As India’s goods and services tax (GST) framework moves into 2026, experts say the regime has reached a stage where fine-tuning rather than fire-fighting will define the next phase of reform, with growing emphasis on selective restructuring, technology-driven enforcement and formalisation-led revenue stability, instead of frequent rate changes.
The emerging policy discussion is centred on whether a second wave of GST and Customs restructuring will be required to sustain consumption momentum and business confidence, particularly in areas such as inverted duty structures and MSME (Micro, Small, and Medium Enterprise) compliance.
A second-stage reform push, experts say, would build on the rate rationalisation undertaken in 2025 but operate within a more stable and predictable framework, aligning tax design with system maturity rather than a major structural overhaul.
Second reform wave on the table?
Even as the system moves towards stability, some structural gaps remain, particularly in areas such as inverted duty structures and MSME-level compliance complexity, prompting calls for a calibrated follow-through phase of reform rather than a disruptive overhaul.
“A second wave of GST and Customs restructuring may be necessary, focusing on pruning remaining inverted duty structures, merging overlapping slabs and simplifying compliance for MSMEs. The GST reform journey has reached a stage where fine-tuning, not fire-fighting, is required,” an tax expert said.
He said a leaner and more predictable GST architecture would not only protect revenues but also help support domestic consumption, investment confidence and formalisation.
“In sum, the 2025 rate rationalisation has not merely trimmed taxes, it has trimmed frictions, revived confidence and reset market behaviour. As we step into 2026, GST has the potential to evolve from a tax framework into a true growth catalyst, provided the reform baton continues to be carried forward,” he said.
The road ahead
As GST enters 2026, the reform conversation is moving towards a balance between policy stability and targeted structural refinement. The emphasis is increasingly on a carefully calibrated second-stage restructuring where required — a direction, experts say, will determine how the tax regime shapes consumption, investment and compliance behaviour in the year ahead.
Stability with selective, evidence-based interventions
Tax practitioners say that the GST regime is entering a period where policy continuity and predictability are becoming more critical than slab revisions, allowing firms to plan pricing, investments and supply-chain strategies with greater confidence.
“Looking ahead to 2026, the GST regime is clearly entering a phase of consolidation and stability. The policy direction is expected to move away from frequent rate tinkering towards predictability and system maturity, with any further interventions being selective and evidence-based. Such stability is essential for businesses to plan pricing, investments, and supply chains with greater confidence and lower regulatory uncertainty,” another tax expert, told Moneycontrol.
He said revenue performance in 2026 is expected to be supported more by improved compliance, deeper formalisation and technology-led enforcement than by higher tax rates, with analytics-based matching across returns, e-invoicing and customs data playing a larger role in administration.
He added that enforcement would likely become sharper and more targeted, particularly in areas involving misclassification of goods, incorrect rate application and ineligible exemption claims, alongside tighter linkage between input-tax-credit claims, supplier compliance and transaction authenticity.
Industry lens: Smartphone market dynamics
Industry feedback suggests that while GST-related rationalisation has influenced pricing and reporting behaviour across sectors, demand outcomes remain uneven in categories driven more by macro-economic conditions than by tax changes.
“While it’s true that the GST rates on smartphones and our ecosystem remain unchanged, we must consider the broader economic landscape that is influencing consumer behaviour. The slowdown in smartphone consumption can be attributed to several macroeconomic factors, including inflationary pressures, shifts in consumer sentiment, and changing spending priorities,” an industry expert, told Moneycontrol.
He said businesses have responded by adjusting margins and re-evaluating supply chains, adding that any further restructuring should be approached carefully to avoid disruptions.
“Looking ahead, a recovery in consumer demand is contingent on stabilising economic conditions. While further GST restructuring could be beneficial, it should be approached with care to avoid potential disruptions. For the smartphone sector, enhancing the value proposition and driving innovation will be critical in reigniting consumer interest and spending,” he said.
2025 rate rationalisation and behavioural reset
The forward-looking debate on selective reform is rooted in the 2025 GST rate rationalisation, which, experts say, recalibrated pricing dynamics, improved credit flows and influenced compliance behaviour across segments.
“The GST rate rationalisation of 2025 has acted as a much-needed tonic for a fatigued marketplace… The improved flow of Input Tax Credit has reduced the cascading effect, unclogged working capital cycles and strengthened balance sheets,” he said, adding that the simplified structure also reduced disputes and nudged more players into the formal tax net.
He noted that businesses have since shifted from survival mode to strategic growth planning, with supply-chain redesign and sourcing optimisation becoming more prominent behaviours in response to a cleaner credit flow environment.
