GST 2.0 needs course correction, not complacency

India’s second-generation Goods and Services Tax reforms—popularly branded as GST 2.0—have been rolled out with laudable intent. The overarching objective is clear: simplify compliance, rationalise rates, reduce litigation and, above all, strengthen the ease of doing business.

In spirit, GST 2.0 marks a welcome evolution of a landmark reform. In practice, however, it is becoming increasingly evident that the transition is riddled with anomalies and grey areas that threaten to dilute its promise unless addressed with urgency and sensitivity.

This underlying concern resonated strongly at the 42nd Annual Conference of Accountants’ Library, held in Kolkata, where leading professionals dissected the changing tax, audit and regulatory architecture. Speaking on the sidelines, renowned GST expert CA Bimal Jain aptly described GST 2.0 as “a right move in the right direction”, while cautioning that unresolved structural issues could blunt its effectiveness.

One of the most telling illustrations comes from the paper and packaging sector. Effective from September 2025, the GST on finished packaging products—such as boxes, bags, and certain stationery items—has been reduced to 5 per cent, while the tax on uncoated paper and board, a key raw material, has been increased sharply to 18 per cent.

The result is an inverted duty structure that places businesses, particularly MSMEs, under acute working capital stress. Input tax credits accumulate but remain largely unusable against lower-taxed outputs, forcing firms into prolonged refund cycles and pushing up costs. For enterprises already operating on thin margins, this inversion is more than a technical flaw; it is a threat to viability.

Compounding the problem are compliance-related burdens. Frequent changes in HSN codes, product reclassification and mandatory software reconfigurations translate into additional operational costs. While the government has offered interim relief—such as permitting limited use of old packaging and waiving newspaper advertisements for MRP changes—these measures merely treat the symptoms. The core structural anomaly remains unaddressed.

The packaging sector is not an isolated case. Similar inconsistencies persist elsewhere, notably in the toy industry, where electronic and soft toys continue to attract different GST rates, creating confusion, interpretational disputes and avoidable litigation. Such disparities undermine the very idea of a unified tax regime and erode business confidence.

In this evolving ecosystem, chartered accountants occupy a pivotal role—as interpreters of law, advisers to business and a critical feedback loop for policymakers. As Jain underscored, the profession must proactively flag distortions and push for timely corrections, preferably with retrospective effect where genuine hardship has been caused.

The conference also placed GST 2.0 within a wider professional and economic context. Former ICAI President CA Debashis Mitra emphasised that innovation it artificial intelligence or new practice models must ultimately serve the larger goals of nation-building and economic resilience.

On auditors’ fees, he argued for transparency through cost disclosures to curb unhealthy undercutting. CA Amitava Banik, President of Accountants’ Library, struck a measured note on technology, observing that while AI can enhance efficiency, it can never replace professional judgment.

The message from a packed hall was unmistakable. GST 2.0 carries immense promise, but good intent alone does not make good policy. Unless it’s rough edges are swiftly and thoughtfully smoothed out, India risks turning a transformative reform into another cautionary tale of ambition undermined by imperfect execution.