GST 2.0 and Government Revenue: Boost or Burden?
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- by MI September 19, 2025
Since its introduction in 2017, the Goods and Services Tax (GST) has been one of the most significant tax reforms in India. With the rollout of GST 2.0 in 2025, the government aims to simplify compliance, expand the tax base, and improve transparency. But the big question remains: Will GST 2.0 act as a revenue booster or create a compliance burden?
1. How GST 2.0 Affects Government Revenue
- Broader Tax Base: More sectors like petroleum, alcohol, and digital services may come under GST, adding to revenue.
- Improved Compliance: With AI-driven return filing, e-invoicing, and real-time tracking, leakages and evasion are expected to reduce.
- Automation of Refunds: Faster refunds for exporters will encourage higher trade volumes, indirectly boosting tax collections.
- Digital Economy Taxation: Online gaming, cryptocurrency, and e-commerce will add new streams of revenue.
2. Potential Burdens of GST 2.0
- Compliance Costs: Small and medium businesses may face challenges in upgrading systems for e-invoicing and digital reporting.
- Technology Dependence: Increased reliance on digital systems could create hurdles in areas with low digital literacy.
- Sectoral Challenges: Industries like agriculture and unorganized sectors may find it hard to adapt to stricter GST norms.
3. Comparative View: Boost vs Burden
| Aspect | Boost to Revenue | Burden on Economy |
|---|---|---|
| Compliance | Stronger monitoring reduces tax evasion | Higher compliance cost for MSMEs |
| Revenue Streams | New sectors like crypto, petroleum, digital services | Resistance from traditional industries |
| Technology | Automation ensures faster collections | Digital dependency may exclude small players |
4. Expert Outlook for 2025
Experts believe that while GST 2.0 may initially increase compliance costs, the long-term benefits of higher transparency, reduced tax evasion, and improved collections will outweigh the challenges. The reform is expected to boost government revenue significantly by 2025–2026.
Conclusion
GST 2.0 is designed to be a revenue booster for the government by widening the tax net and improving compliance. However, businesses, especially MSMEs, may feel a short-term compliance burden. In the long run, GST 2.0 is likely to strengthen India’s tax system and contribute to sustainable growth.
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