🇮🇳 Eight Years of GST: Has India’s ‘One Nation, One Tax’ Truly Delivered?
- Dr.Sanjaykumar Pawar
📚 Table of Contents
- Introduction: GST at Eight – A Fiscal Turning Point
- What is GST? Understanding India’s Dual Tax Model
- Key Achievements: The Transformation So Far
- Persistent Challenges: Unfinished Business
- GST Revenue and Compliance Trends: Data Snapshot
- GST Council: The Federal Backbone of Reform
- The Road Ahead: What Should GST 2.0 Look Like?
- Conclusion: Towards a More Harmonized Future
- Frequently Asked Questions (FAQs)
📌 Introduction: GST at Eight – A Fiscal Turning Point
On July 1, 2017, India embarked on one of its boldest tax reforms with the rollout of the Goods and Services Tax (GST). Designed to replace a labyrinth of central and state levies, GST sought to unify India’s fragmented tax structure into a single, transparent system. This landmark reform aimed to simplify compliance, eliminate tax cascading, and promote a seamless “One Nation, One Tax, One Market” economy.
Now, in July 2025, GST marks its eighth anniversary, standing as a pivotal moment in India’s fiscal journey. Over the years, it has subsumed more than 17 indirect taxes and 23 cesses, widened the formal economy, and powered record-breaking GST revenue collections, crossing the ₹2 lakh crore monthly mark. It has also boosted interstate trade and brought SMEs into the tax fold through digitization and the e-invoicing system.
However, GST's journey has not been without hurdles. Challenges like compliance burdens, rate rationalization, and sectoral gaps still hinder its full potential. As we reflect on GST’s evolution, this blog delves into its achievements, ongoing challenges, and what the future holds for a more inclusive, efficient GST 2.0 framework.
📖 What is GST? Understanding India’s Dual Tax Model
✅ Key Features of GST:
| Feature | Description |
|---|---|
| Destination-based Tax | GST is collected where goods or services are consumed. |
| Dual Model | Both Centre and State levy GST: CGST, SGST/UTGST, and IGST. |
| Input Tax Credit (ITC) | Seamless credit chain avoids cascading of taxes. |
| Zero-rated Exports | Exports are tax-free, promoting global competitiveness. |
| Multiple Rate Structure | 0%, 5%, 12%, 18%, 28%, plus special rates on gold, diamonds, and luxury items. |
The Goods and Services Tax (GST) revolutionized India’s indirect tax system by bringing transparency, efficiency, and uniformity. At its core, GST is a destination-based tax, meaning the tax revenue goes to the state where goods or services are consumed, not produced—fostering fairness in inter-state trade.
India adopted a dual GST model, allowing both the Centre and States to levy tax. This is categorized into CGST (Central), SGST/UTGST (State/Union Territory), and IGST (for inter-state transactions). The system encourages cooperative federalism while maintaining a seamless tax process.
A standout feature is the Input Tax Credit (ITC) mechanism, which eliminates the cascading effect of taxes. Businesses can claim credit for taxes paid on purchases, reducing their tax liability and promoting transparency.
To support international trade, GST treats exports as zero-rated, making them tax-free and globally competitive. However, the system includes a multi-tiered rate structure—0%, 5%, 12%, 18%, and 28%—along with special rates for luxury goods and precious items like gold and diamonds.
By replacing taxes such as excise duty, VAT, CST, and entry taxes, GST has created a uniform and efficient indirect tax regime, laying the foundation for a stronger, more integrated Indian economy.
🎯 Key Achievements: The Transformation So Far
Over eight years, the Goods and Services Tax (GST) has reshaped India’s tax landscape, driving transparency, efficiency, and economic integration. Despite challenges, the GST regime has delivered several impactful achievements that continue to define its success story.
1. ✅ Unified Market Structure
One of GST’s most significant accomplishments is the creation of a common national market. By subsuming 17 indirect taxes and 23 cesses, GST replaced the cumbersome web of central and state levies. Crucially, it eliminated inter-state tax barriers like CST and octroi, making movement of goods smoother across state borders. This shift has enabled pan-India supply chains, simplified compliance, and promoted scale-based efficiencies for businesses of all sizes.
