With initial challenges like online portal glitches and delays in refunds mostly resolved, and monthly revenue consistently surpassing Rs 1.6 lakh crore, experts believe the government is ready to push ahead with the second phase of GST reforms.

During the upcoming interim budget presentation on February 1, Finance Minister Nirmala Sitharaman is expected to outline the proposed GST system reforms.

While any actual changes to the GST would need the approval of the GST Council, businesses are eager for a clear roadmap on the next phase of reforms.

Two main issues are likely to kickstart the second phase of GST reform: streamlining tax slabs and bringing petroleum products under the GST umbrella.

Many countries around the world have a Goods and Services Tax (GST) or similar national tax system with one or two tax slabs. However, India currently operates with four main GST tax slabs: 5%, 12%, 18%, and 28%, each accompanied by additional cess. There are also special rates for specific items, like a 3% tax on gold and a 0.25% GST on rough precious, and semi-precious stones.

In 2021, a Group of Ministers (GoM) was formed, chaired by then Karnataka Chief Minister Basavaraj Bommai, to suggest changes to GST slabs and rates. The Bommai panel submitted an interim report in June 2022, asking for more time from the GST Council to finalize their recommendations.

After a change in government in Karnataka, the panel has been reconstituted, now led by Uttar Pradesh Finance Minister Suresh Khanna. This seven-member panel includes finance ministers from Kerala, Karnataka, West Bengal, Rajasthan, Bihar, and Goa.

There are indications that the number of tax slabs may be reduced to three, possibly by eliminating the 12% slab and merging its items with either the 18% or 5% slabs. There's also talk of possibly increasing the 5% slab to a higher rate, like 8%.

Currently, most products are taxed at 18%, while higher rates of 28% plus cess apply to certain goods. The GST Council has adjusted rates for various products several times in the past.

The Confederation of Indian Industries (CII) proposes a three-tiered tax structure: a low rate for essentials, a standard rate for most goods, and a high rate for luxury items. CII also urges including products like petroleum, electricity, and real estate, currently outside the GST, into the GST framework.

Bringing petroleum products into the GST has been a contentious issue between the central government and states, as these products contribute significantly to state revenues.

Although the central government supports including petroleum products in the GST, many states are hesitant. Finance Minister Sitharaman mentioned in a post-budget session last year that once states agree, petroleum products could be brought under the GST.

The central government may push for including aviation turbine fuel (ATF) and natural gas under the GST, as opposition from states is likely to be lower compared to diesel and petrol.

Strong tax collections will give the government the confidence to move forward with pending reforms. In the first nine months of the current financial year, monthly GST collections averaged Rs 1.66 lakh crore, marking a 12% increase year-on-year.