Editorial: GST, a tumultuous journey
As the bold indirect tax reform completes eight years of implementation, the occasion calls for an honest appraisal and the introduction of further changes
Overcoming initial scepticism, technical glitches and political differences, the Goods and Services Tax (GST) regime has come a long way and has proved largely beneficial for the country. As the bold indirect tax reform completes eight years of implementation, the occasion calls for an honest appraisal and the introduction of further reforms. There is a strong case for simplifying compliance, reducing the number of tax slabs to three, and broadening the base by bringing petroleum products under the GST purview. At present, petroleum products remain subject to central excise duty and State Value Added Tax (VAT). They can be brought within the ambit of GST only upon a specific recommendation by the GST Council, comprising Finance Ministers from the States and the Centre. However, the primary concern of the States is that subsuming these commodities under GST would lead to a revenue shortfall. The GST was originally conceived by the Congress-led UPA government years before its actual rollout on July 1, 2017. Gross GST collections have doubled over the last five years to touch a record Rs 22.08 lakh crore in 2024-25, according to official data. Gross GST collections in 2024-25 rose 9.4 per cent year-on-year with an average monthly mop-up of Rs 1.84 lakh crore. In comparison, total GST collections stood at Rs 11.37 lakh crore in 2020-21. The rise reflects the increasing formalisation of the economy and improved tax compliance.
The robust growth is attributed to timely reforms, simplified procedures, and upgrades to the GST portal, which have helped taxpayers comply with ease. Since its rollout, the number of active registered taxpayers has more than doubled, from 60 lakh at inception to over 1.51 crore as of April 2025. The GST Council determines tax rates and policies under the four-tier rate structure of 5, 12, 18, and 28 per cent. Special rates apply to items like gold, diamonds and jewellery, while a compensation cess is levied on select goods to make up for States’ revenue losses following GST implementation. It is estimated that the GST, which subsumed a cascade of 17 central and State taxes and 23 cesses, has helped reduce the overall tax burden on goods and services, saving households around 4 per cent on monthly expenses. Undoubtedly, the GST has been the most transformative indirect tax reform undertaken in independent India. It warranted a complete reset of one of the world’s largest economic systems. The system has now reasonably stabilised. The overall experience has been positive, with tax compliance rising significantly and numerous businesses being brought into the formal economy. The success of GST is a fitting tribute to the spirit of cooperative federalism, despite political and ideological differences. While there is scope for further simplification, a single GST rate is an impractical idea, given the vast diversity of consumers in India.
