When the Goods and Services Tax (GST) was rolled out on July 1, 2017, it marked India’s biggest overhaul of indirect taxation since Independence. Replacing a patchwork of central and state levies with a destination-based tax system, the reform sought to create a common domestic market, reduce tax cascading and simplify compliance for businesses operating across state borders.Before GST, businesses had to deal with multiple Central and State levies such as excise duty, service tax, VAT, entry tax and Central Sales Tax, often resulting in cascading taxes and higher compliance costs. GST subsumed these taxes into a single framework, creating a common national market and allowing seamless flow of input tax credit across the supply chain.Nine years later, GST has evolved beyond its original objective of subsuming multiple taxes. It has widened the tax base, accelerated the formalisation of businesses, digitised tax administration and reshaped logistics and supply chains.GST has shifted most registrations, return filing, tax payments and refunds to a digital platform, reducing physical interaction with tax authorities and improving transparency. By treating exports as zero-rated, simplifying interstate trade through the Integrated GST (IGST) mechanism and introducing uniform rules across states, GST aimed to improve ease of doing business, reduce logistics costs, curb tax evasion and enhance overall tax efficiency while strengthening revenue collection.The tax applies to almost all goods and services, with alcoholic liquor for human consumption and petrol and diesel kept outside its ambit. The GST Council, a constitutional body comprising the Centre and states, plays a pivotal role in deciding tax rates, exemptions and policy changes, making it a key institution of cooperative federalism.
GST Council at a glance
The system is supported by the Goods and Services Tax Network (GSTN)–a Centre-State owned digital platform that powers registrations, return filing, tax payments, refunds and other online services, helping improve transparency, compliance and ease of doing business.GST’s taxpayer base has expanded significantly since its rollout, rising from 66.5 lakh in 2017 to 1.65 crore as of May 2026, reflecting greater formalisation of the economy, according to government data. GST collections have also grown steadily.
Gross collections increased from around Rs 7.4 lakh crore in 2017-18 to nearly Rs 22.27 lakh crore in 2025-26. Over the last five years alone, collections rose from about Rs 13.76 lakh crore in 2021-22. The momentum has continued in 2026-27, with GST collections reaching around Rs 4.37 lakh crore during April-May 2026.
What changed for consumers
While GST was designed primarily as a structural tax reform, experts say its impact has also been felt by ordinary consumers through lower tax cascading, greater price transparency and a more uniform indirect tax regime across states.When GST was introduced, it featured four tax slabs-5%, 12%, 18% and 28%. Last year, the rate structure had been rationalised to two main slabs: 5% and 18%.Responding to TOI’s queries, Bipin Sapra, Partner and Indirect Tax Policy Leader at EY India, said GST has simplified the indirect tax framework by replacing multiple levies with a single-point taxation system.“GST streamlined India’s indirect tax system through single-point taxation and by removing cascading taxes. It unified the national market, which improved transparency and ease of doing business. It also reduced compliance and transaction costs across supply chains, leading to more competitive pricing and consistent tax treatment for consumers across states,” Sapra said.He noted that GST has also reduced the effective tax incidence on several mass-consumption goods compared with the pre-GST regime.
New GST Rate applicable from September 2025
“For consumers, GST reduced the effective tax burden at its onset to a maximum rate of 18%, especially for mass-consumption goods, compared to the higher pre-GST rates of 26-38% under multiple taxes. With most essential consumer items now taxed at 5%, it has eased the cost of daily necessities, thereby improving affordability and accessibility. Overall, GST has delivered tangible benefits to ordinary households while strengthening tax administration,” he added.
New GST Rate applicable from September 2025
The government has also progressively rationalised GST rates over the years. GST rationalisation exercises have reduced tax on a range of products, including healthcare items, insurance, construction materials, textiles, footwear, leather products and sectors with high employment potential.
