GST reforms: The goods and services tax completes nine years on July 1 and enters its tenth. That is long enough to separate launch-day claims from institutional achievement. GST has done three things well. It replaced a fragmented indirect tax regime, improved the movement of goods across states, and pushed compliance onto a common digital platform. It has not yet become the Good and Simple Tax promised in 2017.
Before GST, businesses dealt with central excise, service tax, state VAT, entry tax, octroi, purchase tax, luxury tax, entertainment tax and cesses, each with its own forms, assessments and disputes. Interstate checkpoints slowed trucks. Taxes embedded in inputs raised production costs. GST did not remove every distortion, but it created a national market where businesses could carry input tax credit across much of the value chain and move goods without the old border delays.
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GST revenue and taxpayer base
The administrative gains are clear. E-way bills, e-invoicing, online returns and data matching have made evasion harder. The number of GST taxpayers has risen from 66.5 lakh in 2017 to 1.65 crore in May 2026. Gross collections have moved from about ₹7.4 lakh crore in 2017-18 to about ₹22.27 lakh crore in 2025-26. Monthly collections have crossed ₹2 lakh crore more than once.
These numbers should not settle the argument. GST’s strongest achievement is administration, not tax design. Higher nominal collections reflect growth, inflation, imports, better reporting and compliance. NIPFP’s work on GST revenue performance made a more limited point than official celebrations do. Post-GST buoyancy improved, but the GST-to-GDP ratio has not yet bettered the comparable pre-GST revenue streams. For a tax sold as more efficient than the old system, that is a serious qualification.
The 2025 rate cuts also showed the fiscal trade-off. They reduced taxes on mass-consumption goods, insurance, drugs, medical devices, cement, small cars, two-wheelers and some labour-intensive sectors. They also made revenue growth slower in the months after implementation. A simpler and lower GST is desirable, but it is not costless for the Centre or states.
GST rate rationalisation and classification disputes
The GST Council’s September 2025 reset was important. It replaced the four main slabs with 5% and 18%, while retaining a 40% rate for a small set of demerit goods and services. It also ended some avoidable oddities. All Indian breads, including chapati, roti, paratha and parotta, were moved to nil GST.
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Yet the politics of tax simplification has not ended the administrative habit of classification. The popcorn clarification of December 2024, with different rates for loose salted popcorn, packaged popcorn and caramel popcorn, showed why citizens often see GST as clever rather than simple. Some such distinctions follow tariff logic. Many taxpayers still experience them as uncertainty.
The consumer record is also mixed. Rate reductions do not always show up fully in retail prices. Firms adjust prices according to input costs, inventories, competition and demand. GST’s case should therefore rest less on whether every item became cheaper and more on whether the tax reduces cascading, litigation and compliance costs.
GST’s dispute-resolution machinery has also lagged the enforcement system. E-way bills, e-invoicing and data matching arrived early. The GST Appellate Tribunal became operational only in 2025, leaving taxpayers to carry disputes through departmental appeals and High Courts for years. A tax that relies so heavily on digital scrutiny needs a fast and credible appellate forum. Without it, classification and input-tax-credit disputes become a working-capital cost for firms rather than a legal question awaiting resolution.
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Petroleum under GST remains the largest gap
The larger failure lies outside the rate card. Petroleum crude, petrol, diesel, aviation turbine fuel and natural gas remain outside GST until the GST Council recommends a date. Electricity is also outside. Alcohol for human consumption is constitutionally excluded. Parts of real estate remain outside the value-added chain.
These exclusions keep cascading alive. Manufacturers and transport firms cannot fully set off taxes embedded in fuel and power costs. Exporters and logistics firms carry part of this burden even when their final output is taxable or zero-rated. A tax designed to remove tax-on-tax cannot leave fuel and electricity outside indefinitely and still claim completeness.
The political reason is plain. States depend on VAT and excise from fuel and alcohol. The Centre too has used fuel taxation for revenue. Bringing petrol and diesel into GST in one step would strain state finances and force a hard debate on compensation. That is why petroleum inclusion has to begin with narrower items such as aviation turbine fuel or natural gas, where the economic case is strong and the fiscal shock can be contained.
GST Council and the unfinished GST reforms
The GST Council remains the reform’s most durable institution. It has kept the Centre and states at the same table, avoided a return to tax competition among states, and supplied a regular forum for rate corrections. That is not a small institutional gain in Indian fiscal federalism.
The Council now has less excuse for postponement. The compensation period has ended, the taxpayer base is larger, and the technology backbone is established. The harder work is no longer rollout. It is to bring excluded sectors into the chain, cut classification disputes, reduce input-tax-credit litigation, and lower compliance costs without weakening enforcement.
GST has earned credit as an administrative reform. Its next phase has to prove that it can also be a cleaner tax. Rising collections show capacity, not completion.