GST (GOODS & SERVICES TAX)

An Investigatory Project on Goods and Services Tax (GST) in India:

Introduction, Evolution, Structure, Rates, Institutional
Framework, Comparison with VAT, Business Implications,
International Context, and Critical Analysis

Executive Summary

The Goods and Services Tax (GST), implemented in India on July 1, 2017,
represents a landmark reform in the nation's indirect taxation system.
Designed as a comprehensive, multi-stage, destination-based tax, GST
aimed to unify India's fragmented tax landscape under a single regime. Its
core objectives included fostering a common national market, eliminating
the cascading effect of taxes, and simplifying the overall taxation
structure. This reform has played a pivotal role in integrating the Indian
economy, enhancing supply chain efficiencies, and promoting
formalization. While the transition presented initial challenges related to
compliance and operational adjustments, the GST regime has
continuously evolved, demonstrating adaptability through ongoing
refinements in rates and administrative processes. This report delves into
the introduction, historical evolution, intricate structure, prevailing rates,
robust institutional framework, and significant business implications of
GST, alongside a comparative analysis with the erstwhile Value Added Tax
(VAT) and its international parallels. It concludes with a critical evaluation
of its achievements and areas requiring further enhancement.

1. Introduction to Goods and Services Tax (GST)

1.1 Definition and Core Objectives

The Goods and Services Tax (GST) is a consumption-based indirect tax

levied on the supply of goods and services across India. It came into effect
on July 1, 2017, fundamentally reshaping the country's indirect tax system
by subsuming a myriad of central and state-level taxes into a singular
framework.1

The introduction of GST was driven by several strategic objectives:

 Building a Common Market with Uniform Taxation: Prior to

GST, India's indirect tax system was characterized by a complex
web of varying state and central taxes, which created internal trade
barriers and hindered the seamless movement of goods and
services. GST was designed to unify this diverse market under a
single tax regime, thereby fostering an integrated and inclusive
economic environment. This unification has significantly reduced
logistical and compliance complexities for businesses operating
across state lines, encouraging fair competition and enabling
enterprises, particularly startups and small ventures, to expand their
 GST (GOODS & SERVICES TAX)

operations nationwide without the burden of disparate tax

regulations. The result is an enhanced efficiency in supply chains
and a reduction in the overall cost of goods and services for
consumers, stimulating demand and economic growth. 1 This
ambition extends beyond mere revenue collection; it is a
foundational economic policy aimed at enhancing India's overall
economic efficiency and global competitiveness by unlocking the full
potential of its vast domestic market.

 Eliminating the Cascading Effect of Taxes: One of the most

significant drawbacks of the pre-GST tax regime was the "tax on
tax" phenomenon, where taxes were levied at multiple stages of the
supply chain without adequate credit for taxes paid on inputs. This
cascading effect inflated the final price borne by the consumer. GST
addresses this by implementing a comprehensive Input Tax Credit
(ITC) system. This mechanism allows businesses to claim credits for
taxes paid on input goods and services, ensuring that tax is levied
only on the value addition at each stage of the supply chain. This
leads to more transparent and equitable pricing, making goods and
services more affordable for consumers and enhancing the
competitiveness of Indian products in international markets. For
businesses, it translates into improved profit margins and reduced
tax liabilities, fostering a positive environment for growth and
expansion.1 The ITC system is not merely a technical tax feature; it
is the core economic engine of GST. By ensuring that tax is only
applied to the value added, it streamlines supply chains,
incentivizes formalization (as businesses must be registered to claim
ITC), and ultimately contributes to a more efficient allocation of
resources within the economy. Its effective functioning is paramount
to realizing GST's broader economic benefits.

 Simplifying the Taxation System: GST consolidates numerous

indirect taxes into a single levy, drastically reducing the
administrative burden on both businesses and the government. The
regime is underpinned by a digital-first approach, with all processes
—including registration, tax filing, and refunds—managed online
through the GST portal. This digital infrastructure simplifies
compliance, minimizes human errors, and accelerates the
processing of tax-related matters, particularly benefiting Small and
Medium-sized Enterprises (SMEs) that often lack the resources to
navigate complex regulations. This simplification has also improved
tax compliance rates, leading to increased revenue collection for the
government.1
 GST (GOODS & SERVICES TAX)

1.2 Key Features of GST

The Indian GST system is characterized by several distinguishing features:

 Dual GST Structure: India adopted a unique dual GST model, a

reflection of its federal structure. Under this system, both the
Central and State governments concurrently levy and collect taxes
on the same transaction. This dual structure comprises Central GST
(CGST) and State GST (SGST) for intra-state supplies, and Integrated
GST (IGST) for inter-state supplies.2

 Input Tax Credit (ITC) Mechanism: As highlighted, ITC is a

cornerstone of GST, allowing businesses to offset the tax paid on
their purchases against the tax collected on their sales. This
mechanism effectively eliminates the "tax on tax" effect, ensuring
that the tax burden is shared across the supply chain based on
value addition, ultimately reducing the effective tax rate on the final
product and making it more affordable for the end consumer. 1

 Destination-Based Consumption Tax: GST is levied at the point

where goods or services are finally consumed. This means that the
tax revenue accrues to the state where the consumption occurs,
rather than the state where the goods or services are produced. This
principle is crucial for inter-state trade and revenue distribution
among states.4

 Comprehensive Coverage: GST subsumed a wide array of indirect

taxes previously levied by the Central and State governments.
These include Central Excise Duty, Service Tax, Additional Duties of
Customs, State VAT, Central Sales Tax, Entertainment Tax, and Entry
Tax, among others, creating a unified tax base. 2

 Digital-First Approach: The entire GST ecosystem operates on a

robust digital platform, the GST Network (GSTN). This online
infrastructure facilitates all aspects of tax compliance, from
taxpayer registration and return filing to tax payments and refunds,
promoting transparency and efficiency across the system. 1

2. Evolution and Journey of GST in India

2.1 Historical Background and Genesis

The journey of GST in India was a protracted and complex process,

spanning over a decade and a half, reflecting the intricate nature of
federal fiscal reforms in a diverse country.

 Initial Proposal (2000): The concept of a nationwide GST was first

proposed in 2000 by the Kelkar Task Force on Indirect Taxes. The
 GST (GOODS & SERVICES TAX)

primary objective was to replace the prevailing complex and

fragmented indirect tax structure with a unified and simplified
system.10

 First Discussion Paper (2009): Following extensive deliberations

and negotiations, the Empowered Committee of State Finance
Ministers (EC) prepared a detailed design and roadmap for GST. This
culminated in the release of the First Discussion Paper on Goods and
Services Tax in India in November 2009. This paper laid the
groundwork for a dual GST model, acknowledging India's federal
structure.11

 Constitutional Amendment Efforts (2011-2016): The

implementation of GST necessitated a constitutional amendment to
redefine the taxing powers of the Centre and States. The
Constitution (115th Amendment) Bill was initially introduced in 2011
but lapsed. Subsequently, the Constitution (122nd Amendment) Bill,
2014, was introduced in Parliament with the aim of enabling GST
implementation. This bill faced significant challenges, particularly
concerning compensation to states for potential revenue losses and
other intricate issues. After years of intense deliberation and
negotiations between the Central and State Governments, the bill
was finally passed by the Lok Sabha in May 2015 and, with certain
amendments, by the Rajya Sabha in August 2016. 10 This extended
gestation period, from its initial proposal in 2000 to its eventual
enactment, is a direct consequence of India's complex federal
structure. The necessity of a Constitutional Amendment
underscored that the existing division of fiscal powers was a major
hurdle. India's decision to adopt a dual tax structure, where both
levels of government levy and collect tax, required broad consensus
on revenue sharing and state compensation. The prolonged
negotiations and the repeated introduction and lapse of bills
highlight the political complexities inherent in unifying taxes across
diverse states with varying economic interests. This historical
context is essential for understanding the nuances of India's
economic policymaking, demonstrating that significant reforms
often require extensive political negotiation and consensus-building
among states, which, while slowing the process, ultimately ensures
broader acceptance and stability.

