I have spent enough evenings with GST notifications to know that no tax reform survives first contact with an Indian wedding invoice. A caterer, decorator and hotel can transform one celebration into a small jurisprudence seminar. That is why the move towards a simpler structure—principally a 5 per cent merit rate, an 18 per cent standard rate and a special rate for selected demerit goods—is more consequential than the familiar television argument about whether the government has won another political round.
My view is straightforward: the Narendra Modi government deserves substantial credit for being willing to revise its own flagship reform. The GST Council’s published recommendations describe both rate rationalisation and relief for everyday goods, health insurance and life insurance. Governments usually defend complicated systems because admitting complexity sounds like admitting failure. This one has instead treated GST as an operating system that can be updated.
Congress’s response has been predictable. It first presents simplification as proof that GST was always defective, then quietly claims intellectual ownership of every sensible alteration. This is the same party whose preferred political memory begins with a proposal and ends just before implementation. Drafting a concept note is not the same as persuading states, building the network, absorbing the early shocks, correcting classification disputes and maintaining collections. Congress nostalgia habitually confuses intention with state capacity.
The reform was never a sacred tablet
I supported GST because India could not indefinitely remain a federation of border check-posts, cascading taxes and state-specific paperwork. I did not support every rate or every compliance ritual. The original multi-slab arrangement reflected political bargaining and revenue anxiety, not divine economic truth. A country containing both basic food products and luxury consumption was always likely to retain more than one rate, but four principal slabs plus cesses created needless ambiguity.
The government’s critics are right about one point: small businesses paid a disproportionate price during the rough opening years. Filing systems changed, accountants became emergency personnel, refunds moved too slowly and honest traders sometimes felt that the portal presumed guilt. Giving the government credit now should not require pretending those experiences were imaginary. A pro-reform position must include the discipline to distinguish a good architecture from poor user experience.
Yet the record also matters. The GST Council’s institutional account notes the steady pruning of the highest slab, return simplification and measures intended to ease compliance. The system evolved because the Centre and states had a standing bargaining table. That federal mechanism is the underappreciated achievement. Before GST, disagreements were often hidden inside an untidy maze. Under GST, they are political, public and capable of producing a common decision.
I find the opposition’s language of unilateral imposition especially unserious. The Council includes state governments run by parties that accuse Delhi of treating federalism as decorative. Those governments negotiate aggressively, as they should. They cannot celebrate their influence when a concession is won and describe the same institution as a dictatorship when the final press conference inconveniences their national messaging.
Simpler rates must mean simpler ownership
The strongest case for the new structure is not merely that toothpaste or bicycles may become cheaper. It is that fewer boundary disputes mean fewer opportunities for arbitrary enforcement. Classification litigation is the comic-opera wing of tax law: businesses spend years arguing whether a product is one sort of snack, another sort of snack, a service accompanying a good, or a good disguised by a service. Every unnecessary distinction creates costs that eventually reach consumers.
A two-rate spine should reduce this friction, but only if the government resists the temptation to rebuild complexity through exceptions. Ministries and industry groups will arrive carrying impressive presentations about why their product deserves the merit rate. Some cases will be genuine, particularly where an inverted duty structure punishes domestic value addition. Many will be lobbying in patriotic clothing. The Finance Ministry must publish clear principles and explain departures from them.
The insurance relief is welcome, though I would watch the pass-through carefully. A tax exemption helps households only if premiums reflect it rather than silently absorbing the benefit into insurer margins. Regulators and the government should publish comparable premium data, encourage transparent renewal notices and make it easy for customers to see how the tax change altered what they pay. Reform must be legible at the kitchen table.
Compliance is the other unfinished task. A trader should not need to understand the internal plumbing of the GST Network to correct an innocent mismatch. Notices should be written in plain language. Low-value discrepancies should first produce a chance to reconcile rather than a threatening demand. Refund clocks should be real clocks. The state is entitled to pursue fraud firmly, but suspicion is not a sound default interface for millions of ordinary firms.
The Congress counterfactual is too convenient
Congress supporters often insist their party would have introduced a cleaner GST. Perhaps it would have produced a cleaner white paper. I am less persuaded it would have produced political agreement. The UPA’s final years were marked by policy paralysis, fraying authority and an opposition that had every incentive to extract safeguards. BJP, after 2014, had the mandate and administrative energy to close the deal. That does not erase earlier intellectual work; it places it in proportion.
Nor should we forget that several opposition parties now demanding perfect simplicity also defended state-level exceptions when those exceptions served their own treasuries. Federal politics creates legitimate caution about revenue. It also creates convenient hypocrisy. Every finance minister wants fewer rates in the abstract and one special concession for the industry standing in his office.
The better opposition argument would be specific: demand a transparent assessment of distributional effects, identify sectors where input credits remain trapped, compare compliance costs by firm size and insist that anti-profiteering claims follow due process. That would improve the tax. Calling every revision an admission of catastrophe merely teaches governments not to revise.
I would also like Parliament to receive an annual GST complexity statement. It should count active rates, cesses, major classification disputes, average refund times, portal downtime and the compliance hours reported by small firms. Budgets report revenue down to the last crore while barely measuring the human time consumed in collecting it. Time is an economic cost even when it never appears as a line item.
A reform government must keep reforming
The Modi government’s advantage has often been its willingness to attempt changes that previous governments discussed but postponed. Its weakness can be a tendency to oversell the finishedness of those changes. GST was not completed on launch night, and it is not completed by a new rate table. It will be judged by whether a small manufacturer can plan prices, receive credits and answer queries without maintaining a miniature legal department.
There is also a political lesson here. Voters are not offended when a government improves a policy. They are offended when it refuses to acknowledge their experience. The best defence of the original GST is not that every detail was correct; it is that India built a national framework sturdy enough to be corrected without returning to fiscal fragmentation.
I give the government credit because simplification requires both confidence and humility. I give Congress little credit for arriving after the difficult implementation and announcing that it had always imagined something nicer. But my support comes with a test: fewer slabs must become fewer disputes, fewer notices and fewer hours lost to clerical anxiety. If that does not happen, the reform will remain an elegant press release sitting on top of an old bureaucratic instinct.
India has already crossed the hardest bridge by accepting one national indirect-tax framework. The next task is less theatrical and therefore easier to neglect: making that framework boring. A good tax should not be a daily adventure. It should collect revenue predictably, distort choices minimally and leave citizens enough time to run their businesses. If GST 2.0 achieves that, it will be a Modi reform worth defending long after the slogans expire.