New GST Rate applicable from September 2025
How GST changed the way businesses operate
For industry, GST’s biggest contribution has been structural rather than fiscal.Nidhi Lukose, Partner at Deloitte India told TOI that the reform has fundamentally changed business operations by integrating India’s domestic market and encouraging technology-led compliance.
“Over the past decade, GST’s most significant contribution has been the creation of a unified, technology-driven national market by eliminating cascading taxes, enabling supply chain optimisation, and accelerating formalisation through digital compliance,” Lukose said.Before GST, manufacturers and distributors often established warehouses and distribution centres based on tax considerations rather than operational efficiency. Multiple indirect taxes, interstate checkpoints and fragmented compliance requirements increased logistics costs and slowed the movement of goods.According to the government’s GST handbook, the removal of interstate checkposts and the introduction of systems such as the e-Way Bill improved freight movement across states. The handbook cites studies suggesting transport time improved by more than one-third after GST’s implementation.Businesses have also increasingly adopted digital compliance through GSTN, e-Way Bills and e-Invoicing, creating a technology-driven tax ecosystem that has significantly reduced manual processes.These structural changes are reflected in Deloitte India’s GST@9 Survey, which covered more than 1,000 businesses across eight sectors. The survey found that 84% of respondents reported a positive experience under GST, while less than 1% expressed a negative view. Respondents identified digital compliance, supply-chain optimisation and greater tax transparency among the reform’s biggest gains.At the same time, businesses believe the next phase of GST should focus less on expanding the tax base and more on reducing compliance friction.“There is a clear opportunity to further enhance its impact through greater uniformity in interpretations, streamlined audits, avenues of unlocking working capital and more efficient dispute resolution mechanisms. Strengthening these aspects will help the industry in ease of doing business and sustained business confidence,” Lukose said.
Beyond collections: GST’s economic impact
Beyond higher tax collections, GST has had a wider impact on the economy, with experts pointing to gains in efficiency, formalisation and the creation of a unified national market.Responding to TOI’s queries, DK Srivastava, Chief Policy Advisor at EY India, said GST should be assessed not merely by record collections but by its revenue buoyancy and contribution to improving economic efficiency. Tax buoyancy is calculated by dividing the percentage change in tax revenue by the percentage change in GDP.“Having been introduced in July 2017, India’s GST has evolved over nine years. A major reform, often referred to as GST 2.0, was introduced in September 2025. Measured in absolute terms, in several months gross GST revenues crossed Rs 2 lakh crore. However, it is best to judge the revenue performance of GST in terms of its growth and buoyancy,” Srivastava said.According to him, gross GST collections, including compensation cess, recorded a compound annual growth rate (CAGR) of 11.4% between FY19 and FY24, implying a buoyancy of 1.2 with respect to the revised nominal GDP series.
New GST Rate applicable from September 2025
Looking specifically at the period after the September 2025 reforms, he noted that gross GST collections grew at a CAGR of 7.1% between FY24 and FY26, while buoyancy moderated to 0.8. The period also included the discontinuation of the GST compensation cess from September 2025, he said.“These reforms primarily reduced the effective rate of GST with the expectation that it will support growth of consumption in the economy and thereby improve overall growth performance. Over time, the base effect of increased consumption and therefore tax base is expected to compensate for the revenue loss due to rate reduction,” Srivastava told TOI.Beyond revenues, he said GST’s larger objective was to build a destination-based indirect tax system that removes fiscal distortions across states.“GST was introduced in order to implement a destination-based tax system in which the incidence of taxation fell on the final consumers or users along with ensuring that fiscal barriers across states would be minimised, if not altogether eliminated. In the presence of such a domestic indirect tax system, the expectation is that the allocative efficiency of resources in the economy would improve. This expectation can be considered, at least indirectly, to have been realised since India has maintained 7% plus real GDP growth in the post-Covid years covering 2021-22 to 2025-26,” he said.Srivastava also described the GST Council as one of the reform’s enduring institutional contributions.“The introduction of GST also heralded a new framework for Centre-State coordination with the institution of the GST Council, which meets periodically and takes its decisions mostly on the basis of consensus,” he added.The government has consistently described the GST Council as one of the strongest examples of cooperative federalism. Constituted under Article 279A of the Constitution, the Council brings together the Union Finance Minister and finance ministers of states and Union Territories with legislatures to recommend GST rates, exemptions, compliance rules and other policy changes. Most decisions have been arrived at through consensus despite the Council’s weighted voting mechanism.
