On July 1, 2017 midnight, India saw what was described as a “tryst with economic destiny”. Under a ceremonial launch in Parliament’s Central Hall, the Goods and Services Tax (GST) was rolled out as the most comprehensive indirect tax reform in independent India. Celebrated as a “Good and Simple Tax,” GST would make the tax environment simpler, integrate the Indian market, and enhance efficiency on all fronts.
Eight years on, the question still is: has GST fulfilled those commitments?
Why reform was necessary
Prior to 2017, India’s indirect tax regime was a broken patchwork of various state and central imposts such as VAT, excise duty, octroi, and service tax. Each state had its own rates and rules, creating a network of inefficiencies, cascading tax incidence, and formidable administrative challenges. Goods moving from one state to another often experienced long delays and numerous checkpoints, which held up supply chains and added costs.
GST vowed to substitute this disorder with a single tax system, incorporating 17 major taxes and 13 cesses. It sought to remove the artificial state boundaries, facilitating free flow of goods and establishing an actual single national market.
A dual GST model, multiple slabs
India implemented a dual GST model consisting of Central GST (CGST), State GST (SGST), and Integrated GST (IGST) for inter-state supplies. While this framework enabled the Centre as well as the states to have fiscal autonomy, it also created a somewhat complex tax architecture.
Rather than one rate, the GST Council introduced a multi-rate structure with tax slabs of 5 percent, 12 percent, 18 percent, and 28 percent, besides zero-rated and exempted goods. As of 2025, more than 1,370 goods and services are categorized under these slabs. Even with repeated attempts to rationalize the rates, the intricateness is a problem—particularly for small businesses confronting classification controversies, duplicated rates, and compliance issues.
Revenue trends
GST collections have seen consistent growth in recent years. In its very first year, FY2017-18, the average monthly GST collection was about ₹90,000 crore. This amount has grown significantly, with FY2024-25 (up to March 2025) recording an average monthly gross GST collection of ₹1.68 lakh crore, up by a good 12 percent compared to the last fiscal year.
The ₹1 lakh crore milestone collection was first regularly breached from November 2020 onwards. Monthly collections have been consistently exceeding ₹1.5 lakh crore since April 2023, and in April 2024, the government had its highest ever monthly collection of ₹2.10 lakh crore.
These indicate the tax base’s expansion and compliance improvements, although this increasing trend has not been continuous. In the pandemic situation of COVID-19, collections fell steeply in April and May 2020 because of the slowdown in economy. The recovery started in the third quarter of FY21 due to higher formalisation, tightened enforcement, and growing digital infrastructure.
Formalisation of the economy
One of the biggest achievements of the GST regime has been the formalisation of economic activity. At the time of the roll-out of GST, there were about 1.03 crore registered taxpayers. This figure had increased to more than 1.46 crore as of March 2025—a whopping 42 percent jump in merely eight years.
Contributing to this success is the use of technological interventions like e-way bills, which allow the real-time tracking of goods. Until March 2025, over 374 crore e-way bills had been created. Yet another significant development has been the rollout of e-invoicing, which became obligatory for those businesses whose turnover exceeds ₹5 crore with effect from August 2023. This has not only subdued the printing of spurious invoices but also aided in the simplification of tax credits and real-time tracking.
Moreover, the government launched the Quarterly Return Monthly Payment (QRMP) scheme for small taxpayers to relax their compliance burden. At the same time, the Composition Scheme, with the facility of payment of tax at a fixed rate with low compliance, had 18.60 lakh registered taxpayers up to March 2025. All these have added up to make a more formal, transparent, and accountable tax system.
Efficiency and compliance
GST compliance has shown marked improvement over the years. When the system was launched in 2017-18, the return filing rate for the monthly GSTR-3B form hovered around 55 to 60 percent. By 2023-24, the timely filing compliance had crossed 90 percent. However, the compliance journey has not been entirely smooth. Taxpayers are now obligated to file a series of forms—GSTR-1 for outward supplies, GSTR-3B for return in summary form, and GSTR-9 and GSTR-9C for annual returns. This complexity continues to prove difficult, particularly for small and medium enterprises.
The Input Tax Credit (ITC) system, which forms the backbone of the GST regime, has also faced glitches. Delays in the processing of refunds and discrepancies in reporting invoices have caused working capital issues for businesses, particularly exporters. Additionally, fraudulent activities and troubles in blocked credits have disrupted the effectiveness of the credit system.
Cooperative federalism in GST Council
The GST Council, which is the first federal body in India made up of Centre and state representatives, was established for achieving consensus-based decision-making. The Council has had 52 meetings since it was formed to address matters varying from rate rationalisations to norms of compliance. The Council, in its early days, showed enormous cooperation amongst the members. But discord started emerging during the pandemic period, especially regarding the payment of compensation cess to states.
As states were confronted with large revenue deficits, the Centre was forced to borrow to reimburse them—testament to the weakness of the fiscal compact. The mechanism of compensation cess, which was envisaged to be temporary for five years, was later put in place to April 2026 to take care of borrowings incurred during the pandemic. These events have stretched the limits of cooperative federalism but not broken it. The GST Council remains an efficient, if sometimes acrimonious, decision-making forum.
Challenges ahead
Albeit impressive strides, GST is still a work in progress. The intricacy of the slab structure, five big rates plus exemptions, still prevents simplification. Compliance rules continue to be cumbersome for micro and small business. Interstate trade barrier reductions have been achieved, while classification disputes and legal uncertainties continue to pervade.
The increasing appeals backlog and litigation is indicative of yet another pressing concern—interpretational clarity. Companies are still looking for more predictability and simplicity in knowing their tax burden.
Eight years since its historic rollout, GST has transformed the Indian tax system in ways never seen before. It has integrated the market, promoted formalisation, got more firms into the tax net, and delivered relatively stable exchequer growth over this period. Its tech revolution is likely its least noticed achievement.
But for all its success, GST remains far from the “Good and Simple Tax” it originally aimed to be. The road ahead calls for political will to simplify slabs, minimise litigation, and enhance business-friendliness of compliance—particularly for India’s enormous MSME economy. GST is no failed reform. It is a bold, complicated, and in-progress one. Whether it realises its complete potential will hinge on how the next phase of reform is managed.
Source: WION
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