One Nation, One Tax: India’s New Tax Revolution

How GST 2.0 Cuts Complexity, Lowers Costs and Strengthens Global Competitiveness

India’s Next-Generation Goods and Services Tax (GST 2.0), scheduled to take effect on 22 September 2025, represents a fundamental redesign of the country’s indirect tax architecture. Beyond rate changes, GST 2.0 restructures the entire tax model — moving decisively away from a fragmented, multi-slab system toward a uniform, digitised and easier-to-administer regime captured by the slogan “one nation, one tax.” The reform is designed to simplify taxation, lower compliance costs, and strengthen India’s competitiveness in global markets while protecting social priorities.

Rationalisation and Simplification of Tax Rates

GST 2.0 replaces the earlier multi-tier rate structure (0%, 5%, 12%, 18%, 28% plus special cesses) with a streamlined three-tier framework: a merit rate (5%) for essentials and agricultural inputs, a standard (18%) rate for the bulk of goods and services, and a demerit rate (40%) for luxury and harmful goods. Selected lifesaving medicines, educational materials, and specific food items remain exempt.

Key differences from the previous model:



• Fewer rate bands: Reduces classification disputes and administrative complexity. 

• Reduced state-by-state divergence: Strengthens uniformity across the federal structure. 

• Targeted exemptions retained: Balances simplification with social protection.

By consolidating slabs and clarifying classifications, GST 2.0 significantly reduces compliance friction for taxpayers and administrators, making pricing, invoicing, and tax accounting more predictable.

One Nation, One Tax

GST 2.0 is guided by a set of strategic goals that blend economic, social and administrative aims. The reform is structured around seven pillars that operationalise the “one nation, one tax” principle:

1. Rate rationalisation: Clear, limited slabs to reduce ambiguity.

2. Digital-first compliance: Single portal, simplified returns, automated reconciliations.

3. Taxpayer centricity: Streamlined procedures and better service standards.

4. Cooperative federalism: Harmonisation between Centre and states to prevent arbitrage.

5. Swift dispute resolution: Dedicated appellate mechanisms to reduce litigation.

6. Targeted exemptions & redistribution: Protect essentials while taxing negative externalities.

7. Fiscal sustainability & predictability: Balance revenue needs with growth incentives.

These pillars aim to create a uniform, transparent tax environment across India’s federal landscape, reducing administrative cost and uncertainty for businesses.

Economic and Social Impacts

GST 2.0 is expected to deliver multiple benefits: lower effective tax burdens on essentials and key inputs; reduced compliance costs for businesses, especially MSMEs; and greater household disposable income through cheaper basic goods. Lower tax incidence on construction materials, durable goods, and agricultural inputs should stimulate demand, industrial activity, and employment. At the same time, higher demerit rates on harmful luxuries protect revenues and public health objectives. The combined effect is intended to promote equitable growth while enlarging the formal tax base.

Global Implications: India’s Competitiveness in the Global Economy

By removing fragmentation and embedded tax inefficiencies, GST 2.0 strengthens India’s competitive position internationally. Key global implications include: 

• Lower embedded tax costs in exports, improving price competitiveness of Indian goods and services. 

• Faster trade logistics and reduced documentation frictions due to standardised procedures and digital compliance. 

• Increased attractiveness for FDI, as predictable taxation and quicker dispute resolution reduce operating risk for multinational firms. 

• Easier integration into global value chains, since uniform taxation lessens operational complexity for companies sourcing or manufacturing in India. 

• Scale effects from stronger domestic demand, where tax relief and increased consumption expand local markets that exporters can leverage.

Collectively, these effects make India a more reliable and efficient partner for international trade and investment, supporting deeper integration in manufacturing, renewable energy, agritech, pharmaceuticals, and digital services.

GST 2.0 is expected to stimulate India’s consumption-driven growth by reducing the tax burden on households and small businesses, while promoting industrial expansion in housing, infrastructure, automobiles, and agriculture. This growth momentum offers new opportunities for Chile to deepen trade and investment ties, aligning with both countries’ priorities in innovation, sustainability, and value-added exports.

Conclusion

GST 2.0 represents a decisive shift from a multi-slab, often fragmented tax system to a unified, digitally enabled model under the banner of “one nation, one tax.” Through rate rationalisation, digital-first compliance, streamlined dispute resolution and seven foundational pillars, the reform reduces complexity, cuts compliance costs, and enhances predictability. These changes not only support domestic welfare and growth but also strengthen India’s competitive credentials in the global economy — a development that international businesses and investors should watch closely.

India’s GST 2.0 reform marks a turning point in its economic landscape, simplifying taxation, boosting competitiveness, and fostering equitable development. It represents a decisive shift torwards One Nation, One Tax that will support domestic welfare and strenthen India’s competitivness. For Chilean businesses and investors, this new tax regime offers a more stable, transparent, and efficient framework to expand engagement with India, reinforcing bilateral trade ties and opening the door to stronger cooperation in high-growth sectors.

Abhilasha Joshi

Ambassador of India