2. 📈 Revenue Milestone
GST has emerged as a robust revenue engine. In FY 2024–25, the government collected a record ₹22.08 lakh crore, reflecting a 9.4% year-on-year growth. Monthly collections have consistently hovered around ₹1.84 lakh crore, indicating strong compliance and broad tax base coverage. As of April 2025, there are over 1.51 crore active GST taxpayers, showcasing the regime’s expanding footprint.
3. 💼 Business Formalization
GST has propelled formalization of the economy, bringing countless small and medium businesses into the tax net. Digital initiatives like e-way bills, e-invoicing, and GSTR-9C audit filings have increased traceability and reduced evasion. The culture of digital documentation and invoice transparency is fostering trust and ease in doing business.
4. 🌐 Boost to Exports
By designating exports as zero-rated supplies, GST ensures that Indian exporters are not burdened with domestic taxes, enhancing global competitiveness. The refund mechanism for input taxes has made Indian goods more attractive in global markets, further boosting trade and foreign exchange inflows.
5. 📲 Digital Tax Infrastructure
The Goods and Services Tax Network (GSTN) has matured into a robust digital platform powering India’s indirect tax system. AI-enabled audit trails, real-time invoice matching, and automated ITC validation have streamlined compliance. The shift to a tech-driven tax environment has not only increased efficiency but also set the foundation for a future-ready, transparent fiscal framework.
Together, these achievements mark GST as a milestone reform, laying the groundwork for sustained growth and better governance.
While the Goods and Services Tax (GST) has transformed India’s indirect tax system, it is far from perfect. Several structural and operational challenges continue to hinder its full potential. As GST completes eight years, it remains a work in progress, especially for small businesses, exporters, and high-compliance sectors.
1. 🛢️ Exclusion of Key Sectors
Major revenue-generating sectors such as crude oil, petrol, diesel, natural gas, ATF, and alcohol remain outside the GST umbrella. Their exclusion results in tax cascading, where tax is paid on already-taxed inputs, and disrupts input tax credit (ITC) chains. This fragmentation contradicts GST’s core goal of tax uniformity and burdens end consumers with higher costs.
2. ⚖️ Complex Rate Slabs
GST features five major tax slabs—0%, 5%, 12%, 18%, 28%—along with three special rates (0.25%, 1.5%, and 3%). While aimed at balancing revenue and affordability, this multi-rate structure causes classification disputes, compliance confusion, and litigation—especially in fast-moving sectors like food, FMCG, and electronics.
3. 🚫 Input Tax Credit Bottlenecks
One of GST’s promises was seamless ITC. However, credits often get blocked due to supplier non-compliance, invoice mismatches, or filing delays. For MSMEs, navigating these ITC conditions adds a heavy procedural burden, affecting cash flow and working capital management.
4. 🔄 Frequent Law Changes
Regular updates to GST rules, return formats, and filing requirements create compliance fatigue, especially for micro and small businesses. Additionally, issues related to place of supply, advance ruling inconsistencies, and ITC eligibility lead to legal ambiguities that erode business confidence.
5. 🧾 Inverted Duty Structure
In sectors like textiles, footwear, and fertilizers, the tax on inputs is higher than on final products—known as an inverted duty structure. This leads to accumulated ITC, delays in refunds, and a working capital crunch, particularly for low-margin manufacturers.
6. ⚖️ Delayed Dispute Resolution
The non-operational GST Appellate Tribunal (GSTAT) has caused a backlog of over 15,000 unresolved appeals pending in High Courts as of 2024 (Source: PIB). The absence of a functional tribunal slows justice, discourages dispute resolution, and increases litigation costs.
Addressing these issues is vital to realize the true promise of GST—a simple, predictable, and business-friendly tax regime.
