8 years of GST: Journey of reform, resilience, renewal

Hindustan Times

01-07-2025

Reform is not a one-time event, but a continuous process. This adage best explains the journey of the Goods and Services Tax (GST) in India. On the midnight of July 1, 2017, India witnessed a tectonic shift in its fiscal architecture with the launch of GST. On the midnight of July 1, 2017, India witnessed a tectonic shift in its fiscal architecture with the launch of the Goods and Services Tax (GST) in India.
Marketed as 'One Nation, One Tax', GST aimed to subsume a labyrinth of central and state levies into a unified, destination-based tax. Eight years on, the reform has matured from a disruptive overhaul to a stabilising force in India's indirect tax regime. As we reflect on this transformative period, it becomes imperative to examine the early hurdles, the mechanisms that addressed them, the current state of compliance assurance, and the road ahead.
The idea of a unified goods and services tax was first mooted in 2000 by the Atal Bihari Vajpayee government. It took 17 years of political negotiation, constitutional amendments, and consensus-building to bring it to fruition. The 101st Constitutional Amendment Act laid the legal foundation, while the GST Council, an embodiment of cooperative federalism, became the nerve centre for rate rationalisation and policy calibration.
Complexity in simplicity
Despite its promise of simplification, GST's rollout was riddled with challenges. The Goods and Services Tax Network (GSTN), the digital backbone of the regime, struggled to handle the surge in return filings. Frequent downtimes and system crashes frustrated taxpayers, particularly during peak deadlines. The original return-filing structure (GSTR-1, 2, 3) proved too complex and was quickly replaced by the simplified GSTR-1 and GSTR-3B. Small and medium enterprises (SMEs) found it difficult to adapt to digital compliance, invoice matching, and input tax credit (ITC) reconciliation. The presence of five major tax slabs — 0%, 5%, 12%, 18%, and 28% — led to classification disputes and undermined the goal of a simplified tax structure. States were apprehensive about revenue loss and autonomy. The compensation mechanism, funded through a cess on sin and luxury goods, was introduced to allay these concerns.
Adaptive governance
The GST Council, with a total 55 meetings to date, has demonstrated remarkable agility in responding to stakeholder feedback. Key reforms include: i) The introduction of the quarterly returns with monthly payment (QRMP) scheme for small taxpayers, reducing filing frequency while maintaining revenue flow; ii) E-invoicing mandates for large businesses, enhancing invoice authenticity and curbing fake ITC claims; iii) Launch of GSTR-2B, a static ITC statement, which brought predictability to credit claims; iv) Automated return scrutiny and AI-driven analytics, enabling risk-based audits and reducing human interface; and v) E-way bill system and the upcoming Invoice Management System (IMS) have streamlined logistics and compliance. These interventions reflect a shift from rule-based enforcement to data-driven compliance assurance.
Maturing ecosystem
As of FY 2024–25, GST collections have consistently crossed ₹ 1.6 lakh crore a month, with May 2025 touching ₹ 2.01 lakh crore — a record high. Return filing rates have improved, and the GSTN infrastructure has stabilised. The integration of GST data with income tax and customs databases has enabled better triangulation and reduced evasion.
The compliance ecosystem has matured, with most businesses adapting to digital workflows. The long-awaited GST Appellate Tribunal will be finally operational soon, addressing a critical gap in dispute resolution.
Reform to refinement
Despite the progress, challenges persist. The multiplicity of slabs continues to create confusion. A merger of the 12% and 18% rates, as recommended by the group of ministers, remains pending. Sectors like textiles and footwear still face refund backlogs due to input-output rate mismatches. Frequent rule changes and notifications, though well-intentioned, often overwhelm taxpayers. Smaller businesses in rural areas still struggle with digital literacy and infrastructure. With the compensation cess set to expire in March 2026, the government must explore alternatives, such as merging cess into base GST rates and raising the present cap of maximum 40% or introducing targeted levies like a health or clean energy cess — to maintain fiscal neutrality.
Way forward: GST 2.0
To fulfil its promise, GST must now evolve from a compliance framework to a facilitative ecosystem. Simplifying rate structure to reduce disputes and improve ease of doing business.
Enhancing taxpayer services through pre-filled returns, real-time dashboards, and multilingual support. Institutionalising capacity building for tax officers and taxpayers alike, particularly in tier-2 and tier-3 cities. Strengthening dispute resolution through faster appellate processes and mediation mechanisms. Leveraging technology not just for enforcement, but for predictive analytics, fraud prevention, and policy design.
Eight years into its journey, GST stands as a testament to India's ability to undertake complex structural reforms through consensus and iteration. It has unified the national market, improved tax buoyancy, and fostered a culture of compliance. Yet, it remains a reform in motion — demanding continuous refinement, stakeholder engagement, and political will.
As India aspires to become a $5 trillion economy, a robust, transparent, and taxpayer-friendly GST regime will be indispensable. The next chapter must focus not just on plugging gaps, but on unlocking potential. Baljit Singh Khara (HT Photo)
The writer is a former Indian Revenue Service officer. Views expressed are personal.