics, fintech, and B2B commerce. MSMEs, in particular, stand to benefit through lower compliance costs, improved working capital flows, and better competitiveness in global markets. By strengthening backward linkages, supporting localization, and reducing import dependency, GST 2.0 will foster a resilient and self reliant industrial ecosystem aligned with India’s long term growth ambitions.

From a consumer perspective, the benefits are direct and tangible. With industries committing to pass on reduced rates, goods will become more affordable and accessible. Aspirational products are set to reach a wider cross-section of society, driving demand not just in urban centers but also in Tier-II and Tier-III markets.

Preliminary estimates suggest that GST reforms could add 100–120 basis points to GDP growth while easing inflationary pressures. This dual impact underscores the significance of the reform not only as a growth catalyst but also as a stabilizer that protects household purchasing power.

Beyond fiscal impacts, GST 2.0 enhances the Ease of Doing Business by expediting registration and refund processes. This will unlock working capital, enabling businesses to reinvest in technology, innovation, and productivity gains fueling a more dynamic and competitive economy.

In sum, GST 2.0 is more than a tax reform; it is a strategic economic enabler. It promises to energize consumption, empower businesses, and broaden inclusivity—marking a decisive step toward building a stronger, more equitable economy for all.

Note: This article has been contributed by Mr Rishi Kumar Bagla, Chairman, CII Western Region (2025–26), and Chairman & Managing Director, BG Electricals and Electronics India Ltd., and was published in CII PASCHEEM, Volume 15, No. 02, August 2025.