GST 2.0 overhaul: How global practices can help India achieve a seamless transition

As India prepares for a major GST overhaul, experiences from other countries offer valuable pointers on how to simplify rates and strengthen compliance.

India’s Goods and Services Tax is set for a major reset on September 22, 2025, when the long-awaited GST 2.0 comes into force. The overhaul, announced by Prime Minister Narendra Modi on August 15 and cleared by the GST Council on September 3, moves the country from multiple slabs to a simpler framework of 5% and 18%, with a 40% de-merit rate on luxury and ‘sin’ goods.

The government hopes the changes will lift consumption and make tax compliance easier. Similar reforms around the world show both the opportunities and the pitfalls.

New Zealand’s GST

New Zealand’s single-rate GST of 15% is seen as a global benchmark for simplicity. With few exceptions, it keeps administration costs low and makes revenue forecasting easier. India’s two-slab model should reduce disputes, but it will work only if product and service classifications are crystal clear and backed by advance rulings to prevent litigation.

Canada’s Unified HST

Canada’s Harmonised Sales Tax (HST) is a value-added consumption levy that blends the federal Goods and Services Tax (GST) with provincial sales taxes. Under this system, businesses collect the tax on eligible goods and services and remit it to the Canada Revenue Agency. Supporters say that by streamlining the tax structure and easing administrative burdens, the HST strengthens the competitiveness of Canadian businesses and helps keep consumer prices in check.

India’s dual GST, shared between the Centre and the states, will require similar attention to detail. Drawing on Canada’s experience, a single nationwide IT platform and a transparent revenue-sharing mechanism could help maintain federal balance while keeping compliance costs low for traders.

High ‘Sin’ Tax Rates Can Backfire

Some countries impose very high taxes on products such as alcohol and tobacco to discourage consumption. But such steep rates can also fuel tax evasion and a thriving black market. Brazil’s historical VAT regime is a case in point. A complicated and opaque system, combined with heavy tax burdens and weak enforcement, created strong incentives for fraud and distorted market competition. For India, which plans a 40% slab on luxury and sin goods under GST 2.0, the lesson is clear. Strong safeguards such as e-invoicing analytics and targeted audits will be essential to prevent misclassification and curb illicit trade.

Technology Support

Global e-reporting drives show why India must upgrade its GST tech. For example, Australia and the European Union are stepping up real-time e-reporting and reconciliation to tackle tax fraud through new regulations and advanced technologies. The EU’s VAT in the Digital Age (VIDA) package will make e-invoicing and a unified real-time reporting system mandatory for businesses by 2030 to curb VAT fraud. Likewise, Australia is deploying real-time payment and reconciliation platforms such as NAB Portal Pay to boost efficiency and tighten security in financial transactions, according to reports.

For India, these global efforts highlight the importance of strengthening its own digital tax infrastructure. The country’s existing e-invoicing system needs deeper integration with customs and excise databases, improved analytics to detect fraud and an expanded network of taxpayer helplines so businesses can adapt swiftly to GST 2.0.

GST 2.0 can reshape India’s tax system by blending global best practices with local needs. Clear tax rates, strong technology, fair state compensation and strict enforcement will be key to its success.