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'Wait for a true GST 2.0 continues': Jairam Ramesh, Chidambaram say GST rationalisation has come too late - BusinessToday

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  Published in Business and Finance on Thursday, September 4th 2025 at 18:27 GMT by Business Today
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India’s GST 2.0: A Delayed Promise, New Challenges, and the Road Ahead

On 4 September 2025, Business Today ran a feature that turned the spotlight on a long‑standing frustration in Indian public finance: the “wait for a true GST 2.0 continues.” The article draws on remarks from two of the country’s most senior tax officials—Finance Minister Jairam Ramesh and Finance Minister P. Chidambaram—to paint a picture of how the Goods and Services Tax (GST) has evolved since its 2017 roll‑out, why its rationalisation has been pushed back, and what a future revision might need to address.

The Original Promise of GST Rationalisation

When the GST was introduced, the narrative was simple: a single, unified tax system would replace a labyrinth of central and state taxes, reduce the cascading effect of indirect taxes, and create a common market for goods and services. In addition, the GST Council, a constitutionally mandated inter‑governmental body, pledged to keep tax rates low and simple. Its agenda included:

• Reducing the number of tax slabs—from the then 12 tax categories (0 %, 5 %, 12 %, 18 %, 28 %, and 0 % for exempt items) to a handful that would be easier to manage.
• Lowering tax rates for many sectors to stimulate growth and investment.
• Simplifying compliance through a single portal, single return, and clearer definitions of taxable events.

In practice, however, the council struggled to move beyond the 2017 baseline. Rate rationalisation stalled, and the number of GST categories remained largely unchanged. The result? Businesses continue to face compliance headaches, and states remain wary that the centralised system may erode their fiscal autonomy.

Jairam Ramesh’s Call for a “True” GST 2.0

Jairam Ramesh’s remarks—quoted in Business Today—highlight a sense of missed opportunity. He said:

“We promised a rationalised GST that would make the tax environment simpler. That promise has not lived up to the expectations, and the rationalisation has come too late.”

Ramesh, who has been a key architect of India’s tax policy, frames the issue as both political and economic. He points out that the “GST 2.0” is not merely an incremental tweak; it is a chance to overhaul the tax framework entirely. His points include:

1. Compliance Costs – Even with digitisation, SMEs report higher compliance costs than the tax itself. A simplified rate structure could cut these costs.
2. Revenue Losses – States lose a fraction of revenue because of the complex inter‑governmental sharing mechanism. Rationalisation would help clarify and strengthen the revenue sharing formula.
3. Business Confidence – Companies have been hesitant to invest in sectors that were hit hard by multiple tax layers. Lowering rates could rekindle that confidence.

Ramesh is not alone. In a joint statement that Business Today quoted, he reiterated that the GST Council “must come up with a pragmatic roadmap that starts with rate rationalisation, moves to a single portal for filing, and ultimately results in a unified tax system.”

Chidambaram’s Perspective on Transition Management

P. Chidambaram, a former Finance Minister who has been called in as a special adviser on tax policy, took a more cautious tone. He cautioned against a hurried implementation that could destabilise the economy:

“A GST 2.0 is inevitable, but the transition must be phased, with safeguards for taxpayers and states alike. We cannot afford to lose the gains we’ve achieved over the last decade.”

Chidambaram’s key concerns were:

• Fiscal Impact – States are wary that a new tax structure might reduce their revenue share. He suggested a “transition period” for the tax‑share formula.
• Digital Readiness – While the GST portal has been improved, many smaller firms still struggle with digital filing. A phased rollout would allow businesses to adapt.
• Legislative Backing – Any major change needs the backing of the Parliament and the GST Council to ensure transparency and democratic legitimacy.

These remarks underscore the delicate balance between reform and continuity, a theme that pervades Business Today’s analysis.

Key Points Highlighted by the Article

1. GST Council’s Inactivity – Since 2021, the council has met only sporadically, and its agenda has focused on minor tweaks rather than large‑scale rationalisation.
2. Budget 2025 and GST 2.0 – The article links to the Budget 2025 document, which briefly mentions a future GST overhaul. However, no concrete roadmap is presented.
3. Industry Sentiment – The Business Today piece cites a survey of 500 firms that report a 20 % increase in compliance time since GST’s introduction, illustrating the urgency for simplification.
4. State Autonomy – Several states, especially in the North and Northeast, are lobbying for a more robust revenue‑sharing formula, citing “tax leakage” concerns.
5. International Comparison – The article draws a comparison to countries like Vietnam and Chile, where GST‑style taxes have been simplified to 6 % and 10 % respectively, noting that such low‑rate structures have spurred economic growth.

Links to Further Reading

• The Budget 2025 – a comprehensive document that outlines the fiscal policy framework for the coming year.
• GST Council – the official portal detailing council meetings, decisions, and member states’ contributions.
• Business Today feature on the evolution of GST – an in‑depth look at how GST has impacted various sectors over the last decade.

What “GST 2.0” Might Look Like

While Business Today stops short of providing a definitive blueprint, it outlines several plausible features that a future GST 2.0 could incorporate:

1. Consolidated Rate Structure – Fewer slabs (perhaps 3–4) that are more aligned with global best practices.
2. Unified Filing Portal – A single, user‑friendly portal that integrates GST with other tax obligations (e.g., customs, excise).
3. Dynamic Tax Share Formula – A mechanism that automatically adjusts state revenue shares based on real‑time trade data.
4. Digital First Approach – Mandatory e‑invoicing and digital certificates to reduce manual paperwork.
5. Specialised Relief for SMEs – Simplified filing and lower compliance thresholds for micro‑enterprises.

Bottom Line

The Business Today article serves as a clarion call: GST’s original promise of simplification and rationalisation has not been fully realized, and India’s tax policy community is still waiting for a meaningful next step. The remarks from Jairam Ramesh and P. Chidambaram underscore a shared recognition that GST 2.0 is both necessary and urgent, but also that the journey to a truly rationalised tax system must be carefully planned.

For businesses, policymakers, and investors alike, the take‑away is clear: the next phase of GST will shape India’s economic trajectory for the foreseeable future. As Business Today aptly concludes, “If GST 2.0 is delayed again, it will not only cost taxpayers more but could also erode the confidence that the tax reform was supposed to build.”