GST 2.0: The next phase of reforms
As the system matures, the focus has shifted from implementation challenges to what many describe as GST 2.0–a phase centred on simplification, technology-led compliance, faster refunds, reduced litigation and a more efficient tax structure.Nine years after rollout, experts believe GST has entered a new phase where the emphasis is shifting from implementation to optimisation.The Deloitte GST@9 Survey suggests businesses now see litigation, working capital and compliance efficiency—not technology adoption—as the biggest areas requiring policy attention.
7 Pillars of Next-Gen GST Reforms
The survey found that 87% of respondents identified interpretational clarity as the top reform priority, followed by working capital optimisation (67%), uniformity in audits (61%) and faster refunds (36%). Businesses also favoured wider adoption of AI-enabled compliance tools, automated reconciliations and greater integration of the GST technology platform.In her response to TOI, Lukose said the next generation of reforms should focus on making GST simpler and more technology-driven.“As GST enters its maturity phase, the priority is to drive simplification through more integrated, AI-enabled compliance and automated reconciliations. Equally critical is unlocking working capital via seamless ITC availability, efficient refunds and flexible credit utilisation, alongside stronger, more consistent dispute resolution to minimise litigation,” she said.She added that progressive rate rationalisation and measures to improve the flow of input tax credit, particularly in sectors where credit blockages persist, would further strengthen the ease of doing business.“Further, while the vision of ‘One Nation, One Tax’ remains, it continues to exclude sectors such as petroleum, alcohol for human consumption and electricity. The near-term priorities will revolve around framework improvements through AI-enabled systems,” Lukose added.Sapra echoed the need for a more predictable tax regime, saying the next phase of reforms should focus on reducing disputes and improving credit flow.
He added that improvements in refunds, registration and audits would benefit both businesses and consumers.“While the Government has worked to improve the ease of doing business and reduce the transaction cost of paying GST, the industry needs efficiency in refunds, registration and the audit mechanism. These reforms, coupled with a technology-driven GST framework, will lower transaction costs and ultimately make goods more affordable for consumers,” Sapra said.
The unfinished agenda
Srivastava believes GST’s next stage should focus on broadening its coverage while further simplifying the rate structure.He said some major sectors continue to remain outside the GST framework, limiting the benefits of a comprehensive value-added tax.
“Eventually, these will have to be included so that any cascading due to taxation of inputs can be eliminated and resource allocation becomes even more efficient across the country, independent of differences in inter-state or inter-regional indirect taxes. With zero-rating of exports, export competitiveness of Indian producers is also expected to increase,” Srivastava said.He also sees scope for further simplification of GST rates.“Significant progress has been made through GST 2.0, although there is still scope to simplify certain rate structures and optimise the input tax credit mechanism. This may call for reducing the rate differences between the 5% rate and the core 18% rate. While the penal rate of 40% for demerit goods may continue, the remaining rate structure may be re-examined with a view to raising overall revenue buoyancy and eliminating continuing input tax blockage issues,” he added.Nine years after its rollout, GST has moved well beyond being a tax reform. It has become a common fiscal framework binding the Centre and states, a digital compliance ecosystem for businesses and an important pillar of India’s economic formalisation drive.The next chapter of GST will likely be judged less by record monthly collections and more by how effectively it simplifies compliance, improves certainty, reduces litigation and supports investment, competitiveness and consumption in one of the world’s fastest-growing major economies.
