GST 2.0: What changes, Pg13.

Key Highlights:

• GST 2.0 reforms, effective Monday, include exemptions for items like Indian breads and health/life insurance [2025-09-22].
• The reforms aim to resolve classification disputes and correct the inverted duty structure (IDS).
• The GST regime, implemented in July 2017, has undergone multiple rate revisions, with the latest focusing on restructuring slabs.
• Services have seen cuts, with welfare services like health and life insurance now exempt from GST.

Detailed Insights:

• The GST 2.0 aims to boost household consumption by leaving more disposable income with people, incentivizing investments.
• The multiple GST slabs have been replaced with a broad two-slab structure comprising a merit rate of 5% and a standard rate of 18%, plus a demerit rate of 40% for sin and demerit goods.
• The Finance Ministry has directed officers to compile monthly data reports on price changes of commodities pre- and post-GST to ensure benefits are passed to consumers.
• Some sectors like bicycles, tractors, and fertilizers still face an IDS, with raw materials taxed higher than output, causing capital blockage.
• GST 2.0 seeks to streamline registration, returns, and refund processes using technology, especially for small businesses and startups.
• Amendments in Section 54 (6) of the CGST Act will allow risk-based provisional sanction of 90% of refund claims arising from the inverted duty structure.

Key Concepts Involved:

• GST (Goods and Services Tax): An indirect tax levied on the supply of goods and services.
• Inverted Duty Structure (IDS): When the tax rate on inputs is higher than the tax rate on outputs.
• Input Tax Credit (ITC): Mechanism allowing businesses to reduce tax liability by claiming credit for taxes paid on inputs.