Can GST Reforms Enhance Revenue Through Tax Moderation?
Synopsis
A recent report highlights that the latest GST reforms prove that simplifying tax structures and moderating rates can significantly enhance revenue. The Think Change Forum urges for freezing peak rates and leveraging technology for tax expansion. This could reshape India's tax landscape, making compliance easier and less burdensome for taxpayers.
Key Takeaways
GST reforms can boost revenues through simplification.
Maintaining peak tax rates is essential for compliance.
Technology can help expand the tax base.
A phased approach is needed to incorporate excluded sectors.
Strong enforcement is required to combat tax evasion.
New Delhi, Dec 24 (NationPress) The latest adjustments made in GST 2.0 demonstrate that simplification and tax moderation can indeed go hand in hand with significant revenue enhancement, as reported on Wednesday. The document advocates for maintaining current peak tax rates while leveraging technology to broaden the tax base.
A white paper published by Think Change Forum reveals that the recent GST changes have challenged the longstanding notion that elevated tax rates are essential for boosting collections, as evidenced by a 4.5% increase in gross GST collections to Rs 1.95 lakh crore in October 2025 compared to the previous year.
The analysis contends that the uptick in tax revenue substantiates the idea that in economies characterized by high informality, compliance elasticity is more impactful than rate elasticity. However, the report raises concerns regarding India's tax-to-GDP ratio of approximately 17%, which conceals a limited direct tax base and a substantial dependency on regressive indirect taxes.
“Excessive taxes—be they direct or indirect—always foster evasion and corruption. Reducing tax rates broadens the tax base and enhances compliance. GST revenues are increasing as the economy formalizes; however, we must prevent the establishment of a new 40% peak rate that could hinder compliance. The ideal GST structure should consist solely of rates at 5% and 18%,” stated Yogendra Kapoor, an author and public speaker.
The forum emphasized the necessity of prioritizing the freezing of peak direct tax rates, utilizing technology to expand the direct tax base, steering clear of MRP-based taxation, and completing the GST credit chain in the forthcoming Union Budget.
As the compensation cess ceases, MRP-based taxation remains vulnerable to manipulation within a cash-dominated economy, prompting a preference for transparent, specific duties that are easier to enforce.
The Budget should delineate a phased plan to incorporate petroleum, electricity, and other excluded inputs under GST to restore tax neutrality and alleviate cascading expenses for industries, it suggested.
Moreover, it outlined additional priorities such as incentivizing productive reinvestment and decisively tackling the parallel economy.
“The Budget must enhance enforcement measures against smuggling, illicit trade, and tax evasion, ensuring that non-compliance becomes more costly than compliance, thereby relieving honest taxpayers from undue penalties,” the report emphasized.
Point of View
The ongoing GST reforms signify a pivotal shift in India's tax strategy. The emphasis on simplification and moderated rates signals a commitment to enhancing compliance and fostering a healthier economic environment. The Nation stands firmly behind initiatives that promote fairness and transparency in taxation, paving the way for sustainable growth.
NationPress
6 May 2026
Frequently Asked Questions
What are the key findings of the GST reforms report?
The report indicates that simplification and tax moderation can lead to significant revenue growth, challenging the notion that higher tax rates are necessary for collection increases.
How much did GST collections rise in October 2025?
GST collections rose by 4.5% year-on-year, reaching Rs 1.95 lakh crore in October 2025.
What is the recommended peak GST rate?
The report suggests that the ideal GST structure should be limited to 5% and 18%.
What are the main priorities for the upcoming Union Budget?
Priorities include freezing peak direct tax rates, expanding the direct tax base through technology, and addressing excluded sectors under GST.
How does the report suggest tackling tax evasion?
It emphasizes the need for stronger enforcement against smuggling and illicit trade, making non-compliance costlier than compliance.
