GST 2.0 and Its Impact on Economic Growth: A Structural and Macroeconomic Analysis
Article Sidebar
Main Article Content
By collapsing the five-tier structure into three slabs (5%, 18%, and 40%), the reform aims to reduce classification disputes and correct inverted duty structures. Using a mixed-method approach—combining secondary data (Q3–Q4 FY2025–26) with sectoral case studies in automobiles, FMCG, and healthcare—this study finds an initial fiscal gap of ₹45,000 crore offset by an 8.1% surge in monthly collections. Econometric projections suggest GST 2.0 contributed to India’s 7.3% GDP growth in FY2026, alongside lower inflation and improved MSME liquidity. Positioned within global VAT/GST experiences, India’s reform illustrates how simplification can stimulate consumption-led growth while raising challenges of fiscal federalism and sin-tax dependency.
Downloads
References
Ahmad, E., & Stern, N. (1991). The Theory and Practice of Tax Reform in Developing Countries. Cambridge University Press.
Bird, R. M., & Gendron, P. P. (2007). The VAT in Developing and Transitional Countries. Cambridge University Press.
Das, S. (2025). Inverted duty structures and manufacturing. Indian Economic Review.
Jha, R., & Saggar, M. (2026). The Laffer effect in emerging markets: The case of GST 2.0. Indian Journal of Economics.
Keen, M. (2013). The anatomy of the VAT. National Tax Journal, 66(2), 423–446.
Keen, M., & Lockwood, B. (2010). The value-added tax: Its causes and consequences. Journal of Development Economics, 92(2), 138–151.
KPMG. (2026). The Digital Transformation of Indirect Taxes.
Ministry of Finance. (2025). Report on the 56th GST Council Recommendations. Government of India.
Ministry of Finance. (2025). Economic Survey: Special Chapter on Indirect Tax Evolution. Government of India.
National Institute of Public Finance and Policy. (2025). Optimal GST structures for emerging economies. NIPFP Policy Paper Series, 2025/04.
OECD. (2016). Consumption Tax Trends 2016. OECD Publishing.
Poddar, S., & Ahmad, E. (2009). GST reforms and intergovernmental considerations in India. Asia-Pacific Tax Bulletin, 15(2), 123–134.
Sharma, R., & Bhatia, A. (2025). Fiscal multipliers of GST versus direct tax cuts in India. Journal of Economic Policy Studies, 18(2), 45–67.
Tanzi, V. (1995). Taxation in an Integrating World. Brookings Institution Press.
World Bank. (2019). Global Economic Prospects: Fiscal Policy and Growth. World Bank Publications.
This work is licensed under a Creative Commons Attribution 4.0 International License.
All articles published in our journal are licensed under CC-BY 4.0, which permits authors to retain copyright of their work. This license allows for unrestricted use, sharing, and reproduction of the articles, provided that proper credit is given to the original authors and the source.