 Presidential Assent (2016): The Constitution (122nd

Amendment) Bill, 2014, received the President's assent on
September 8, 2016, formally becoming the 101st Constitution
 GST (GOODS & SERVICES TAX)

Amendment Act, 2016. This was a critical turning point, providing

the legal framework for GST implementation.13

2.2 Key Milestones and Implementation Timeline

The period leading up to the GST launch was marked by a rapid

succession of legislative and administrative milestones:

 Formation of GST Council (September 2016): Following the

101st Constitutional Amendment Act, the GST Council was notified
on September 12, 2016. This joint forum, comprising the Union
Finance Minister and representatives from all States and Union
Territories, was established to make crucial decisions on various
aspects of GST, including tax rates, exemptions, and administrative
procedures. Its formation was pivotal in shaping the GST
framework.13

 Passage of Key GST Bills (April 2017): To operationalize GST,

several essential bills were introduced and passed by both the Lok
Sabha and the Rajya Sabha by April 20, 2017. These included the
Central Goods and Services Tax Bill (CGST), Integrated Goods and
Services Tax Bill (IGST), Union Territory Goods and Services Tax Bill
(UTGST), and the GST (Compensation to States) Bill. 10

 Enactment of CGST Act (April 2017): The Central Goods and

Services Tax Act, 2017, was enacted on April 12, 2017, with various
sections coming into force on June 22, 2017, and July 1, 2017. 15

 Nationwide Launch (July 1, 2017): The GST laws were officially

implemented across India on July 1, 2017, replacing the complex
web of Central and State taxes and marking a monumental shift in
the country's tax structure.2 The swift passage of multiple laws and
the simultaneous establishment of the GST Council and GST
Network (GSTN) during this period demonstrate a high degree of
coordination between the legislative, executive, and technological
arms of the government. This was crucial for a reform of this scale.
The extensive efforts made to build the necessary technological
infrastructure and train tax officials and businesses indicate a
recognition that legal changes alone were insufficient; a robust
digital backbone was indispensable for smooth functioning.

 Post-Implementation Refinements: Since its implementation,

the Indian GST system has undergone continuous amendments and
refinements based on feedback from businesses and the evolving
economic scenario. Notable refinements include the introduction of
the E-way bill system (2018), the reverse charge mechanism (2019),
and various rate rationalizations and trade facilitation measures
 GST (GOODS & SERVICES TAX)

approved by the GST Council.10 This continuous adaptation signifies

an adaptive governance approach, where the system is constantly
fine-tuned. This demonstrates that successful implementation of
such a large-scale reform requires not only political will and
legislative action but also massive administrative and technological
preparation. The ongoing refinements indicate that GST is a living
system, constantly being optimized, which is a strength in adapting
to real-world challenges but can also create compliance uncertainty
for businesses in the short term.

3. Structure of GST in India

3.1 Types of GST: CGST, SGST, IGST, and UTGST

India's GST framework operates on a dual model, necessitating different

types of GST depending on the nature and location of the transaction:

 Central Goods and Services Tax (CGST): This tax is levied by the
Central Government on intra-state supplies of goods and services,
meaning transactions that occur within the boundaries of a single
state or Union Territory. The revenue generated from CGST is
deposited with the Central Government.2 The rate of CGST is
generally equal to that of SGST.

 State Goods and Services Tax (SGST): Levied by the respective

State Government, SGST applies to intra-state supplies of goods and
services, working in conjunction with CGST. The revenue collected
under SGST goes directly to the state government, empowering
them to bolster their fiscal capabilities and fund developmental
projects.2

 Integrated Goods and Services Tax (IGST): IGST comes into

play for inter-state transactions of goods and services, as well as for
imports into India. Unlike CGST and SGST, which are levied within a
single state, IGST is charged when goods or services move from one
state to another. The central government collects IGST, which is
then distributed to the destination state, ensuring seamless tax flow
and upholding the destination-based consumption tax principle. 2

 Union Territory Goods and Services Tax (UTGST): UTGST

mirrors SGST but is specifically applicable to Union Territories of
India that do not have their own state legislature, such as Andaman
and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman
and Diu, and Lakshadweep. It operates alongside CGST for intra-
territory supplies, with the revenue aiding in the administration and
development of these territories.2
 GST (GOODS & SERVICES TAX)

This multi-component structure, while appearing to add complexity, is a

direct consequence of India's federal structure. Both the Union and State
governments possess constitutionally mandated powers to levy taxes. To
implement a unified indirect tax without infringing upon state fiscal
autonomy, a dual system was adopted. This design preserves the federal
balance but introduces administrative intricacies, particularly for inter-
state transactions (IGST), where the Centre collects revenue and then
distributes it to the destination state. This necessitates a robust IT
backbone (GSTN) for accurate reconciliation and settlement. This
structure, therefore, reflects a pragmatic solution to India's federal
realities, signifying that the "One Nation, One Tax" motto refers more to a
unified framework rather than a single tax rate or a single administrative
authority. The inherent complexity in revenue distribution, especially IGST
settlement, requires continuous coordination between central and state
authorities, as well as robust IT systems to manage the flow of funds.

3.2 Operational Mechanism of Dual GST

The operational mechanism of India's dual GST system is designed to

ensure efficient tax collection and proper revenue distribution:

 Intra-State Transactions: When a supply of goods or services

occurs within the same state or Union Territory, both CGST and
SGST (or UTGST) are levied simultaneously. For instance, if the total
GST rate applicable to a product is 18%, then 9% will be charged as
CGST and 9% as SGST (or UTGST).2

 Inter-State Transactions: For transactions involving the

movement of goods or services between different states, only IGST
is levied. The entire IGST amount is collected by the Central
Government. Subsequently, this collected IGST is apportioned
between the Central Government and the destination State
Government, ensuring that the tax revenue ultimately accrues to
the state where the consumption takes place. 2

 Input Tax Credit (ITC) Utilization Rules: The seamless flow of

credit is a hallmark of GST, but its utilization is governed by specific
rules to maintain fiscal balance between the Centre and States:

o CGST credit can only be utilized to offset CGST liability.

o SGST/UTGST credit can only be utilized to offset SGST/UTGST

liability.

o IGST credit has a more flexible utilization hierarchy: it must

first be used to pay IGST liability. If any IGST credit remains, it
can then be utilized to pay CGST liability, and subsequently, if
 GST (GOODS & SERVICES TAX)

a balance still exists, it can be used to pay SGST/UTGST

liabilities, in that specific order.

o Crucially, CGST credit cannot be used for the payment of

SGST/UTGST, and similarly, SGST/UTGST credit cannot be
used for the payment of CGST.5

These precise rules for ITC utilization are not arbitrary; they are
fundamental to maintaining the fiscal balance between the Central and
State governments within the dual GST framework. By restricting the
cross-utilization of CGST and SGST, the system ensures that each
government's revenue stream from intra-state transactions is protected.
The flexibility of IGST credit, allowing it to offset both central and state
taxes, is critical for the destination-based principle of GST, ensuring the
consuming state ultimately receives its share of the tax revenue from
inter-state trade. Without these precise rules, there could be significant
revenue leakages or imbalances between the Centre and States. This
intricate ITC mechanism underscores the complexity inherent in managing
a dual GST system in a large federal economy. While it prevents cascading
and ensures fair revenue distribution, it places a significant burden on
businesses to accurately track and utilize their credits, requiring
sophisticated accounting systems and increasing compliance vigilance to
avoid discrepancies and penalties. It represents a delicate balancing act
between simplification for taxpayers and fiscal integrity for governments.

4. GST Rates and Classification

4.1 Overview of GST Slabs (0%, 5%, 12%, 18%, 28%, 3%, 0.25%)

The Goods and Services Tax in India is structured around a multi-tiered

rate system, designed to accommodate the diverse economic landscape
and social objectives of the country.

 Primary Slabs: The core of the GST rate structure comprises four
main tax slabs: 5%, 12%, 18%, and 28%.10 Most goods and services
fall within these categories.