📊 GST Revenue and Compliance Trends: Data Snapshot
Over the past eight years, GST has grown from a fledgling reform to a robust pillar of India’s indirect tax system. A look at the key numbers from 2017–18 to 2024–25 reveals remarkable progress in terms of revenue generation, taxpayer base, and digital compliance infrastructure.
Sources: CBIC, PIB, Ministry of Finance A Story of Growth and MaturityFrom just ₹7.41 lakh crore in its first year, GST collections have tripled to ₹22.08 lakh crore in FY 2024–25, indicating stronger economic activity, higher compliance, and a broader tax base. Monthly GST collections have consistently stayed above ₹1.8 lakh crore, a testament to improved filing discipline and real-time data analytics by the government. Rising Registrations and FormalizationThe number of active GST registrations more than doubled, from about 65 lakh in 2017–18 to over 1.51 crore in 2025. This dramatic increase highlights widened formalization, especially among MSMEs and service providers who earlier operated in the informal sector. The adoption of GST by small businesses is driving transparency and credit access. Explosion in E-Way Bills and Digital ComplianceDigital traceability has been another big win. The average number of e-way bills generated per month has surged from 2 crore to 11.2 crore, reflecting increased goods movement and improved supply chain tracking. Platforms like GSTN, e-invoicing, and AI-driven audit tools have created a strong compliance ecosystem, making evasion harder and reconciliation faster. The data clearly shows that GST is not just a tax reform, but a driver of economic formalization, revenue buoyancy, and digital governance. While challenges remain, these trends prove that India’s GST journey is heading in the right direction—towards transparency, accountability, and inclusive growth. | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
🧭 GST Council: The Federal Backbone of Reform
At the heart of India’s GST architecture lies the GST Council—a unique institution that embodies the spirit of cooperative federalism. Established under Article 279A through the 101st Constitutional Amendment, the Council is the central decision-making body responsible for steering GST policy across the country.
👥 Structure: A Balanced Representation
The GST Council is chaired by the Union Finance Minister and includes the Union Minister of State for Finance and Finance Ministers of all States and Union Territories. This inclusive structure ensures that both the Centre and States have a say in how GST evolves, making it one of the most participatory policy platforms in India’s fiscal history.
🗳️ Decision-Making: Consensus-Driven Governance
The Council’s decisions are made through a weighted voting system: the Centre holds one-third of the votes, while all States collectively hold two-thirds. For any decision to pass, a 75% majority is mandatory, encouraging collaboration over coercion. This mechanism ensures that no single entity can dominate GST policymaking, promoting balance and fairness.
📌 Key Roles: Guiding GST Evolution
The Council plays a pivotal role in shaping the GST framework. Its responsibilities include:
- Recommending tax slabs, exemptions, and model GST laws
- Defining threshold limits for registration and composition schemes
- Suggesting changes in compliance requirements, return formats, and e-way bill rules
- Deciding the application and continuation of compensation cess
By providing a forum for open dialogue, the GST Council has been instrumental in resolving disputes, clarifying legal interpretations, and responding swiftly to economic shocks—such as rate reductions during the COVID-19 pandemic.
⚖️ Need for Reform: Unlocking Efficiency
Despite its strengths, the GST Council faces challenges. Delays in key reforms, like rate rationalization or inclusion of petroleum products, often stem from a lack of consensus among diverse states. Critics argue that the consensus model, while inclusive, slows down decision-making.
To make the Council more responsive, experts have proposed reforms like weighted voting based on revenue contribution, structured stakeholder consultations, and fixed timelines for decisions.
The GST Council is the backbone of India’s tax reform, ensuring that the federal spirit is upheld while pushing for economic integration. Strengthening its functioning is crucial to realizing a more agile, simplified, and future-ready GST regime.
🚀 The Road Ahead: What Should GST 2.0 Look Like?
As India celebrates eight years of GST, the system has shown immense promise—but also clear signs of fatigue. To unlock its full potential, a set of targeted reforms is essential. These changes can enhance compliance ease, broaden the tax base, and align GST with the needs of a digital, dynamic economy.
