India’s economic reform journey over the past twelve years has been extraordinary in its breadth, continuity and ambition. From GST and the Insolvency and Bankruptcy Code to digital public infrastructure, regulatory simplification and successive measures to improve the investment environment, reforms have progressively strengthened the foundations of the economy. Equally significant has been a transformation in the philosophy of governance, with increasing emphasis on trusting citizens and enterprises, reducing unnecessary intervention and making regulation more proportionate and predictable.

The decisions of the 57th GST Council on 8 October 2026 represent a particularly important milestone in this journey. The Council’s decisions to remove arrest powers under GST, raise the monetary threshold for prosecution fivefold from Rs 1 crore to Rs 5 crore, narrow the scope of specified criminal offences and rationalise imprisonment provisions mark a fundamental recalibration of tax enforcement. Subject to the necessary legislative amendments, these measures will distinguish more clearly between genuine commercial disputes, procedural lapses and deliberate fraud, while preserving the Government’s ability to act firmly against serious wrongdoing.

On behalf of Indian industry, I wish to convey our profound appreciation and congratulations to Prime Minister Shri Narendra Modi, Finance Minister Smt Nirmala Sitharaman and the State Governments for this landmark achievement. Securing agreement on such sensitive questions of enforcement powers, revenue protection and taxpayer rights required considerable political commitment and institutional confidence. The GST Council has demonstrated the strength of cooperative federalism and the willingness of the Centre and States to undertake difficult reforms in the larger economic interest. This deserves wholehearted recognition.

Yet the significance of this achievement goes beyond the changes in GST administration. It raises an important question about the future relationship between Government and enterprise: if Government is prepared to place greater trust in legitimate business activity, what must industry do to justify and strengthen that trust?

Trust as an economic institution
Trust is often discussed as a moral virtue, but it is also an economic asset. Where rules are clear, institutions are predictable and commitments are honoured, businesses can invest with greater confidence, transactions become easier and fewer resources need to be devoted to protecting against uncertainty. Conversely, mistrust creates costs through excessive documentation, repeated verification, litigation, delays and defensive behaviour on both sides.

CII’s publication, The Shared Responsibility of Building & Strengthening Trust, examines how Indian enterprises build and sustain trust across their relationships with regulators, investors, employees, customers and suppliers. Drawing on the experiences of corporate leaders, it identifies integrity, transparency, consistent performance, accountability and responsible leadership as foundations of enduring trust. An important conclusion is that trust cannot be established through declarations alone. It must be demonstrated repeatedly through conduct, particularly when circumstances are difficult or commercial interests are under pressure.

This insight applies as much to the relationship between Government and industry as it does to relationships within the corporate sector. A regulatory system that assumes every enterprise is a potential offender imposes substantial costs on legitimate activity. Equally, a system that offers greater freedom without corresponding accountability risks undermining public confidence. The objective must therefore be to combine greater regulatory trust with stronger institutional responsibility.

India’s digital transformation makes this increasingly feasible. GST’s electronic returns, e-invoicing and data analytics have substantially enhanced the ability to identify suspicious transactions and target enforcement. The appropriate response to this growing capability is not weaker enforcement, but more intelligent enforcement: concentrating regulatory attention where risks are greatest while making compliance easier for those who act responsibly.

Towards a Government–Industry Compact on Trust
I believe the time has come to consider a new Government–Industry Compact on Trust, founded on reciprocal commitments rather than expectations placed exclusively on one side.

For Government, the first commitment must be to proportionate and predictable regulation. Genuine errors and interpretational disputes should be distinguished from deliberate misconduct, enforcement should be based on evidence and risk, and decisions should be reasoned, transparent and subject to effective review. Businesses should be able to understand their obligations, obtain timely clarification and resolve disputes without disproportionate uncertainty or cost. The GST Council’s decriminalisation decisions provide an important example of this approach.

For industry, the corresponding commitment must be to move beyond minimum compliance towards a culture of voluntary and responsible compliance. Companies must invest in robust internal controls, accurate disclosures, reliable records and timely fulfilment of statutory obligations. Boards and senior management must treat compliance as an essential component of corporate governance rather than merely a legal function. Where errors occur, they should be acknowledged and corrected promptly. Deliberate misrepresentation, concealment and exploitation of regulatory flexibility must have no place in a business environment founded on trust.