 Exempted/Nil-Rated (0%): To ensure affordability of essential

items, a significant category of goods and services is either exempt
from GST or taxed at a 0% rate. This includes basic essentials such
as unbranded food grains, fresh vegetables, milk, eggs, curd, lassi,
kajal, as well as critical services like education and healthcare. 9

 Special Rates: Beyond the primary slabs, certain specific items

attract special GST rates:

o 3%: This rate is specifically applicable to gold and jewelry. 17

 GST (GOODS & SERVICES TAX)

o 0.25%: A very low rate is levied on rough precious and semi-

precious stones.17

 Cess on Luxury and Sin Items: In addition to the 28% slab, a

compensation cess is imposed on certain luxury goods and demerit
goods (often referred to as "sin items"). This includes high-end
motorcycles, consumer durables like air conditioners and
refrigerators, luxury vehicles (e.g., BMWs), cigarettes, tobacco, and
aerated drinks. The cess rates can vary significantly, ranging from
1% to as high as 204%, serving both as a revenue enhancer and a
deterrent for consumption of these items.10

 Services: Similar to goods, most services are categorized within the

four main GST slabs (5%, 12%, 18%, 28%). Essential services like
healthcare and education are exempt from GST. Professional
services, including those provided by legal professionals, chartered
accountants, and healthcare providers, as well as consultancy,
courier, and IT services, are typically taxed at an 18% GST rate. 19

This multi-tiered rate structure, while seemingly complex and appearing to

deviate from the "one nation, one tax" ideal, is a pragmatic approach
adopted to balance various policy goals. The 0% and exempted categories
address social equity concerns by keeping essential goods and services
affordable for the common populace. The higher rates and cesses on
luxury and demerit goods serve as significant revenue generators for the
government and act as tools for discouraging the consumption of certain
items. This approach also facilitated a smoother transition from the highly
differentiated tax regime that existed before GST, allowing for a gradual
adjustment for various industries and consumers. This rate structure
highlights the inherent trade-off between simplifying the tax system and
achieving broader socio-economic objectives, such as equity, discouraging
harmful consumption, and ensuring revenue stability. While it maintains a
degree of complexity for businesses in classifying products and services, it
is a necessary compromise in a diverse economy like India's, reflecting the
government's attempt to use taxation as a tool for both fiscal and social
policy.

4.2 HSN and SAC Codes for Goods and Services

To ensure uniformity and clarity in the application of GST rates across the
country, a standardized classification system is employed for both goods
and services.

 HSN (Harmonized System of Nomenclature) Code: This

internationally recognized system is used for the classification of
goods under GST. It provides a multi-digit code for various products,
 GST (GOODS & SERVICES TAX)

enabling consistent identification and taxation regardless of where

they are traded within India.17

 SAC (Services Accounting Code) Code: Developed by the

Service Tax Department of India, the SAC code system is specifically
used for the classification of services. Similar to HSN, it provides
unique codes for different types of services, ensuring uniform
application of GST rates.17

 Compliance Requirement: Businesses are mandated to mention

the correct HSN/SAC codes on their invoices. This requirement is
crucial for accurate tax calculation, proper reporting in GST returns,
and facilitating the seamless flow of Input Tax Credit. It also aids tax
authorities in verifying compliance.7

The HSN/SAC system is crucial for standardizing the application of GST

rates across the country, thereby reducing ambiguity and facilitating inter-
state trade by ensuring consistent taxation for the same product or
service. This standardization is a key element of the "one nation, one tax"
framework. However, the immense diversity of goods and services means
that accurately classifying items can be a complex task. Disagreements
on the applicable GST rate for specific goods or services are a common
cause of contention, leading to potential litigation and increasing the
compliance burden, especially for businesses dealing with a wide array of
products or services.22 While HSN/SAC codes are essential for the
systematic functioning of GST, their implementation highlights a practical
challenge: the inherent difficulty of categorizing every possible good and
service without ambiguity. Businesses need to invest in understanding
these codes and ensuring accurate application to avoid penalties and
disputes, underscoring that even standardized systems require diligent
interpretation and compliance.

4.3 Recent Rate Rationalization and Exemptions

The GST Council, as the apex decision-making body, periodically reviews

and revises GST rates and exemptions. These adjustments are made in
response to evolving economic conditions, feedback from industries, and
broader policy objectives.

 Examples of Rate Changes and Exemptions:

o Green Energy Initiatives: The GST Council approved a

significant reduction in GST rates on all electric vehicles, from
12% to 5%, and provided an exemption from GST for electric
buses with an occupancy capacity of more than 12 people.
This aims to promote sustainable transportation. 14
 GST (GOODS & SERVICES TAX)

o Real Estate Sector: Under a special scheme, the effective

GST rate for under-construction properties was reduced from
12% to 5% for non-affordable housing and from 8% to 1% for
affordable housing schemes, providing a boost to the sector. 14

o COVID-19 Relief: During the pandemic, the Council

rationalized duties on specified COVID-related goods,
demonstrating responsiveness to public health crises. 14

o Streamlining 28% Slab: A significant rationalization effort

involved reducing the number of items under the highest 28%
GST slab from 227 to just 35, simplifying the tax structure and
reducing the burden on many consumer goods. 14

o Specific Exemptions: Recent recommendations include

waiving GST on Extra Neutral Alcohol (ENA) used for
manufacturing alcoholic liquor for human consumption, fully
exempting GST on gene therapy, and exempting certain
services provided by Indian Railways to the common man,
such as platform tickets and cloakroom services. Corporate
guarantees are also exempt if full Input Tax Credit is
available.18

o Imports: IGST on imports of aircraft tool kits and certain

renewable energy devices has been reduced to 5%.17

These continuous adjustments reflect the GST Council's role as an

adaptive policymaking body. The changes are driven by a need to
stimulate specific sectors (e.g., green energy, housing), provide economic
relief (e.g., during COVID-19), address industry-specific concerns, and
simplify the tax structure by reducing the number of items in the highest
slab. This dynamic approach showcases responsiveness to economic
realities and stakeholder demands. While beneficial for targeted sectors
and consumers, frequent rate changes can concurrently create
uncertainty and increase the compliance burden for businesses, as they
must constantly update their systems and pricing. This highlights the
ongoing tension between the need for a stable, predictable tax
environment and the government's desire for flexibility to achieve specific
economic and social objectives. It also underscores the critical importance
of the GST Council in fine-tuning the tax system post-implementation.

Table 1: Key GST Slabs and Examples of Goods/Services

This table provides a clear and concise overview of the different tax rates
and concrete examples of items falling under each slab, aiding in the
comprehension of the multi-tiered GST rate structure.
 GST (GOODS & SERVICES TAX)

GST Applicability/
Examples of Goods/Services
Rate Category

Unbranded food grains, Fresh

Essential Goods & vegetables, Milk, Eggs, Curd, Lassi,
0%
Services Kajal, Education services, Health
services 17

Rough Precious & Rough precious and semi-precious

0.25%
Semi-Precious Stones stones 17

3% Gold & Jewelry Gold, Jewelry 17

Domestic LPG, Roasted Coffee Beans,

PDS Kerosene, Skimmed Milk Powder,
Household
Cashew Nuts, Footwear (< ₹500),
5% Necessities, Basic
Apparels (< ₹1000), Spices, Life-
Services
saving drugs, Transport services,
Food/drinks at non-AC restaurants 17

Butter, Ghee, Computers (some

Processed Food, types), Processed food, Almonds,
12% Certain Goods & Mobiles, Fruit Juice, Packed Coconut
Services Water, Umbrellas, Business hotels,
Poultry keeping machinery parts 17

Hair Oil, Capital goods, Toothpaste,

Industrial Intermediaries, Soap, Ice-
cream, Pasta, Toiletries, Corn Flakes,
Standard Goods &
18% Soups, Printers, Consultancy
Services
services, Professional services,
Courier services, IT services, Loans
and advances 17

28% Luxury & Sin Items Small cars (+1% or 3% cess), High-
(+ end motorcycles (+15% cess),
Cess) Consumer durables (AC, fridge),
Beedis, Luxury & sin items like
BMWs, Cigarettes (+15% cess),
Aerated drinks (+15% cess),
 GST (GOODS & SERVICES TAX)

GST Applicability/
Examples of Goods/Services
Rate Category

Gambling, Food/drinks at AC 5-star

hotels, Movie tickets over Rs. 100 17

5. Institutional Framework of GST

The effective functioning of GST relies on a robust institutional framework,

involving key bodies responsible for policy, administration, and
technological backbone.

5.1 The GST Council: Composition, Functions, and Decision-

Making

The GST Council stands as the apex decision-making body for GST in
India, embodying the spirit of cooperative federalism.

