Celebrating 8 years of GST
The implementation of the Goods and Services Tax (GST) on July 1, 2017, was one of the most notable milestones in India's economic history. It was the nation's boldest tax overhaul after independence, substituting a labyrinth of indirect taxes imposed by the Centre and states with a single tax system. The central goal of GST was to form a common national market, increase tax compliance, and promote economic efficiency by removing the cascading effect of sequential indirect taxes.
In the last several months, GST collections have witnessed a steep growth. In April 2025, collections reached an all-time high of ₹2.37 lakh crore, the highest ever. For two months in a row, April and May, collections were above ₹2 lakh crore, indicating robust economic activity and better compliance.
India has a dual GST system under which both the Centre and the states collect GST simultaneously. It is imposed on the consumption of goods and services at various levels, yet ultimately paid by the final consumer.
Through input tax credit (ITC), businesses claim credit for taxes paid on purchases.
8 years of GST
It has been eight years on July 1, 2025, since GST was implemented in India. It is almost a decade-long innings, a good time to look back at its successes and setbacks. Let us consider some of the important pointers that reflect the accomplishments, shifts, areas of improvement, and the direction forward.
Achievements in 8 years of GST
1. A truly historic reform in indirect taxation
GST offered a simple "One Nation, One Tax" framework by replacing a complex web of central and state taxes. Earlier, multiple taxes, such as excise, VAT, and service tax, were levied on consumers, which would complicate the indirect tax structure.
2. Simplified compliance through technology
GST compliance was simplified through the rollout of GSTN, e-invoicing, e-way bill, and QR code-based B2C invoicing. Moreover, the automation of return filing, credit matching, and audit trails made it even better.
Through artificial intelligence (AI), machine learning (ML) and analytics, fake invoicing and tax evasions could be detected.
3. Formalisation of the economy
The implementation of GST was one of the most significant steps towards the formalisation of the economy as it encouraged registration of small businesses and improved the tax base. Its integration with PAN, Aadhaar, and the banking system improved traceability.
4. Timely reforms via the GST Council
Over 50 GST Council meetings have been held with a spirit of cooperative federalism, aimed at dynamic rate rationalisations and threshold limit changes.
5. Refund mechanism improvement
Refund timelines have reduced significantly. System-driven processing has made it more transparent, especially for exporters.
Areas of improvement
1. Classification disputes and AAR diversity
Ambiguity about how a particular product or service should be categorised under the GST rate structure is a key challenge. Moreover, there should also be uniformity in Authority for Advance Ruling (AAR). India has state-wise AARs, which have led to divergent rulings on the same issue across different states.
2. ITC restrictions and ambiguities
Complex provisions under Section 17(5) and frequent disputes on ITC eligibility are another key challenge that needs to be addressed.
3. Place of supply issues
For services, especially in inter-state contexts, B2B and SEZ treatment, interpretational differences persist. Besides, India needs virtual digital assets (VDAs)-specific guidelines to ensure tax certainty and prevent disputes. VDAs are borderless, so it remains unclear whether the location should be based on the server, buyer, or wallet. Without clear rules, businesses face confusion and possible double taxation.
4. Rate structure complexity
Multiple slabs (0%, 5%, 12%, 18%, 28%) still exist, with many items straddling slab boundaries (e.g., food products, fabrics). India must move towards a lower GST rate structure as proposed by several studies.
5. Delayed appellate infrastructure
GST Appellate Tribunals (GSTAT) are not yet functional in many states. It is imperative to speed up the appointment and infrastructure setup for GSTAT at the earliest.
6. Defining tax rules for exchanges and wallet providers
The current GST laws do not clearly define how the services of financial intermediaries such as crypto exchanges and wallet services should be taxed. India should standardise treatment, like Singapore’s model of taxing just the commission to avoid confusion and ensure fair play.
7. Clarify Input Tax Credit (ITC) eligibility
Businesses using VDAs have uncertainty on whether they can claim ITC for GST paid on purchases, thus discouraging legitimate adoption and creating compliance gaps. Clear ITC guidelines for registered VDA-related business use would support both compliance and growth.
There should be no doubt that the implementation of GST has long-term structural benefits. It has increased transparency and removed complexity in indirect taxes to a significant extent. However, we still need to fine-tune it by simplifying the rate structure, removing compliance complexity and weeding out ambiguity in rules. A sustained focus on simplification of rules, technological advancements and making access to GST Appellate Tribunals easier will be key to unlocking the full potential of GST.