Eight years of GST: The hits and misses

July 1, 2025, marks the completion of eight years since GST was successfully implemented, with the Centre and state governments continuing to work in tandem to make decisions and resolve industry issues. This day indeed marks the implementation of one of the most transformative tax reforms in the history of Indian taxation. Every year, we reflect on this day to recognise and evaluate the positive impact of GST implementation on the economy, as well as to create a wish list of activities paving the way for improvements.

These eight successful years of GST implementation in India have broken stereotypes by showcasing a perfect jugalbandi between Centre and state administrations coming together to make decisions and resolve issues. Following the motto of ‘One Nation, One Tax,’ the council has continued to respond to the expectations of the industry by demonstrating their commitment to resolving sectoral issues, reducing litigation, and easing compliance.

The council, through its various committees and group of ministers (GoMs), has encompassed a wide array of initiatives, starting from the rationalisation of GST rates on various goods and services to regularising the past period on an ‘as-is, where-is’ basis to avoid any future litigation in sectors such as banking, insurance, and film distribution. This also holds true in cases where the council quickly reacted to certain sectoral issues by amending the law to rectify unintended levies and demands in cases involving foreign airlines, insurance companies, the voucher industry, advertising, and data-hosting services. This led to putting to rest the huge demands imposed or refunds denied for these sectors.

Furthermore, the insertion of Section 11A to exempt supplies where tax has not been paid as a practice in the past, as well as the introduction of an amnesty scheme, were welcome moves by the government to mitigate significant litigations in the future. All such measures demonstrate the government’s commitment to reducing litigation and helping taxpayers. Apart from the above, steps were taken to streamline compliance through measures such as halving the TCS (tax collected at source) rate to 0.5%, introducing IMS to enhance efficiency in credit availment.

No doubt GST has been a landmark change but as we count the many many hits, we need to count the misses as well. The GST council needs to broaden the base and with petroleum products, real estate and electricity outside the purview of GST, more than half the economy continues to be out of GST. For GST to truly become a comprehensive tax, the council needs to reach a consensus to lay down the pathway for broadening the tax base. 

With India achieving a significant milestone of becoming the 4th largest global economy with a GDP exceeding $4 trillion in 2025, the world is increasingly recognising India as a major global economic power. The world is looking at India as a major trading partner, and FTAs are being negotiated/re-negotiated with major world economies. Given this, it’s time to take stock of what further needs to be done to ensure that GST becomes the efficient tax it was purported to be.

While the journey so far has been a testament to the government’s commitment to fostering a conducive business environment to stimulate economic growth and attract foreign investment, the government has also set a long-term vision for itself in the form of GST 2.0, which aims to bring about transformative changes in the GST law and processes. The vision of GST 2.0 is based on three major pillars, starting with GST rate rationalisation, aimed at rationalising the GST rate structure and also streamlining rates on similar supplies to reduce classification disputes. The findings of GoMs on rate rationalisation and planning for the phasing out of compensation cess are much awaited and the industry hopes to see the GST council vision for the coming years. 

The second pillar is the re-evaluation of ITC scope, which will not only require a complete re-examination of Section 17(5) of the CGST Act, which restricts credits in some cases, but also a look at sectors where credits have been restricted to keep the rates low. The unblocking of said credit for the industry will function as an incentive that will ultimately help make their products and services competitive globally. The judgment of Hon’ble Supreme Court of India in case of Safari Retreats has given a window to the GST council to at least reform the credits restricted for input supplies in the real estate sector. 

The third area requiring immediate attention is the multiplicity of audits, assessments, and investigations being carried out on corporates across the country. Multiple organisations, as part of their revenue augmentation targets, audit and investigate corporates, many of which have multiple registrations in various states. The audit needs to be aligned to the best practices across the globe both at central and state levels. It’s time to introduce a Trusted Taxpayer Program, on lines of authorised economic operator (AEO) status being granted by Customs, to incentivise compliant taxpayers by minimising the audit and investigating exposure. 

The GST Council’s proactive approach in addressing the concerns of the industry is a reassuring sign of the government’s dedication to making India an easier place to do business. With the vision of GST 2.0 in place, it is now time to pave the way for some structural reforms to make GST a truly efficient tax.

(The writer is Tax Partner, EY India. Swati Saraf, Tax Director, EY, also contributed to the article.)