 Composition: As per Article 279A(2) of the Constitution, the GST

Council is a joint forum comprising members from both the Central
and State Governments. Its composition includes:

o The Union Finance Minister, who serves as the Chairperson.

o The Union Minister of State in charge of Revenue or Finance.

o The Minister in charge of Finance or Taxation, or any other

Minister nominated by each State Government.13

 Functions: Article 279A(4) of the Constitution mandates the GST

Council to make recommendations to the Union and the States on
all crucial matters related to GST. These functions encompass a wide
range of responsibilities, including:

o Determining which goods and services may be subjected to or

exempted from GST.

o Formulating model GST Laws, principles of levy, and rules

governing the place of supply.

o Setting threshold limits for exemption from GST registration

and compliance.

o Deciding on GST rates, including the establishment of floor

rates with bands.

o Making special provisions for certain states, considering their

unique economic circumstances.
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o Addressing any other matter incidental to or connected with

GST.14

 Decision-Making: The GST Council typically strives for a

consensus-based approach during its meetings, fostering
collaborative policymaking. However, in instances where a proposal
is put to a vote, a specific weighted voting mechanism is employed
to ensure equitable representation. The vote of the Central
Government holds a weightage of one-third of the total votes cast in
that meeting, while the votes of all State Governments taken
together have a weightage of two-thirds. A proposal is carried only if
at least three-fourths of the weighted votes are in favor. 14

This unique structure is a constitutional innovation designed to foster

cooperative federalism in tax matters, which was historically a point of
contention between the Centre and States. The weighted voting
mechanism ensures that neither the Centre nor the States can unilaterally
impose decisions, thereby necessitating genuine negotiation and
compromise. This is crucial for the successful implementation and
continuous evolution of a unified tax system in a diverse federal country
like India, where states retain significant fiscal autonomy. It allows for
collective ownership of policy decisions, thereby enhancing stability and
reducing the likelihood of states opposing central tax policies. The
Council's adaptive nature, as evidenced by its continuous rate
rationalization and policy refinements, is a direct result of this
collaborative framework.

5.2 Central Board of Indirect Taxes and Customs (CBIC): Role and
Structure

The Central Board of Indirect Taxes and Customs (CBIC), formerly known
as the Central Board of Excise and Customs (CBEC), is a pivotal statutory
body operating under the Department of Revenue, Ministry of Finance,
Government of India. Its renaming in 2018 after the introduction of GST
reflects a significant shift in its mandate.23

 Statutory Body: Established under the Central Boards of Revenue

Act, 1963, CBIC is the apex administrative authority for indirect
taxes in India. Its historical roots trace back to 1855, making it one
of the oldest government departments in India. 23

 Key Responsibilities: CBIC is entrusted with a broad range of

duties related to indirect taxation:

o Policy Formulation: It plays a crucial role in formulating

policies concerning the levy and collection of various indirect
 GST (GOODS & SERVICES TAX)

taxes, including customs duties, central excise duties (for non-

GST items), Central Goods and Services Tax (CGST), and
Integrated Goods and Services Tax (IGST). 24

o Tax Administration: CBIC oversees the comprehensive

administration of these taxes, including their collection,
ensuring efficient revenue mobilization for the government. 5

o Enforcement: A significant part of its mandate involves law

enforcement activities, such as the prevention of smuggling,
combating illicit financial activities, and regulating and
controlling narcotics through its attached and subordinate
offices.23

o Administrative Authority: CBIC serves as the

administrative head for a network of subordinate
organizations, including Central Excise and Central GST
Commissionerates, Custom Houses, and the Central Revenues
Control Laboratory.24

 Organizational Structure: The CBIC is headed by a Chairperson,

who is the senior-most Indian Revenue Service (Customs & Indirect
Taxes) officer. The Chairperson is supported by several members,
each overseeing specific portfolios such such as Customs, Legal,
GST & Tax Policy, Administration & Vigilance, and Investigation. 23

The renaming from "Excise and Customs" to "Indirect Taxes and Customs"
is symbolic of a fundamental shift in its mandate. Previously, CBEC
managed a fragmented system of excise, customs, and service tax. With
GST, its role expanded to oversee a unified indirect tax regime. This
change reflects the government's commitment to consolidating indirect
tax administration under a single, cohesive authority, moving from a
fragmented approach to a more unified and streamlined system. This
transformation is crucial for ensuring consistent application of tax laws
and efficient revenue collection in the post-GST era.

5.3 Goods and Services Tax Network (GSTN): Role and Functions

The Goods and Services Tax Network (GSTN) is a pivotal non-profit, non-
government company that serves as the technological backbone of India's
GST regime. Its establishment was crucial for the successful
implementation and ongoing administration of GST, given the reform's
digital-first approach.12

 Nature and Vision: GSTN was created to provide a common and

shared IT infrastructure and services to the Central and State
Governments, taxpayers, and other stakeholders for the seamless
 GST (GOODS & SERVICES TAX)

implementation of GST. Its vision is to be a trusted National

Information Utility (NIU) that provides a reliable, efficient, and robust
IT backbone for the smooth functioning of the GST regime. 25

 Core Functions and Services: GSTN manages the entire IT

ecosystem crucial for GST operations, acting as the primary
interface between taxpayers and the government. Its key
responsibilities include:

o Registration: Enabling taxpayers to register under GST and

obtain a unique Goods and Services Tax Identification Number
(GSTIN).12

o Return Filing: Providing a robust online platform for

taxpayers to file their various GST returns (e.g., GSTR-1, GSTR-
3B, GSTR-9).12 The system is designed to handle billions of
invoices and returns from millions of taxpayers monthly. 12

o Tax Payment: Facilitating online payment of GST dues

through various modes such as net banking, credit/debit
cards, and NEFT/RTGS, integrating banking networks with tax
payment details.12

o Refund Processing: Managing the processing of GST

refunds, aiming for timely disbursement to eligible
taxpayers.12

o Invoice Matching: Supporting the reconciliation of sales and

purchase invoices uploaded by taxpayers, which is critical for
preventing tax evasion and ensuring accuracy in tax
payments and Input Tax Credit claims.12

o Data Security: Implementing robust security measures to

safeguard taxpayer data and ensure confidentiality and
integrity.12

o System Integration: Integrating with other government

systems (like e-way bill system, e-invoicing portals) and
databases to streamline processes and facilitate information
exchange.12

o Taxpayer Services: Offering various support services,

including helpdesk assistance, taxpayer education, and
addressing compliance-related queries.12

o IGST Settlement: Responsible for calculating and settling

Integrated GST (IGST) payments, acting like a clearinghouse
for inter-state transactions.25
 GST (GOODS & SERVICES TAX)

 GST Suvidha Providers (GSPs): GSTN has also fostered an

ecosystem of third-party service providers, known as GST Suvidha
Providers (GSPs). These GSPs develop innovative applications and
interfaces (desktop, mobile, etc.) that connect with the GST system
via secure APIs, offering taxpayers additional convenience and
specialized solutions for GST compliance, such as converting data
into GST-compliant formats and automatic reconciliation of purchase
records.29

The digital foundation provided by GSTN is critical for the system's

efficiency and transparency, enabling seamless compliance and reducing
errors. The successful doubling of registered taxpayers to 14-15 million
and the processing of billions of invoices and returns underscore its vital
role in the formalization of the Indian economy and the smooth
administration of this complex tax reform.25

5.4 Directorate General of GST Intelligence (DGGI): Role and

Functions

The Directorate General of GST Intelligence (DGGI) is a specialized law

enforcement agency operating under the Ministry of Finance, Government
of India. Its primary mandate is to combat tax evasion within the Goods
and Services Tax regime.32

 Formation and Evolution: Established in 1979 as the Directorate

General of Anti-Evasion, it was later renamed the Directorate
General of Central Excise Intelligence. Following the introduction of
GST, the agency was renamed Directorate General of GST
Intelligence (DGGI).33

 Core Functions: The DGGI's core function involves meticulous

intelligence gathering, collation, and dissemination related to the
evasion of Goods and Service Tax. Through vigilant monitoring,
advanced data analysis, and surveillance techniques, the DGGI aims
to detect and prevent tax evasion effectively.32 Since 2004, the
agency has also been responsible for detecting cases of service tax
evasion.33

 Operational Structure: The organization is staffed by officers of

the Central Board of Indirect Taxes and Customs (CBIC) and operates
with zonal units in major cities like Chennai, Delhi, Kolkata, and
Mumbai.33 DGGI is also part of NATGRID, a national intelligence
grid.33

6. Comparison with Value Added Tax (VAT)

 GST (GOODS & SERVICES TAX)

The introduction of GST marked a significant departure from the previous

Value Added Tax (VAT) regime, addressing many of its inherent limitations
and aiming for a more streamlined and efficient indirect tax system.

6.1 Key Differences and Advantages of GST over VAT

While both VAT and GST are consumption-based indirect taxes, their
implementation, framework, and impact on businesses and consumers
differ considerably.

