GST 2.0 and the Union Budget 2026‑27:
A Paradigm Shift

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Nine Years, One Ledger

GST timeline: 2017–2026

From the historic midnight rollout to the Budget that folds GST 2.0 into law.

 
2017
Launch of GST
Rolled out on 1 July, unifying 17 Central and State taxes and 13 cesses under a single structure.
 
2018
E‑way bill introduced
Made mandatory for tracking goods movement across States, improving transparency.
 
2019
Return simplification
Filing steps simplified; Aadhaar linked to registration for fraud prevention.
 
2020
COVID impact & e‑invoicing
Revenue dipped, but e‑invoicing began for large firms (₹500 crore+ turnover).
 
2021–22
IGST refund automation
Exporters benefited from fast refunds via ICEGATE — turnaround cut to under a week.
 
2023
Compliance tightened, MSMEs eased
ITC rules tightened overall, while compliance was made simpler for small businesses.
 
2025
GST 2.0 — 8 years of GST
56th GST Council Meeting adopts Next‑Gen amendments: fewer slabs, deeper tech integration.
 
2026
Union Budget 2026‑27
CGST, SGST and IGST sections amended; GST 2.0 written into administrative practice.
Source: adapted from Insights IAS, 2025 & Gajendra Singh Godara, 2025

The Price Puzzle, Solved

From four slabs to a cleaner structure

GST 2.0 collapses the old multi‑rate ladder into two principal slabs, plus a distinct levy for luxury and sin goods — easing both billing and reconciliation.

Before — GST 1.0

5%
12%
18%
28%
5%
12%
18%
28%

After — GST 2.0

5%
18%
40%
5%
essentials
18%
standard
40%
luxury & sin

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Transitional Provisions · Billing Rule

Which rate applies when the slab changes mid‑transaction?

The applicable rate turns on the timing of three events — supply, invoice, and payment — relative to the 22 September rate change.

CasePre‑22/09/2025 eventsPost‑22/09/2025 eventsRate applicable
Case 1SupplyInvoice and PaymentNew rate
Case 2Supply and InvoicePaymentOld rate
Case 3Supply and PaymentInvoiceOld rate
Case 4InvoiceSupply and PaymentNew rate
Case 5Invoice and PaymentSupplyOld rate
Case 6Acceptance of PaymentSupply and InvoiceNew rate

In short: when invoice and payment both fall after the revision, the new rate governs. When both precede it, the old rate holds. Where events straddle the change, the rate follows whichever of the three — supply, invoice, or payment — occurs last.

Section 18, CGST Act

Input Tax Credit: transitional treatment

Transitional ITC exists to protect the tax chain — credit is held or reclaimed strictly according to how the underlying supply is taxed after the change.

CaseNature of changeITC treatment
1Goods are not exempt to taxationKeep availing ITC normally
2Goods become exemptedITC should be reversed under Section 18(4)
3Goods have been zero‑ratedITC is not withdrawn; taxpayer can claim refund
4Goods transferred between zero‑rated and exemptedNo ITC and no refund is allowed

Businesses are advised to regularly reconcile inventory against claimed credits — especially where new sector exemptions are announced — and to maintain complete documentation for rate transitions, eligible ITC, and reconciliation.

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Union Budget 2026‑27

Five statutory amendments that carry GST 2.0 forward

Sections 15 & 34, CGST Act

Post‑sale discounts, without the paperwork. A pre‑existing agreement is no longer required. As long as a credit note is issued under Section 34 and the recipient reverses the related ITC, the discount can be excluded from taxable value.

Section 54(6), CGST Act

Provisional refunds for inverted duty structure. Taxpayers claiming refunds now become eligible for provisional refunds, improving cash flow while the final refund is processed.

Section 54(14), CGST Act

No minimum threshold on export refunds. The minimum sanctioning threshold is removed for exports made with payment of GST, so refunds process regardless of amount.

Section 13, IGST Act

Simpler place‑of‑supply for intermediaries. The special rule for intermediary services is withdrawn; the general rule (location of the recipient) now applies, which may reduce disputes and improve export clarity.

Section 101A(1A) — effective 1 April 2026

No gap in the appellate process. Until the National Appellate Authority (NAA) is constituted, the Government can authorise an existing authority or tribunal to hear appeals under Section 101B.