🛢️ 1. Bring Petroleum and Alcohol Under GST
Currently, petroleum products and alcohol for human consumption remain outside the GST net, leading to tax cascading and credit blockages for businesses. Their inclusion will establish a seamless input tax credit (ITC) chain, eliminate inefficiencies, and make India’s tax system truly comprehensive and consumption-based.
🧾 2. Simplify Compliance for MSMEs
Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy but often struggle with frequent return filings and complex portals. Introducing quarterly simplified returns for businesses with a turnover of less than ₹5 crore can significantly reduce compliance costs and encourage more businesses to formalize.
📦 3. Rationalize GST Slabs
India’s current GST rate structure—with multiple slabs and special rates—causes confusion and disputes. Moving toward three principal slabs—5%, 12%, and 18%, while retaining 28% only for sin and luxury goods—can improve clarity, ease classification issues, and promote revenue neutrality.
🧑💼 4. Reform Input Tax Credit (ITC) Mechanism
One of the most pressing concerns for taxpayers is denial of ITC due to non-compliance by suppliers. A major reform would be to allow ITC based on tax payment to the government, regardless of the supplier’s compliance, thus protecting honest taxpayers and improving trust in the system.
🌐 5. Expand the Base: Tax the Gig Economy & Digital Services
India’s growing gig and digital economy—including freelancers, ride-hailing services, e-commerce, and crypto transactions—remains loosely regulated under GST. Including these sectors with clear, enforceable guidelines can widen the tax base and ensure fairness across platforms.
🕊️ 6. Speed Up GST Appellate Tribunal (GSTAT)
The long-pending GSTAT must be made operational to resolve thousands of appeals clogging High Courts. A functional tribunal will ease legal burden, ensure timely dispute resolution, and restore taxpayer confidence.
🧩 7. Reform the GST Council
To enhance transparency and institutional strength, the GST Council should adopt an independent secretariat, maintain institutional memory, and publish meeting minutes—bringing in more accountability and public trust.
Together, these reforms can lead to a simpler, fairer, and future-ready GST system.
🔚 Conclusion: Towards a More Harmonized Future
In the eight years since its launch, India’s Goods and Services Tax (GST) has achieved several transformational milestones—from creating a unified national market to enhancing tax transparency, expanding the formal economy, and delivering record-high revenues. It has simplified indirect taxation for many businesses and laid the digital groundwork for real-time compliance and monitoring.
Yet, despite this progress, GST remains a work in progress. Its current structure continues to be complex, fragmented, and exclusionary, with critical sectors like petroleum and alcohol still outside its purview. Small businesses face compliance fatigue, and legal bottlenecks delay justice for taxpayers.
As India aspires to become a $5 trillion economy, the need for a forward-looking GST 2.0 is more urgent than ever. This means adopting a simplified rate structure, expanding the tax base to include the digital and gig economy, fixing input tax credit inefficiencies, and ensuring faster dispute resolution through a functional appellate system.
A truly tech-enabled, inclusive, and cooperative GST regime will not only support India's growth trajectory but also build long-term trust in the tax system. The road ahead must be paved with bold reforms to make GST smarter, fairer, and future-ready.
❓ Frequently Asked Questions (FAQs)
Q1. What are the key components of GST in India?
- Central GST (CGST), State GST (SGST), and Integrated GST (IGST)
Q2. What is the purpose of the GST Council?
- To recommend policies, resolve disputes, and ensure coordination between Centre and States
Q3. Why are petroleum and alcohol excluded from GST?
- Due to State revenue dependency; political consensus needed for inclusion
Q4. What is ITC and why is it important?
- Input Tax Credit allows businesses to claim credit on input tax paid, reducing double taxation
Q5. What is GST 2.0?
- Proposed reform phase involving rate rationalization, ITC overhaul, inclusion of new sectors, and dispute resolution reforms
🔎 Sources Used:
- Central Board of Indirect Taxes and Customs (CBIC)
- Press Information Bureau
- Ministry of Finance
- Economic Survey 2024–25, NITI Aayog Reports, and RBI Bulletins
.PNG)