 Applicability:

o VAT: Was primarily levied on the sale of goods at the state

level. Services were subject to a separate Central Service Tax. 3

o GST: Is a comprehensive tax applied on both goods and

services, unifying the tax base under a single levy. 3

 Cascading Effect:

o VAT: Suffered from a "cascading effect" or "tax on tax."

Businesses often paid tax on inputs without full credit for
taxes paid at previous stages, especially across state borders
or between goods and services. This increased the final cost
to consumers.1

o GST: Effectively eliminates the cascading effect through a

seamless and comprehensive Input Tax Credit (ITC)
mechanism. Tax is levied only on the value added at each
stage, leading to lower costs for consumers and more
transparent pricing.1 This is a major improvement, translating
to reduced manufacturing costs and enhanced
competitiveness for Indian products.

 Uniformity of Rates:

o VAT: Tax rates varied significantly from state to state, leading

to market fragmentation and complexities for inter-state
trade.3

o GST: Introduced uniform tax rates across India for most goods
and services, simplifying pricing and compliance for
businesses operating nationwide.3

 Input Tax Credit (ITC):

o VAT: ITC was limited, often restricted by state boundaries, and

generally not available for Central Sales Tax (CST) paid on
 GST (GOODS & SERVICES TAX)

inter-state purchases. This hindered seamless credit flow

across the supply chain.3

o GST: Provides a comprehensive ITC framework, allowing

businesses to claim credits for taxes paid across the entire
supply chain, regardless of whether the transaction is intra-
state or inter-state. This significantly improves cash flow for
businesses and reduces their overall tax burden. 3

 Compliance:

o VAT: Required multiple compliances and registrations across

different states, increasing the administrative burden. 3

o GST: Streamlined compliance procedures with a unified online

portal for registration, return filing, and payments, making tax
administration easier and more efficient.1

 Revenue Sharing:

o VAT: Revenue collected was confined entirely to the state

where the sale occurred.3

o GST: Under the dual model, the collected tax is shared

between the Central and State governments, ensuring a more
equitable distribution of revenue based on the destination
principle.3

 Exemptions: While GST is comprehensive, certain fundamental

goods like petrol, diesel, and alcohol for human consumption remain
outside its purview and are still subject to VAT, reflecting a
pragmatic approach to revenue generation and state fiscal
autonomy.3

In essence, GST transformed the Indian tax landscape by overcoming

VAT's limitations, offering a more comprehensive, unified, and transparent
tax structure. It has aimed to simplify tax collection, promote economic
efficiency, and reduce the overall tax burden by eliminating the cascading
effect.

7. Business Implications of GST

The implementation of GST has had profound implications for businesses

across India, bringing about both significant benefits and notable
challenges.

7.1 Impact on Compliance and Operations

 GST (GOODS & SERVICES TAX)

 Simplified Tax System: One of the primary aims of GST was to

simplify the complex indirect tax regime. By subsuming numerous
taxes like sales tax, service tax, excise duty, and octroi into a single
framework, GST has indeed simplified the overall taxation process
for businesses. This allows businesses to focus more on their core
competencies while maintaining compliance. 1

 Digitalization Burden: The shift to an online taxation system

under GST, managed through the GSTN portal, initially presented a
significant challenge for many businesses, particularly Small and
Medium-sized Enterprises (SMEs). It necessitated additional software
purchases, resource hiring, training for staff, and other operational
changes to adapt to the new digital structure. 7 While most
businesses have gradually adapted, the initial implementation
setbacks were considerable.7

 Increased Operational Expenses: In the initial days, the

transition to GST led to a rise in operational costs for many
businesses. This included expenses related to upgrading IT systems,
purchasing new accounting software, hiring tax consultants or
specialists (e.g., Chartered Accountants) to navigate the
complexities, and training personnel on new compliance
requirements, such as generating e-Invoices with HSN codes and
GSTINs.7

 Compliance Requirements: Adhering to GST regulations involves

several mandatory practices:

o GST Registration: Businesses engaged in manufacturing or

trading goods with an annual turnover exceeding ₹40 lakhs
(or ₹20 lakhs for services in most states) are required to
register under GST and obtain a unique GST Identification
Number (GSTIN).21 Registration is also mandatory for inter-
state supplies and e-commerce operators, regardless of
turnover.36

o Tax Invoicing: Invoices must include mandatory information

such as the supplier's and purchaser's GSTIN, description of
items, HSN/SAC codes, quantity, per unit price, and applicable
CGST/SGST rates.21

o GST Returns Filing: Businesses must file multiple returns,

primarily GSTR-1 (outward supplies) and GSTR-3B (summary
return), on a monthly or quarterly basis (under the QRMP
scheme). An annual return (GSTR-9) is mandatory for
 GST (GOODS & SERVICES TAX)

businesses with turnover exceeding ₹2 crore. Timely filing is

crucial to avoid late fees and interest charges. 21

o Payment of Collected Tax: Businesses must remit the

collected tax to the government.21

o Record Keeping: Maintaining accurate records of all

invoices, credit notes, purchase and sales registers, and other
documentation is essential. These records must be preserved
for at least six years.21

o E-way Bills: For transactions exceeding ₹50,000, an e-way

bill must be generated for the transportation of goods. 21

o Reverse Charge Mechanism (RCM): Compliance with RCM

provisions requires the recipient of specified goods/services to
pay GST, with proper ITC claims for such payments. 36

o Audit Requirements: Businesses with an annual turnover

exceeding ₹2 crore are subject to a GST audit conducted by a
qualified Chartered Accountant.36

 GST Compliance Rating: The GST Act, 2017, includes a provision

for a GST compliance rating (Section 149), where the Central
Government can assess and rate registered taxpayers based on
their adherence to GST rules. Companies with high ratings benefit
from reduced scrutiny by tax authorities, better concessions for
inadvertent issues, improved business image, and enhanced
negotiation power with financial institutions and investors. 21

7.2 Benefits for Businesses

Despite the initial challenges, GST has delivered several significant

benefits to businesses:

 Seamless Input Tax Credit (ITC): The comprehensive ITC system

is a major advantage, allowing businesses to offset GST paid on
inputs against their output tax liability. This facility, largely
unavailable in the pre-GST era, reduces the tax burden on
businesses, enhances their cash flow, and contributes to healthier
balance sheets, particularly benefiting small enterprises. 1

 Unified National Market: By eliminating multiple state-level taxes

and check-posts, GST has facilitated the free movement of goods
and services across state borders. This has led to improved logistics,
reduced transit times, optimized warehousing strategies, and
fostered a more competitive landscape for all businesses operating
in India.1
 GST (GOODS & SERVICES TAX)

 Reduced Tax Evasion: The digital nature of GST, coupled with

mechanisms like invoice matching and the e-way bill system, has
significantly reduced the scope for tax evasion, promoting greater
transparency and accountability in the tax system. This has
benefited the government in revenue collection and contributed to a
clearer tax environment for businesses.7

 Enhanced Competitiveness: The elimination of the cascading

effect of taxes has led to lower production costs for businesses,
making Indian products and services more competitive both
domestically and in international markets.1

7.3 Challenges Faced by Businesses

The transition and ongoing operation under GST have also presented
businesses with notable challenges:

 Complex Tax Structure and Rates: Despite the aim of

simplification, the existence of multiple GST slabs (0%, 5%, 12%,
18%, 28%, plus special rates and cesses) can lead to confusion in
classifying goods and services. This complexity often requires
businesses to seek external expertise, increasing operational
expenses and the risk of non-compliance due to misclassification. 7

 Technical Glitches on GST Portal: The reliance on the online GST

portal for filing returns and other compliances has been a source of
frustration. Businesses have frequently encountered technical
glitches, making it difficult to file returns on time and sometimes
leading to incorrect filings, which can result in penalties and fines.
While GSTN has undertaken measures to address these issues,
problems have persisted.20

 High Compliance Costs: For many SMEs, the costs associated with
GST compliance—including registration, regular return filing,
maintaining detailed digital records, and undergoing audits—have
increased significantly. This can make it challenging for smaller
businesses to operate and compete with larger entities that have
greater resources.7

 Input Tax Credit (ITC) Refund Delays: While ITC is a major

benefit, businesses have faced issues with delays in receiving ITC
refunds. These delays can lead to a shortage of working capital,
creating cash flow problems, particularly for businesses with high
input costs or those involved in exports. 20

 E-way Bill System Hurdles: The e-way bill system, essential for
goods transportation, has also encountered technical glitches and
 GST (GOODS & SERVICES TAX)

delays in bill generation. Such issues can lead to higher compliance

costs and even the detention of goods, disrupting supply chains. 20

 Litigation: Despite efforts to simplify, disputes over applicable GST

rates, interpretation of notifications, and refund eligibility remain
common, leading to significant litigation for businesses. 22

8. International Context of GST

The Goods and Services Tax (GST) or Value Added Tax (VAT) is a widely
adopted indirect tax system globally, with India's model presenting unique
characteristics shaped by its federal structure and economic diversity.