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Figure 7 · Rs. in Lakh Crores

FY‑wise GST collection since inception

7.19
FY17‑18
11.77
FY18‑19
12.22
FY19‑20
11.36
FY20‑21
14.76
FY21‑22
18.10
FY22‑23
20.18
FY23‑24
14.07
FY24‑25
Source: Annapoorna, 2024

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On the Ground

Three ledgers, three lives

Chhattisgarh, rice grower

Before
Numerous tax layers and checkpoints on the road to Maharashtra ate into earnings; delays hurt crop prices.
After
Fewer slabs, faster inter‑State movement. Consumers get fresher produce; he earns more from the same crop.

Local retail store

Before
Perplexing slabs meant hiring an accountant just to file returns — a real cost for a small business.
After
Digital filing in minutes, with only two major slabs. More time for the store, less time on tax codes.

Middle‑class family budget

Before
Grocery bills padded with several rates — 12% here, 18% there — made true costs hard to track.
After
Necessities like paneer, bicycles and toothpaste sit at 5%. Lower expenses, and a bill they can actually read.

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GST: From Global to Local

Two models, one dual choice

GST was first introduced in France in 1954; over 160 nations now use some form of it. Broadly, two models dominate: single‑GST systems, as in Singapore and Australia, and dual systems — splitting collection between federal and state governments — as in Canada and India.

India’s dual system applies CGST and SGST to transactions within a State, and IGST to inter‑State transactions, with the Centre distributing the State’s share onward. Canada’s GST, by contrast, is a straightforward consumption tax collected by the vendor and remitted to government — a $10 book becomes $10.60 once a flat rate is applied. GST 2.0 moves India’s more intricate dual model closer to that clarity, without giving up the federal revenue‑sharing that the dual structure exists to protect.

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Conclusion

A ledger rewritten for trust

India’s journey from a detailed, multi‑slab GST system in 2017 to the streamlined GST 2.0 of 2025 marks a clear shift toward efficiency, fairness and transparency. The 2025 reforms have meaningfully eased the frictions of the previous system, balancing inclusivity with simplicity while the dual GST framework continues to preserve India’s federal character through streamlined slabs and stronger compliance procedures.

Taken together with the Union Budget 2026‑27, GST 2.0 is not merely an indirect tax reform but a pillar of India’s next‑generation fiscal system — a convergence that points from revenue extraction toward revenue facilitation, built on simplicity, technology, and the taxpayer’s trust.

Considering it in conjunction with the Union Budget 2026‑27, GST 2.0 does not just appear as an indirect tax reform but a pillar of the next‑generation fiscal system in India.

References

Annapoorna. (2024). Total GST Collection in India. cleartax.in/s/gst-collections-of-2024
Arun Kumar Deshmukh, Ashutosh Mohan & Ishi Mohan. (2022). Goods and Services Tax (GST) Implementation in India: A SAP–LAP–Twitter Analytic Perspective. link.springer.com
Gajendra Singh Godara. (2025). GST Council (Goods and Services Tax Council), Constitutional Provisions, Functions, Way Forward. padhai.ai
GST@8. (2025). Deloitte India. deloitte.com
Insights IAS. (2022). Editorial Analysis: GST — Five years stronger. insightsonindia.com
Insights IAS. (2025). 8 Years of GST. insightsonindia.com
Keen, M. (2013). The Anatomy of the VAT. IMF Working Paper. imf.org
OECD. (2020). Consumption Tax Trends. oecd.org
Press Information Bureau. (2025a). Eight Years of GST. pib.gov.in
Press Information Bureau. (2025b). PM Modi’s I‑Day Address: A Vision for Reform, Self‑Reliance, and Empowering Every Indian. pib.gov.in
Press Information Bureau. (2025c, November 3). GST Revenue Soars in October 2025. pib.gov.in
Shreya Kashyap, TaxGuru. (2025). GST Council 56th Meeting: Tax Rate & Reforms. taxguru.in
The Economic Times / EY India. (2023). 6 years of GST — hits and the way forward. economictimes.indiatimes.com
Manisha Singhmanishhasingh3@gmail.com
Editorial Boardeboard@icai.in
Originally publishedThe Chartered Accountant, April 2026 · icai.org