8 Years Since GST Launch: How India’s Biggest Tax Reform Is Evolving -

On July 1, 2025, India completes eight years since the implementation of the Goods and Services Tax (GST) a major structural reform that reshaped the country’s indirect taxation landscape. Introduced on July 1, 2017, GST replaced a patchwork of central and state taxes with a unified system, aimed at promoting ease of doing business, eliminating tax inefficiencies, and formalizing the economy. While the reform has brought several benefits, it also continues to face challenges that call for further refinement.

What is GST?

The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. It replaced multiple central and state taxes including excise duty, service tax, VAT, luxury tax, and entry tax. India adopted a dual GST model with CGST levied by the Centre, SGST by the States, and IGST on inter-state supplies and imports.

The system is governed by the GST Council, a constitutional body comprising the Union Finance Minister and state finance ministers, which decides on tax rates, rules, and policies.

How GST Transformed India’s Tax System

Before 2017, India’s indirect tax structure was marked by complexity and cascading taxation. GST aimed to overhaul this by:

Eliminating the Cascading Effect: GST enabled Input Tax Credit (ITC) across the supply chain, reducing the tax-on-tax burden.
Unifying the Market: By subsuming over 17 indirect taxes, GST helped create a single national market for goods and services.
Digital Tax Administration: Filing returns, paying taxes, and claiming refunds were moved to a single online platform (GSTN), improving transparency.
Reducing Logistics Costs: The removal of interstate checkpoints and harmonized rates reduced time and cost for logistics operators.

According to the Ministry of Finance, the GST regime now includes more than 1.4 crore taxpayers, and the average monthly GST collections have steadily increased over the years. For instance, in April 2024, GST revenues hit a record ₹1.87 lakh crore, the highest since its inception.

Benefits of GST

Ease of Doing Business: GST simplified the taxation structure for businesses, particularly in inter-state trade.
Increased Compliance: The system of e-invoicing, e-way bills, and input tax credit tracking improved tax compliance.
Formalization of the Economy: GST incentivized businesses to register and maintain digital records, gradually expanding the tax base.
Higher Tax Revenue: According to GSTN and the Ministry of Finance, collections have risen, indicating better compliance and economic activity.

Ongoing Challenges

Despite these gains, there are areas where GST continues to face criticism:

Complex Rate Structure: India has four main tax slabs—5%, 12%, 18%, and 28%—plus exemptions and cesses, making it more complicated than many international GST models.
Refund Delays: Exporters and MSMEs often report delays in refund processing, impacting liquidity.
Technical Issues: Smaller businesses, especially those in rural areas, face difficulties navigating the GST portal and digital compliance norms.
Inverted Duty Structure: In sectors where input taxes are higher than output taxes, ITC accumulation remains unresolved.
Exclusions: Key sectors such as petroleum products, alcohol, and real estate remain outside GST’s scope, limiting its comprehensiveness.

These concerns have been raised by several industry bodies including FICCI, CII, and the Confederation of All India Traders (CAIT), urging simplification and support for smaller businesses.

Areas for Reform

For GST to meet its original objectives, the following reforms are necessary:

Simplify Rate Structure: Gradually reduce the number of slabs and eliminate unnecessary exemptions.
Streamline Refunds: Implement faster, automated refund systems with minimal manual intervention.
Widen the Tax Base: Consider bringing petroleum, electricity, and real estate under GST for greater efficiency.
Improve Digital Infrastructure: Enhance the GSTN portal to ensure smoother access for small traders.
Strengthen Federal Coordination: Empower the GST Council to ensure more timely consensus on rate rationalization and reforms.

Conclusion

Eight years since its implementation, GST remains a landmark reform that brought about greater tax uniformity, reduced inefficiencies, and improved compliance. However, it is also clear that GST must continue to evolve to meet the needs of a diverse economy. Simplification, inclusion, and stability should now be the focus areas to make GST a truly robust and efficient tax system for India’s next decade of growth.

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