8.1 Global Adoption of VAT/GST

The concept of a value-added tax was first implemented by France in

1954 to reduce tax evasion. Since then, over 160 countries worldwide
have adopted either a GST or VAT system on both goods and services. 9
This widespread adoption underscores the effectiveness of a consumption-
based tax in modern economies.

8.2 Comparison of Indian GST Model with Global Systems

While India's GST shares fundamental principles with global VAT/GST

systems, its specific design reflects its unique socio-economic and political
context.

 Dual Model vs. Single National VAT: Most countries, such as the
UK (20% VAT), Singapore (7% GST), China (13% VAT), Germany
(19% VAT), and New Zealand (15% GST), operate with a single
national VAT or GST system.9 In contrast, India, similar to Canada
and Brazil, has adopted a dual GST model (CGST + SGST/UTGST for
intra-state, IGST for inter-state).9 This dual structure is a direct
consequence of India's federal system, where both the Central and
State governments have constitutional powers to levy and collect
taxes. This approach preserves the fiscal autonomy of states while
creating a unified indirect tax framework.

 Tax Rates and Slabs: Many countries typically have a single

standard GST/VAT rate, often complemented by reduced rates or
exemptions for essential goods. For example, the UK has a standard
rate of 20% with reduced rates of 5% and exemptions, while
Singapore has a standard rate of 7% with zero-rated and exempt
supplies.9 India, however, employs a multi-tiered rate structure with
primary slabs of 0%, 5%, 12%, 18%, and 28%, along with special
rates like 3% for gold and 0.25% for rough precious stones. 9 This
multi-tiered approach, while appearing complex, is a pragmatic
compromise to manage the transition from a highly differentiated
 GST (GOODS & SERVICES TAX)

pre-GST tax regime and to address socio-economic objectives, such

as keeping essential goods affordable and taxing luxury/demerit
goods at higher rates.

 Thresholds for Applicability: India's GST applicability threshold

(₹40 lakh for goods and ₹20 lakh for services in most states) is
generally lower compared to many other countries. This means a
larger number of small businesses fall under the GST net, potentially
increasing their compliance burden compared to their counterparts
in countries with higher thresholds.9

 USA Contrast: The United States stands as a notable exception, as

it does not have a federal Value Added Tax levied on goods and
services. Instead, it operates a sales tax system governed at the
state level, with rates varying significantly across states. 9

India's GST model, therefore, is a unique blend of global best practices

adapted to its specific federal and economic realities. While it shares the
fundamental objective of taxing consumption and eliminating cascading,
its dual structure and multi-slab rates are distinctive features that reflect
the compromises necessary to achieve a unified indirect tax system in a
large and diverse federal economy.

9. Critical Analysis and Evaluation of GST

Since its implementation, GST has demonstrated both significant

achievements and persistent challenges, reflecting its ongoing evolution
in India's dynamic economic landscape.

9.1 Achievements and Positive Impacts

 Economic Growth: Empirical evidence suggests a positive

correlation between GST revenue growth and India's economic
growth (proxied by GDP). Studies indicate that GST revenue growth
has a significant and positive impact on economic growth in India in
both the short and long run.16 Rising GST collections, coupled with
increased e-way bill generation and improved consumer sentiment,
are indicators of strengthening economic activity. 39 The Economic
Survey 2025 highlights steady GDP growth (estimated at 6.4% in
FY25) and robust performance in manufacturing, logistics, and
digital services, which contribute significantly to GST collections. 40

 Increased Tax Compliance and Formalization: GST has been

instrumental in formalizing the Indian economy. The number of GST-
registered taxpayers has more than doubled, growing from 6.78
million in 2017 to 14 million by June 2023 30 and further to 15 million
by FY25, with over 2.5 million new registrations recorded in FY25. 31
 GST (GOODS & SERVICES TAX)

This expansion in the taxpayer base reflects increased voluntary

registrations, particularly by small enterprises seeking to avail Input
Tax Credits (ITC).43 The growth in taxable revenue base further
signifies the formalization catalysed by GST. 44

 Robust Revenue Collection: GST collections have shown

consistent growth, reinforcing confidence in sustained economic
recovery. Monthly gross GST collections have regularly exceeded
₹1.6 lakh crore, maintaining momentum above ₹1.9 lakh crore since
January 2025.40 April 2025 recorded the highest-ever monthly
collection at ₹2.36 lakh crore, driven by year-end filings and
improved compliance.40 The total GST collection for FY 2023-24
stood at ₹20.18 lakh crore.44 The May 2025 collection was ₹2.01
lakh crore, marking a 16.4% year-on-year growth. 40

 Improved Supply Chain Efficiency: By eliminating inter-state

check-posts and disparate state taxes, GST has significantly eased
the transportation and movement of goods within states. This has
led to improved logistics, reduced warehousing costs, and a more
integrated national market, fostering fair competition. 1

 Enhanced Transparency: The digital-first approach of GST, with all

processes managed online through the GSTN portal, has promoted
greater transparency in tax transactions. Taxpayers can access their
records and transaction history online, fostering accountability and
trust in the system.12

9.2 Challenges and Areas for Improvement

Despite its successes, GST continues to face several challenges that

require ongoing attention and reform:

 Complexity of Rates: While aiming for simplification, the multi-

tiered GST rate structure (0%, 5%, 12%, 18%, 28%, plus special
rates and cesses) still poses challenges for businesses. Classifying
goods and services accurately under the correct slab can be
confusing, leading to increased compliance costs and potential
litigation due to differing interpretations.7

 Technical Glitches: The reliance on the GST portal for all

compliance activities has been marred by persistent technical
glitches. These issues have made it difficult for taxpayers to file
returns on time, leading to delays, incorrect filings, and the
imposition of penalties and fines.20

 High Compliance Costs: Especially for Small and Medium-sized

Enterprises (SMEs), the initial and ongoing costs associated with
 GST (GOODS & SERVICES TAX)

GST compliance remain substantial. This includes expenses for

software, training, professional assistance for registration, return
filing, record maintenance, and audits, making it challenging for
smaller businesses to adapt and compete.7

 Input Tax Credit (ITC) Refund Delays: Despite the seamless

credit mechanism, businesses have frequently reported delays in
receiving ITC refunds. These delays tie up working capital, creating
cash flow issues and hindering business operations, particularly for
exporters.20

 E-way Bill System Issues: The e-way bill system, crucial for goods
transportation, has also encountered technical hurdles, including
glitches and delays in generating bills. Such problems can result in
increased compliance costs and the detention of goods, disrupting
supply chains.20

 Litigation: Disputes related to tax rates, the applicability of

notifications, and refund eligibility remain common under the GST
regime, indicating areas where clarity and simplified provisions are
still needed.22

 Exclusion of Key Sectors: Certain significant sectors, notably

petroleum products, alcohol for human consumption, and specific
aspects of real estate, remain outside the GST framework. This
limits the comprehensiveness of the "one nation, one tax" vision
and prevents the full realization of ITC benefits across these
sectors.3

10. Relevant Data and Statistics

The performance of GST in India can be substantiated by various official

data points and trends:

10.1 GST Collection Trends

 Recent Monthly Collections:

o May 2025: India's GST revenue stood at ₹2.01 lakh crore,

marking a 16.4% year-on-year growth and continuing the ₹2
lakh crore+ momentum for the second consecutive month. 40

o April 2025: Recorded the highest-ever monthly GST

collection at ₹2.36 lakh crore, indicating a 12.6% year-on-year
growth.40

o March 2025: Collections were over ₹1.96 lakh crore.40

o February 2025: Collections were over ₹1.83 lakh crore.40

 GST (GOODS & SERVICES TAX)

o January 2025: Collections were ₹1.95 lakh crore.40

o Monthly GST revenues have consistently remained above ₹1.7

lakh crore for the last nine months, reinforcing confidence in
sustained economic recovery.40

