As India’s Goods and Services Tax (GST) marks its eighth anniversary on July 1, leading economists and policy experts are emphasizing the need for structural reforms to improve the tax system’s revenue efficiency. Introduced in 2017 as a major economic reform, GST aimed to unify India’s fragmented indirect tax structure and simplify compliance for businesses across states. Eight years later, while collections have improved, challenges in design and execution remain.
According to data from the Finance Ministry, average monthly GST collections crossed ₹1.67 lakh crore in FY 2024–25, reflecting robust consumption and increased formalization of the economy. However, experts believe that GST’s revenue productivity—measured by tax collected relative to GDP—has not reached its full potential. They attribute this gap to an overly complex rate structure, limited tax base, and compliance issues that still affect small businesses and traders.
Senior government officials have acknowledged these concerns and indicated that discussions around a comprehensive overhaul are gaining traction. Several proposals are being considered, including the simplification of tax slabs, merging overlapping rates, and gradually including high-revenue sectors like petroleum, real estate, and electricity under the GST framework. Currently, these sectors remain outside the tax net, leading to cascading taxes and restricted input credits.
Experts also point to the challenges faced by Micro, Small, and Medium Enterprises (MSMEs), which continue to struggle with the technical and procedural aspects of GST filings. Many businesses have cited frequent portal glitches, input tax credit mismatches, and delayed refunds as issues affecting working capital and compliance morale.
The discontinuation of GST compensation to states in 2022 has also reignited debates around revenue sharing and fiscal balance. States with weaker industrial bases have voiced concerns over widening collection disparities and are seeking renewed mechanisms to ensure stable and predictable revenues.
Finance Minister Nirmala Sitharaman, in a statement released ahead of the anniversary, reiterated the government’s commitment to improving the GST framework in consultation with states and industry stakeholders. She noted that the GST Council, which is expected to meet in July, would likely discuss rate rationalization and digital compliance tools to enhance efficiency.
While GST has undeniably transformed India’s tax ecosystem by creating a common national market and increasing transparency, economists argue that the next phase of reform is essential. Without structural adjustments, India risks falling short of the economic gains that a mature GST system can deliver.
With the economy entering a new growth phase and digital adoption deepening, stakeholders agree that the time is ripe for bold adjustments to GST that prioritize simplicity, fairness, and long-term revenue sustainability.
