Welcome to yet another edition, chief!

In today’s edition — The GST reset is a welcome clean-up attempt aimed at simplifying tax slabs and fixing rate mismatches. But many stubborn problems remain including refund delays, pending litigations, and a trust deficit with tax officers. It’s progress, certainly, though still far from complete.

GST Rate Cut Helps, But Pain Points Remain

Vishwas Ved

Exactly a week ago on Independence Day, Prime Minister Narendra Modi announced some major changes in GST — the kind that made everyone happy.

First was retiring 12% and 28% slabs, and replacing them with a simpler two-tier system of 5% and 18%. And second was ensuring that only a handful of “sin goods” like tobacco, pan masala and online gaming would face a steep new 40% rate.

Everyone called it a big move. And in many ways, it is. (Watch The Core’s take)

But without sounding cynical, let’s ask a pertinent question here: does it fix all the problems businesses are facing with regard to GST?

To answer this, let’s take you back a few weeks when Deloitte released a survey report, GST@8, on the 8th anniversary of GST.

The survey, which captured the viewpoints of over 950 respondents, pointed out that businesses aren’t only worried about tax rates. They are frustrated because of a few other things as well: refunds stuck for months, audits leading to endless notices, and tribunals that don’t function.

So the real question is: do these new reforms actually solve the problems companies have been shouting about?

Let’s look at them.

Simpler Structure, At Last

One big complaint in the survey was the complexity of GST slabs. Should an item be taxed at 12% or 18%? Why is cement at 28% while food products are split between 5% and 12%?

For businesses, these distinctions created confusion, compliance problems, and in some cases, litigation.

On this front, the Independence Day announcement scores 100/100. By scrapping the 12% and 28% slabs, the government is removing much of the ambiguity. 

Footwear, garments, insurance premiums, cement, hotel rooms — all these odd cases are finally getting lined up for rationalisation. 

There is no doubt that if the proposals see the light of day, the system will become easier to navigate.

Disputes Drag On

But here’s the catch: simplification doesn’t remove the pile of disputes already choking the system.

Deloitte’s survey revealed that 44% of GST audits last year ended with demand notices, compared with 30% the year before. 

Also, the businesses complained that the responses from the GST department often turned out to be “copy-paste” versions of earlier rulings, and the GST Appellate Tribunal still hadn’t started functioning.

On this, the new reforms are silent. 

Cutting the number of slabs may reduce future disputes, but it won’t speed up the resolution of the cases piling up today. 

Refund Delays

Micro, small and medium enterprises also featured heavily in Deloitte’s findings. Their biggest complaint is refund delays. When GST refunds get stuck, it blocks their working capital.

The Prime Minister did talk about easing the burden on MSMEs, and lower GST rates certainly reduce the immediate tax outflow. That’s welcome. But the structural issue — refunds moving too slowly through the system — remains unsolved. 

Moving Goalposts

Another theme from the survey was unpredictability. Businesses complained that GST rules changed too often, which made tax planning a nightmare.

Here too, the new reforms might help indirectly. A simpler rate structure means fewer categories, fewer disputes about which slab applies, and hopefully fewer changes. 

But the government hasn’t promised stability. If political or fiscal pressures push for frequent adjustments, companies may still find themselves scrambling.

Trust Deficit

Perhaps the most sobering part of Deloitte’s findings was the trust deficit between businesses and tax officers. Too many notices, an aggressive compliance culture, and a feeling of being treated as suspects rather than taxpayers in good faith.

On this count, nothing has shifted. The Independence Day speech was about numbers and slabs, not behaviour. 

Unless enforcement becomes less combative, the relationship between business and the GST system will remain uneasy.

Final Words

So where does that leave us? 

On the positive side, one of GST’s most prominent design flaws — too many slabs and too many anomalies — is finally being tackled. Businesses should genuinely find life easier once the changes take effect.

But let’s not pretend this is the full story. Steps are also needed to address pending litigations, refund delays, frequent rule changes, and the trust gap between taxpayers and tax officers. 

The Independence Day reset of course fixes the architecture of GST, but definitely not the plumbing..

$25 Billion

Shares of the struggling chipmaker Intel have rallied 28% this month, adding about $25 billion in market value, on reports that the US government is in talks for a potential equity stake, as well as plans for a $2 billion investment from Japan’s SoftBank Group Corp. The jump has Intel trading at 53 times profits projected over the next 12 months, the highest since early 2002. The valuation now is so high, its most recent precedent is from the dot-com era more than two decades ago.

—GST rejig to give ₹1.98 trillion consumption boost. The proposed GST reforms through a two-tier tax structure and lower tax rates on household goods will lead to an estimated average revenue loss of ₹85,000 crore a year, but will boost consumption by ₹1.98 lakh crore, SBI Research Report said. It estimated that the effective weighted average GST rate has come down from 14.4% at the time of inception to 11.6% in September 2019. Given the current rationalisation of rates, we believe that the effective weighted average GST rate may come down to 9.5%.

—Indian Oil, BPCL resume buying Russian oil. Indian Oil and Bharat Petroleum have bought Russian oil for September and October delivery, resuming purchases after discounts widened. The refiners had halted purchases in July due to narrower discounts and after India was criticised by Washington for its purchases of Russian oil. Discounts for Russian flagship Urals crude have widened to about $3 per barrel, making the oil attractive for Indian refiners.

—Trump goes after yet another top Fed official.  US President Donald Trump this week called on a top policymaker at the Federal Reserve to resign, after one of his allies alleged that she committed mortgage fraud. In a letter dated August 15, Federal Housing Finance Agency director Bill Pulte urged the Justice Department to investigate a pair of mortgages taken out in recent years by Fed Governor Lisa Cook. But Cook pushed back, saying she would not be forced out of the Fed.

—Online gamers lose ₹20,000 crore per year. The government estimates that around 45 crore people lose close to ₹20,000 crore every year in online real-money gaming. The government made the statement while making the move to ban online gaming. There is a rough estimate that 45 crore people lose money every year, the Lok Sabha was informed on the day when the Promotion and Regulation of Online Gaming Bill, 2025, was tabled and passed.

—America's 'nicest judge' dies at 88. Frank Caprio, a retired municipal judge in Rhode Island who gained international fame for being a compassionate jurist and host of the reality court show, Caught in Providence, has died at the age of 88. He had been battling pancreatic cancer. Just a day before his passing, Caprio had shared a video from his hospital bed asking followers to pray for him. “Unfortunately, I’ve had a setback… I’m a great believer in the power of prayers,” he wrote on his page..

ICYMI | Deep Wound, Not Papercut

Missed last week's update? Markets may be discounting the impact of US tariffs, but for some sectors such as textiles and jewellery, this could be an uppercut of sorts, a real jab in the belly. The fear is that this might inevitably lead to job losses in thousands and ceding of ground to international competitors such as Ecuador. Meanwhile, an eyedrop is coming up soon that could make reading glasses redundant.

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