 Breakup of Collections (May 2025):

o CGST: ₹35,434 Crore

o SGST: ₹43,902 Crore

o IGST: ₹1,08,836 Crore (including ₹50,070 Crore from imports)

o Cess: ₹12,879 Crore.40

 Financial Year Collections:

o FY 2023-24: Total GST collection was ₹20.18 lakh crore. 44

o FY 2022-23: Total GST collection was ₹18.07 lakh crore. 44

o FY 2021-22: Total GST collection was ₹14.83 lakh crore. 44

o FY 2020-21: Total GST collection was ₹11.36 lakh crore

(impacted by COVID-19).40

o FY 2019-20: Total GST collection was ₹12.22 lakh crore. 40

o FY 2018-19: Total GST collection was ₹11.77 lakh crore. 40

o FY 2017-18 (Jul-Mar): Total GST collection was ₹7.19 lakh

crore.40

10.2 Taxpayer Base Growth

 The number of entities registered to pay GST has significantly

increased since its inception. From 67.83 lakh (6.78 million)
taxpayers in 2017, the base doubled to 14 million by June 2023. 30

 By FY25, the total number of registered taxpayers reached 15

million, with over 2.5 million new GST registrations recorded in that
fiscal year alone.31

 States like Uttar Pradesh, Maharashtra, Gujarat, Karnataka, and

Tamil Nadu each account for over a million registered taxpayers,
with Uttar Pradesh leading in total registrations and Maharashtra in
absolute collections.31

10.3 Economic Impact Data

 Research indicates a significant and positive impact of GST revenue

growth on India's economic growth.16
 GST (GOODS & SERVICES TAX)

 Reports from the Reserve Bank of India (RBI) highlight rising GST
collections, higher e-way bill generation, and improved consumer
sentiment as key indicators of strengthening economic activity in
India.39 The RBI also noted positive GST readings in April and May
2025, though a major part of it was from imports. 46

 The Economic Survey 2025 projects India's real GDP growth at 6.4%
for FY25 and identifies high formal-sector activity, strong consumer
demand, and robust performance in manufacturing, logistics, and
digital services as drivers of consistent GST collections. 40

11. Conclusion

The Goods and Services Tax (GST) represents a transformative fiscal

reform in India, fundamentally reshaping the nation's indirect tax
landscape. Its journey, spanning over a decade and a half of intricate
deliberations and constitutional amendments, underscores the profound
complexities inherent in unifying taxation within a large, diverse federal
system. The adoption of a dual GST model, with distinct Central and State
components, stands as a pragmatic compromise, preserving the fiscal
autonomy of states while fostering a unified national market. This delicate
balance, while introducing administrative intricacies, has been managed
through a unique institutional framework, notably the GST Council, which
embodies cooperative federalism in action, and the Goods and Services
Tax Network (GSTN), serving as the indispensable digital backbone.

GST has demonstrably achieved several of its core objectives. It has

largely succeeded in eliminating the cascading effect of taxes through a
seamless Input Tax Credit mechanism, leading to more transparent pricing
and enhanced competitiveness for businesses. The unification of
numerous indirect taxes into a single levy has simplified compliance,
albeit with initial transitional challenges. Furthermore, the digital
infrastructure has significantly boosted tax compliance and formalized the
economy, evidenced by the substantial growth in the taxpayer base and
consistent, robust revenue collections. Recent data, showing monthly
collections frequently exceeding ₹2 lakh crore and a doubling of registered
taxpayers, affirms GST's positive contribution to economic growth and
fiscal health.

However, the journey has not been without its challenges. The multi-tiered
rate structure, while serving various socio-economic objectives, continues
to pose classification complexities for businesses. Technical glitches on
the GST portal, coupled with high initial and ongoing compliance costs,
particularly for Small and Medium-sized Enterprises, have created
operational hurdles. Issues such as delays in ITC refunds and complexities
 GST (GOODS & SERVICES TAX)

with the e-way bill system also persist, leading to cash flow concerns and
increased litigation. Moreover, the exclusion of key sectors like petroleum
products and alcohol from the GST ambit limits its full
comprehensiveness.

In conclusion, GST in India is a living system, continuously adapting and

evolving. Its success hinges on ongoing refinements, technological
enhancements, and a sustained collaborative approach between the
Centre and States. While it has laid a strong foundation for a more
integrated and efficient economy, addressing the remaining complexities
and operational challenges will be crucial for realizing its full potential and
ensuring its long-term stability and effectiveness in India's dynamic
economic environment.

An Investigatory Project on Goods and Services Tax (GST) in India:

Introduction, Evolution, Structure, Rates, Institutional
Framework, Comparison with VAT, Business Implications,
International Context, and Critical Analysis

Executive Summary

The Goods and Services Tax (GST), implemented in India on July 1, 2017,
represents a landmark reform in the nation's indirect taxation system.
Designed as a comprehensive, multi-stage, destination-based tax, GST
aimed to unify India's fragmented tax landscape under a single regime. Its
core objectives included fostering a common national market, eliminating
the cascading effect of taxes, and simplifying the overall taxation
structure. This reform has played a pivotal role in integrating the Indian
economy, enhancing supply chain efficiencies, and promoting
formalization. While the transition presented initial challenges related to
compliance and operational adjustments, the GST regime has
continuously evolved, demonstrating adaptability through ongoing
refinements in rates and administrative processes. This report delves into
the introduction, historical evolution, intricate structure, prevailing rates,
robust institutional framework, and significant business implications of
GST, alongside a comparative analysis with the erstwhile Value Added Tax
(VAT) and its international parallels. It concludes with a critical evaluation
of its achievements and areas requiring further enhancement.

1. Introduction to Goods and Services Tax (GST)

1.1 Definition and Core Objectives

The Goods and Services Tax (GST) is a consumption-based indirect tax

levied on the supply of goods and services across India. It came into effect
on July 1, 2017, fundamentally reshaping the country's indirect tax system
 GST (GOODS & SERVICES TAX)

by subsuming a myriad of central and state-level taxes into a singular

framework.1

The introduction of GST was driven by several strategic objectives:

 Building a Common Market with Uniform Taxation: Prior to

GST, India's indirect tax system was characterized by a complex
web of varying state and central taxes, which created internal trade
barriers and hindered the seamless movement of goods and
services. GST was designed to unify this diverse market under a
single tax regime, thereby fostering an integrated and inclusive
economic environment. This unification has significantly reduced
logistical and compliance complexities for businesses operating
across state lines, encouraging fair competition and enabling
enterprises, particularly startups and small ventures, to expand their
operations nationwide without the burden of disparate tax
regulations. The result is an enhanced efficiency in supply chains
and a reduction in the overall cost of goods and services for
consumers, stimulating demand and economic growth. 1 This
ambition extends beyond mere revenue collection; it is a
foundational economic policy aimed at enhancing India's overall
economic efficiency and global competitiveness by unlocking the full
potential of its vast domestic market.

 Eliminating the Cascading Effect of Taxes: One of the most

significant drawbacks of the pre-GST tax regime was the "tax on
tax" phenomenon, where taxes were levied at multiple stages of the
supply chain without adequate credit for taxes paid on inputs. This
cascading effect inflated the final price borne by the consumer. GST
addresses this by implementing a comprehensive Input Tax Credit
(ITC) system. This mechanism allows businesses to claim credits for
taxes paid on input goods and services, ensuring that tax is levied
only on the value addition at each stage of the supply chain. This
leads to more transparent and equitable pricing, making goods and
services more affordable for consumers and enhancing the
competitiveness of Indian products in international markets. For
businesses, it translates into improved profit margins and reduced
tax liabilities, fostering a positive environment for growth and
expansion.1 The ITC system is not merely a technical tax feature; it
is the core economic engine of GST. By ensuring that tax is only
applied to the value added, it streamlines supply chains,
incentivizes formalization (as businesses must be registered to claim
ITC), and ultimately contributes to a more efficient allocation of
 GST (GOODS & SERVICES TAX)

resources within the economy. Its effective functioning is paramount

to realizing GST's broader economic benefits.

