Why in news?
The Goods and Services Tax (GST) completed eight years on 1 July 2025. The tax was rolled out on 1 July 2017 to unify India’s indirect tax structure and create a common national market.
Background
- The idea of a single indirect tax was proposed by the Kelkar Task Force in 2003. After several rounds of discussions with states and the centre, the Constitution (One Hundred and First Amendment) Act, 2016 paved the way for GST.
- GST subsumed multiple indirect taxes such as excise duty, service tax and value‑added tax. It follows a dual model where both the centre and states levy tax on the same base. The centre levies CGST and the states levy SGST; for inter‑state supplies IGST is collected and later apportioned.
- The GST Council, a federal body chaired by the Union Finance Minister with state ministers as members, decides tax rates, exemptions and procedures.
Achievements in eight years
- Expanded tax base: GST has expanded India’s indirect tax base to about 1.45 crore registered taxpayers, up from around 60 lakh under the old regime.
- High collections: Monthly revenues have stabilised above ₹1.6 lakh crore. In April 2025 collections reached a record ₹2.1 lakh crore, reflecting better compliance and buoyant consumption.
- Unified market: By replacing check‑posts and entry taxes, GST has facilitated free movement of goods across states and reduced logistics costs.
- Technology‑driven tax administration: The GST Network (GSTN) provides a common online portal for registration, return filing, invoice matching and payment. E‑way bills and e‑invoices have improved traceability and reduced tax evasion.
- Input‑tax credit (ITC): Businesses can claim credit for taxes paid on inputs and services, reducing the cascading effect. This encourages formalisation and improves competitiveness.
- Improved exporter refunds: Integration of GSTN with the ICEGATE customs portal has allowed near real‑time refund of input taxes for exporters.
Challenges and shortcomings
- Refund delays: Small firms still face delays in obtaining refunds, affecting cash‑flows.
- Complex return filing: Although simplified, compliance requires filing multiple returns and reconciling invoices. Many micro and small enterprises find this burdensome.
- Technical glitches: GSTN initially faced IT‑related issues; though the system has stabilised, intermittent glitches remain.
- Limited fiscal autonomy for states: States surrendered some tax powers to the GST Council. Compensation for revenue loss is due to end, increasing fiscal stress.
Way forward
- Simplify return filing, especially for micro‑enterprises, and widen the composition scheme.
- Rationalise tax rates—many goods and services still fall under multiple slabs. A lower number of slabs will reduce disputes.
- Enhance integration between GST and customs systems to use real‑time data for audit and enforcement.
- Strengthen the appellate mechanism and timely resolution of classification disputes.
- Undertake a comprehensive review, termed GST 2.0, to broaden the tax base and reduce exemptions.