A second dimension of the compact should concern transparency and accountability. Government must ensure clarity in rules, consistency in interpretation, meaningful consultation and greater accountability for administrative decisions. Industry, in turn, must strengthen financial integrity, whistleblower protections, responsible disclosures and mechanisms for addressing grievances. Trust is sustained when institutions are willing to explain their decisions, acknowledge mistakes and correct them.

Third, the compact must extend beyond the relationship between regulators and individual companies to the wider business ecosystem. Large enterprises have a particular responsibility towards MSMEs, suppliers, employees and customers. Timely payments, fair contracts, transparent procurement, responsible supply-chain practices and effective customer grievance redressal are not peripheral matters of corporate conduct; they are essential tests of whether industry practises the values it seeks from Government. A company cannot credibly advocate trust-based regulation while imposing unfair terms or avoidable uncertainty on smaller businesses.

Fourth, both sides should commit to evidence-based regulatory reform. Government should assess the costs and benefits of significant new regulations, consult affected stakeholders and periodically review whether existing requirements remain necessary. Industry must reciprocate by providing reliable evidence of compliance costs, identifying practical solutions and acknowledging legitimate public-policy objectives. The purpose of consultation should be better regulation, not simply fewer regulations.

Finally, trust must become measurable. Government and industry should jointly examine whether reforms are reducing avoidable disputes, improving approval timelines, lowering compliance costs and strengthening voluntary compliance. Within enterprises, boards should pay greater attention to indicators of institutional credibility, including regulatory disputes, customer grievances, employee concerns and supplier relationships. CII’s work on trust provides a useful foundation for developing practical approaches to such measurement.

The success of this compact would depend not on the number of commitments announced, but on whether they produce observable improvements in everyday regulatory and business conduct.

Cooperative federalism: The next reform frontier
The GST Council’s achievement also provides an important lesson for India’s next generation of economic reforms. Much of the remaining agenda for improving the ease, cost and speed of doing business lies at the intersection of Central, State and local regulations. An industrial investment may require land-use permissions, construction approvals, environmental and fire clearances, utility connections, labour-related registrations and several local permissions. Even when each requirement serves a legitimate purpose, fragmented administration and sequential processes can create substantial cumulative costs.

The next tranche of reforms must therefore focus increasingly on how regulatory institutions function together. The Centre and States should work towards common standards of administrative efficiency, interoperable digital systems, time-bound approvals, risk-based inspections and transparent service-delivery benchmarks. This need not diminish State autonomy. On the contrary, it can provide a common framework within which States compete to offer better governance, faster services and more predictable investment conditions.

The GST Council has demonstrated that difficult institutional changes can be achieved when the Centre and States agree on shared objectives and work through differences constructively. The political and administrative effort required to reach consensus on enforcement powers makes its achievement especially noteworthy. Similar determination can help advance reforms in land administration, construction permissions, labour regulation, logistics, utilities and local government processes.

Industry must be an active partner in this endeavour, working with governments to identify bottlenecks, provide credible evidence, support digital adoption and improve compliance across enterprises of different sizes. The objective should be to move from isolated regulatory simplification towards a coordinated improvement in the experience of starting, operating and expanding a business in India.

Making trust the foundation of the next reform decade
The spirit of India’s continuing Reform Utsav lies in the recognition that reform is not a one-time event but a sustained process of improving institutions and expanding opportunities. The achievements of the past twelve years have established a strong foundation for the country’s next phase of economic transformation. The GST Council’s decisions demonstrate that the reform process is now reaching deeper questions of institutional behaviour, regulatory philosophy and the relationship between Government and enterprise.

Indian industry must respond to this moment with more than appreciation, important though that appreciation is. We must demonstrate through our own conduct that greater trust can produce stronger compliance, better governance and more responsible enterprise. CII is committed to advancing this agenda through its work on corporate governance, trust-building, regulatory reform and industry capacity-building, particularly among MSMEs.

The proposed Government–Industry Compact on Trust offers a framework for taking this partnership forward. Government would commit to greater predictability, proportionality and accountability; industry would commit to integrity, transparency, voluntary compliance and fair treatment of stakeholders. Both would work together to improve regulatory outcomes and strengthen institutional confidence.

The ultimate test of trust-based governance will not be how many enforcement powers are withdrawn, but whether voluntary compliance improves, disputes decline, regulatory processes become more predictable and confidence between Government and enterprise grows.

The GST Council has shown what is possible through enlightened leadership and cooperative federalism. It is now for Government and industry, working in tandem, to carry this achievement into a broader transformation of India’s economic governance.