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Two-Slab GST Structure: A Theoretical Examination of Efficiency, Equity and Simplicity
Subject area: Management and Commerce · Area of research: Indirect Taxes
DOI: 10.64388/IREV9I3-1710963-2029
Abstract
The introduction of a two-slab Goods and Services Tax (GST) structure in India, recently approved by the GST Council, represents a significant shift in the country?s indirect taxation system. While its implementation is scheduled in the near future, the reform has already attracted wide academic and policy interest due to its potential to balance efficiency, equity, and simplicity in taxation. This study provides a theoretical examination of the proposed GST 2.0 framework, with a particular focus on its implications for the common man and the business community. Drawing on principles of tax efficiency, the study explores how rationalizing the tax structure into two rates can reduce compliance costs, streamline processes, and minimize cascading effects. From the perspective of equity, the paper highlights how reduced rates on essential goods and services are expected to benefit lower- and middle- income households, thereby enhancing consumer welfare. At the same time, by retaining a higher rate for luxury and sin goods, the system aligns with the principle of vertical equity in taxation. The paper also examines the simplicity dimension, considering whether fewer tax slabs can reduce ambiguity, litigation, and administrative burden for both taxpayers and tax authorities. Using a conceptual and literature-based approach, this study situates India?s reform in the broader context of international GST/VAT practices, drawing lessons from countries that have adopted streamlined structures. The paper concludes by emphasizing the potential of GST 2.0 to emerge as a balanced tax reform that promotes inclusivity, supports businesses, and enhances the credibility of India?s tax system.(GST 2.0, Tax Efficiency, Equity in Taxation, Indirect Tax Reform, Simplicity in Tax Structure)
References
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How to cite this paper
@article{1710963,
author = {Dr. Kalpesh Naik, Rasik Lakhani, Dr. Amin Vohra, Faiyaz Khan Pathan, Bhavin Parmar},
title = {Two-Slab GST Structure: A Theoretical Examination of Efficiency, Equity and Simplicity},
journal = {Iconic Research And Engineering Journals},
year = {2025},
volume = {9},
number = {3},
pages = {1717-1727},
issn = {2456-8880},
url = {https://www.irejournals.com/formatedpaper/1710963.pdf},
abstract = {The introduction of a two-slab Goods and Services Tax (GST) structure in India, recently approved by the GST Council, represents a significant shift in the country?s indirect taxation system. While its implementation is scheduled in the near future, the reform has already attracted wide academic and policy interest due to its potential to balance efficiency, equity, and simplicity in taxation. This study provides a theoretical examination of the proposed GST 2.0 framework, with a particular focus on its implications for the common man and the business community. Drawing on principles of tax efficiency, the study explores how rationalizing the tax structure into two rates can reduce compliance costs, streamline processes, and minimize cascading effects. From the perspective of equity, the paper highlights how reduced rates on essential goods and services are expected to benefit lower- and middle- income households, thereby enhancing consumer welfare. At the same time, by retaining a higher rate for luxury and sin goods, the system aligns with the principle of vertical equity in taxation. The paper also examines the simplicity dimension, considering whether fewer tax slabs can reduce ambiguity, litigation, and administrative burden for both taxpayers and tax authorities. Using a conceptual and literature-based approach, this study situates India?s reform in the broader context of international GST/VAT practices, drawing lessons from countries that have adopted streamlined structures. The paper concludes by emphasizing the potential of GST 2.0 to emerge as a balanced tax reform that promotes inclusivity, supports businesses, and enhances the credibility of India?s tax system.(GST 2.0, Tax Efficiency, Equity in Taxation, Indirect Tax Reform, Simplicity in Tax Structure)},
month = {September},
doi = {https://doi.org/10.64388/IREV9I3-1710963-2029}
}