"Having rationalised rates, the next frontier of GST reform lies in process simplification." Discuss with reference to recent proposals for small taxpayers.

The September 2025 "GST 2.0" reform cut the main rate slabs to two (5% and 18%) and added a 40% demerit rate. In October 2026, the Centre is putting a five-pronged plan before the GST Council. The plan leaves rates alone and focuses on process, compliance and ease of doing business [1]. This shows that most of GST's remaining problems now lie in procedure, not in rates.

Why process is the next frontier

• Unfinished design: GST was built on 100% invoice matching. Two years after roll-out, CAG found that this matching "had not kicked in" [2].
• Weak follow-up: CAG's 2024 audit looked at 8,220 data mismatches. 15% of them were clear compliance failures, worth ₹2,203.57 crore [3]. The system flags problems, but officers do not act on them fast enough.
• Fixed compliance costs hurt small firms the most. A tax rate takes the same share from every firm, but the cost of filing and paperwork does not shrink with firm size.

Recent proposals for small taxpayers [1]

• Annual returns instead of monthly for small suppliers who sell only to consumers (B2C). This has been sent to States as a concept note.
• Automatic invoice matching between buyer and seller, plus less ITC paperwork. This would free up working capital that is now stuck in blocked credit.
• No multi-state registration for small sellers trading across India. This matters most for e-commerce.
• Treating services delivered through an overseas branch as exports, which they are not today. This would help service MSMEs.

Concerns

• Fraud risk: Since May 2023, officers have found 29,273 bogus firms with suspected fake ITC of ₹44,015 crore [4]. DGGI found more than 6,000 fake-ITC cases worth over ₹57,000 crore between 2020 and 2023 [5]. Fewer registrations and lighter ITC checks could make such fraud easier.
• States' view of revenue: With annual filing, States would learn about evasion much later. States hold two-thirds of Council votes, and after Mohit Minerals (2022) Council recommendations are only persuasive, so their concerns must be met.

Way forward

• Get the order right: allow credit only on matched invoices first, and cut paperwork after that.
• Fixed deadlines for officers to act on mismatches the system flags.
• Pilot annual filing at a low turnover limit first. Add stronger identity checks for the single registration.
• Amend the law on the export-of-services definition.

Rate rationalisation settled what taxpayers pay; process reform must now settle how they pay. If matching comes first and relief follows, these proposals can make GST a truly "Good and Simple Tax" without losing revenue. Building them through consensus in the Council under Article 279A would also strengthen cooperative federalism.