I have a weakness for reforms that make television anchors yawn. A new subsidy gets a countdown clock, a ministerial sound bite and animated rupee notes on prime time. A change that helps an exporter receive a refund without making six visits to an officer gets three paragraphs somewhere near the business pages. Yet the second kind of reform is usually what separates a government that merely announces policy from one that improves the state’s operating system.
That is why I find the GST Council’s recent emphasis on registration, refunds, input-tax credit and decriminalisation more consequential than the slogans surrounding GST 2.0. The proposals reported from the Council’s meeting deal with the points at which legitimate businesses most often encounter uncertainty: getting registered, correcting returns, keeping credit after paying a supplier and closing an enterprise without entering a bureaucratic maze. None will appear on a campaign poster. All can change investment decisions.
The first GST argument is over
The opposition still speaks about GST as though the calendar stopped in July 2017. Yes, the launch was rough. The portal strained, rules changed too frequently and small firms struggled with compliance designed by people whose offices presumably contained several chartered accountants. I said so at the time. But the Congress’s preferred retrospective—that it would have produced a flawless, gentle and instantly stable national tax—is hard to take seriously. The UPA spent years discussing GST without bearing the political cost of implementing it. It is easy to promise immaculate plumbing when somebody else must break the floor.
The Modi government did the difficult part: it created a functioning national indirect-tax market in a federal country where states guard revenue powers jealously. The system survived implementation problems, the pandemic and repeated rate negotiations. That achievement does not make every GST decision wise. It does mean the relevant question has changed. We are no longer deciding whether India should have GST. We are deciding whether a mature GST can become predictable enough that compliance feels like a routine rather than a negotiation.
The 2025 rationalisation was an important admission that the original structure had accumulated too many anomalies. The rate changes affecting hundreds of goods and services simplified several classifications and reduced burdens on parts of the household basket. I welcomed them, but rate cuts are the photogenic half of tax reform. A lower rate printed in a notification is of limited comfort if a business’s working capital remains trapped in a refund claim or an honest buyer loses credit because somebody elsewhere in the supply chain defaulted.
Discretion is the real tax
Entrepreneurs can plan around a known tax rate. They cannot plan around arbitrary delay. When registration requires documents that vary according to the officer examining the application, the statutory rate is not the entire burden. When a refund has no dependable clock, the government is effectively borrowing from a business without consent. When tax credit already paid by a buyer depends on the subsequent conduct of a supplier, the state transfers its enforcement responsibility to the least powerful person in the chain.
This is why proposed rules for standard documentation, faster acknowledgement of refunds and protection for buyers who possess an invoice, received the goods and paid the supplier deserve attention. In my view, the principle should be brutally simple: technology must handle routine verification, and human discretion should be reserved for genuinely unusual cases. The tax department has far more data than it did nine years ago. If that data produces only more notices rather than fewer unnecessary interactions, digitisation has become an expensive photocopier.
Decriminalisation also matters. Tax evasion should be punished, especially when it is organised and deliberate. But India has too often confused a disputed interpretation with criminal intent. GST law covers complicated supply chains, composite services, interstate transactions and classification questions on which intelligent professionals can disagree. Threatening arrest in ordinary commercial disputes does not demonstrate a strong state. It demonstrates a state unsure of its ability to collect through normal adjudication.
The government’s reform instinct is therefore correct, but I would push it further. Every notice should state the data mismatch in plain language. Every demand generated substantially by an automated system should carry a clear path for digital correction. Refund clocks should have consequences when departments miss them. Orders should be searchable and consistent, so two similar businesses in two states are not governed by entirely different interpretations. And officers should be measured partly by how many sound assessments survive appeal, not by the size of demands they initially raise.
Federalism without theatre
GST is also an underrated example of practical federalism. The Council forces the Centre and states governed by rival parties to negotiate over real money. This is less romantic than speeches about cooperative federalism, but considerably more useful. State finance ministers who denounce New Delhi in public still have to explain their revenue position, hear other states and accept collective decisions. That institutional habit is valuable in a country where every administrative disagreement is now marketed as a constitutional crisis.
The Congress and other INDIA alliance parties have every right to scrutinise distributional effects and state revenues. A serious opposition would publish alternative rate structures, quantify the trade-offs and identify which expenditure it would reduce if collections fell. What we normally receive instead is the language of betrayal, followed by selective demands for exemptions. Everybody wants simplicity in the abstract; every lobby wants its own special treatment. A tax with dozens of favoured exceptions soon becomes the complexity its critics complain about.
I also resist the government’s temptation to brand every rate reduction as a festival gift from the prime minister. Tax money does not originate in North Block, and citizens are not beneficiaries of ministerial generosity when the state decides to take less of it. The promotional language may be electorally effective, but it diminishes a genuine structural achievement. GST reform is strongest when defended as better administration, not packaged as a seasonal coupon.
The unfinished work
The largest weakness remains dispute resolution. Businesses need a credible, adequately staffed appellate system that produces timely, coherent judgments. Otherwise, procedural simplification at the front end merely moves congestion to the back. Smaller firms also need stable rules. A multinational can absorb a circular issued on Friday and operationalise it on Monday; a trader in Surat or Coimbatore may depend on one accountant serving dozens of clients. Frequent improvement can itself become a burden if changes arrive without enough notice.
There is also a legitimate concern about surveillance. The state’s ability to match invoices and detect fraud is useful, but data-led enforcement must have transparent safeguards. An algorithmic risk flag should begin an inquiry, not become a presumption of guilt. Businesses should be able to know why they were flagged and correct faulty information. A pro-reform position is not a blank cheque for every dashboard built by a department.
Still, the direction is encouraging. The Modi government is often accused of caring only for spectacular announcements. Here it is doing the less glamorous work of revising processes after experience exposed their defects. Giving it credit does not require pretending the defects never existed. It requires recognising that institutional learning is itself a form of competence.
If the Council follows through, an exporter may receive working capital sooner, a small online seller may reach customers across state lines more easily, and an honest purchaser may stop being punished for another firm’s failure. No ribbon will be cut for those outcomes. There will be no dramatic before-and-after photograph. But this is what economic reform looks like after the speeches are over: fewer permissions, clearer clocks and a government confident enough to make its own officials less central to ordinary commerce.
