A high-level national conference has begun to discuss the implications of Second Generation GST reforms, focusing on reduced tax rates and the evolving fiscal landscape for Indian states.

  • Effective GST tax rates are projected to drop from 11.6% to 9.5% in GST 2.0.
  • The GST-to-GDP ratio saw a decline from 6.07% in 2022-23 to 5.96% in 2025-26.
  • The conference addresses the critical balance between rate rationalization and state fiscal health.

A significant two-day national conference focusing on Second Generation Reforms in Goods and Services Tax (GST) in India has officially commenced. Organized by the Gulati Institute of Finance and Taxation (GIFT) in collaboration with the Indian Council of Social Science Research (ICSSR), the event aims to dissect the implications of GST 2.0 for state finances and broader fiscal policy.

Delivering the keynote address, R. Kavitha Rao, Director of the National Institute of Public Finance and Policy (NIPFP), highlighted a pivotal shift in the tax structure. She noted that under the proposed GST 2.0 framework, the effective tax rate is expected to decrease from 11.6% to 9.5%. However, she also raised concerns regarding the declining GST-to-GDP ratio, which fell to 5.96% in 2025-26 from 6.07% in 2022-23.

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Why This Matters

BozokMedia analysis shows that the transition to GST 2.0 is not merely a technical adjustment but a fundamental shift in India's fiscal federalism. While lower tax rates aim to boost consumption and compliance, the shrinking revenue-to-GDP ratio poses a significant risk to the financial stability of individual states that rely heavily on GST compensation and shares.

The success of GST 2.0 hinges on whether rate rationalization can effectively offset the potential loss in absolute revenue collection.

The opening technical session was chaired by Arvind Modi, a former IRS official and senior economist at the IMF. The plenary session featured prominent voices including Sacchidhananda Mukherjee (NIPFP), former Income Tax Commissioner R. Mohan, and Sebastian Morris from the Goa Institute of Management, discussing revenue productivity and the evolution from GST 1.0 to 2.0.

The conference has brought together over 25 research papers covering diverse topics such as MSME impact, digital administration, rate rationalization, and compliance behavior. Experts are scrutinizing how these institutional changes will affect industrial variation and sub-national economic evidence across different Indian states.

Historical Background

Since its inception in 2017, GST has undergone multiple iterations aimed at streamlining the indirect tax regime. As the system matures, the focus has shifted from mere implementation to 'Second Generation' reforms, which prioritize simplification, technology integration, and addressing the fiscal disparities between the Center and the States.

Did You Know?: The GST Council is the governing body that makes all major decisions regarding tax rates and exemptions in India.

Frequently Asked Questions

1. What is the primary focus of GST 2.0?
The primary focus is on rate rationalization, improving compliance through digital administration, and stabilizing state finances.

2. Who is inaugurating the main event?
The conference will be formally inaugurated by Chief Minister and Finance Minister V. D. Satheesan, who also serves as the Chairman of GIFT.