 Simplifying the Taxation System: GST consolidates numerous

indirect taxes into a single levy, drastically reducing the
administrative burden on both businesses and the government. The
regime is underpinned by a digital-first approach, with all processes
—including registration, tax filing, and refunds—managed online
through the GST portal. This digital infrastructure simplifies
compliance, minimizes human errors, and accelerates the
processing of tax-related matters, particularly benefiting Small and
Medium-sized Enterprises (SMEs) that often lack the resources to
navigate complex regulations. This simplification has also improved
tax compliance rates, leading to increased revenue collection for the
government.1

1.2 Key Features of GST

The Indian GST system is characterized by several distinguishing features:

 Dual GST Structure: India adopted a unique dual GST model, a

reflection of its federal structure. Under this system, both the
Central and State governments concurrently levy and collect taxes
on the same transaction. This dual structure comprises Central GST
(CGST) and State GST (SGST) for intra-state supplies, and Integrated
GST (IGST) for inter-state supplies.2

 Input Tax Credit (ITC) Mechanism: As highlighted, ITC is a

cornerstone of GST, allowing businesses to offset the tax paid on
their purchases against the tax collected on their sales. This
mechanism effectively eliminates the "tax on tax" effect, ensuring
that the tax burden is shared across the supply chain based on
value addition, ultimately reducing the effective tax rate on the final
product and making it more affordable for the end consumer. 1

 Destination-Based Consumption Tax: GST is levied at the point

where goods or services are finally consumed. This means that the
tax revenue accrues to the state where the consumption occurs,
rather than the state where the goods or services are produced. This
principle is crucial for inter-state trade and revenue distribution
among states.4

 Comprehensive Coverage: GST subsumed a wide array of indirect

taxes previously levied by the Central and State governments.
These include Central Excise Duty, Service Tax, Additional Duties of
Customs, State VAT, Central Sales Tax, Entertainment Tax, and Entry
Tax, among others, creating a unified tax base. 2
 GST (GOODS & SERVICES TAX)

 Digital-First Approach: The entire GST ecosystem operates on a

robust digital platform, the GST Network (GSTN). This online
infrastructure facilitates all aspects of tax compliance, from
taxpayer registration and return filing to tax payments and refunds,
promoting transparency and efficiency across the system. 1

2. Evolution and Journey of GST in India

2.1 Historical Background and Genesis

The journey of GST in India was a protracted and complex process,

spanning over a decade and a half, reflecting the intricate nature of
federal fiscal reforms in a diverse country.

 Initial Proposal (2000): The concept of a nationwide GST was first

proposed in 2000 by the Kelkar Task Force on Indirect Taxes. The
primary objective was to replace the prevailing complex and
fragmented indirect tax structure with a unified and simplified
system.10

 First Discussion Paper (2009): Following extensive deliberations

and negotiations, the Empowered Committee of State Finance
Ministers (EC) prepared a detailed design and roadmap for GST. This
culminated in the release of the First Discussion Paper on Goods and
Services Tax in India in November 2009. This paper laid the
groundwork for a dual GST model, acknowledging India's federal
structure.11

 Constitutional Amendment Efforts (2011-2016): The

implementation of GST necessitated a constitutional amendment to
redefine the taxing powers of the Centre and States. The
Constitution (115th Amendment) Bill was initially introduced in 2011
but lapsed. Subsequently, the Constitution (122nd Amendment) Bill,
2014, was introduced in Parliament with the aim of enabling GST
implementation. This bill faced significant challenges, particularly
concerning compensation to states for potential revenue losses and
other intricate issues. After years of intense deliberation and
negotiations between the Central and State Governments, the bill
was finally passed by the Lok Sabha in May 2015 and, with certain
amendments, by the Rajya Sabha in August 2016. 10 This extended
gestation period, from its initial proposal in 2000 to its eventual
enactment, is a direct consequence of India's complex federal
structure. The necessity of a Constitutional Amendment
underscored that the existing division of fiscal powers was a major
hurdle. India's decision to adopt a dual tax structure, where both
levels of government levy and collect tax, required broad consensus
 GST (GOODS & SERVICES TAX)

on revenue sharing and state compensation. The prolonged

negotiations and the repeated introduction and lapse of bills
highlight the political complexities inherent in unifying taxes across
diverse states with varying economic interests. This historical
context is essential for understanding the nuances of India's
economic policymaking, demonstrating that significant reforms
often require extensive political negotiation and consensus-building
among states, which, while slowing the process, ultimately ensures
broader acceptance and stability.

 Presidential Assent (2016): The Constitution (122nd

Amendment) Bill, 2014, received the President's assent on
September 8, 2016, formally becoming the 101st Constitution
Amendment Act, 2016. This was a critical turning point, providing
the legal framework for GST implementation.13

2.2 Key Milestones and Implementation Timeline

The period leading up to the GST launch was marked by a rapid

succession of legislative and administrative milestones:

 Formation of GST Council (September 2016): Following the

101st Constitutional Amendment Act, the GST Council was notified
on September 12, 2016. This joint forum, comprising the Union
Finance Minister and representatives from all States and Union
Territories, was established to make crucial decisions on various
aspects of GST, including tax rates, exemptions, and administrative
procedures. Its formation was pivotal in shaping the GST
framework.13

 Passage of Key GST Bills (April 2017): To operationalize GST,

several essential bills were introduced and passed by both the Lok
Sabha and the Rajya Sabha by April 20, 2017. These included the
Central Goods and Services Tax Bill (CGST), Integrated Goods and
Services Tax Bill (IGST), Union Territory Goods and Services Tax Bill
(UTGST), and the GST (Compensation to States) Bill. 10

 Enactment of CGST Act (April 2017): The Central Goods and

Services Tax Act, 2017, was enacted on April 12, 2017, with various
sections coming into force on June 22, 2017, and July 1, 2017. 15

 Nationwide Launch (July 1, 2017): The GST laws were officially

implemented across India on July 1, 2017, replacing the complex
web of Central and State taxes and marking a monumental shift in
the country's tax structure.2 The swift passage of multiple laws and
the simultaneous establishment of the GST Council and GST
Network (GSTN) during this period demonstrate a high degree of
 GST (GOODS & SERVICES TAX)

coordination between the legislative, executive, and technological

arms of the government. This was crucial for a reform of this scale.
The extensive efforts made to build the necessary technological
infrastructure and train tax officials and businesses indicate a
recognition that legal changes alone were insufficient; a robust
digital backbone was indispensable for smooth functioning.

 Post-Implementation Refinements: Since its implementation,

the Indian GST system has undergone continuous amendments and
refinements based on feedback from businesses and the evolving
economic scenario. Notable refinements include the introduction of
the E-way bill system (2018), the reverse charge mechanism (2019),
and various rate rationalizations and trade facilitation measures
approved by the GST Council.10 This continuous adaptation signifies
an adaptive governance approach, where the system is constantly
fine-tuned. This demonstrates that successful implementation of
such a large-scale reform requires not only political will and
legislative action but also massive administrative and technological
preparation. The ongoing refinements indicate that GST is a living
system, constantly being optimized, which is a strength in adapting
to real-world challenges but can also create compliance uncertainty
for businesses in the short term.

3. Structure of GST in India

3.1 Types of GST: CGST, SGST, IGST, and UTGST

India's GST framework operates on a dual model, necessitating different

types of GST depending on the nature and location of the transaction:

 Central Goods and Services Tax (CGST): This tax is levied by the
Central Government on intra-state supplies of goods and services,
meaning transactions that occur within the boundaries of a single
state or Union Territory. The revenue generated from CGST is
deposited with the Central Government.2 The rate of CGST is
generally equal to that of SGST.

 State Goods and Services Tax (SGST): Levied by the respective

State Government, SGST applies to intra-state supplies of goods and
services, working in conjunction with CGST. The revenue collected
under SGST goes directly to the state government, empowering
them to bolster their fiscal capabilities and fund developmental
projects.2

 Integrated Goods and Services Tax (IGST): IGST comes into

play for inter-state transactions of goods and services, as well as for
imports into India. Unlike CGST and SGST, which are levied within a
 GST (GOODS & SERVICES TAX)

single state, IGST is charged when goods or services move from one
state to another. The central government collects IGST, which is
then distributed to the destination state, ensuring seamless tax flow
and upholding the destination-based consumption tax principle. 2

 Union Territory Goods and Services Tax (UTGST): UTGST

mirrors SGST but is specifically applicable to Union Territories of
India that do not have their own state legislature, such as Andaman
and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman
and Diu, and Lakshadweep. It operates alongside CGST for intra-
territory supplies, with the revenue aiding in the administration and
development of these territories.2

This multi-component structure, while appearing to add complexity, is a

direct consequence of India's federal structure. Both the Union and State
governments possess constitutionally mandated powers to levy taxes. To
implement a unified indirect tax without infringing upon state fiscal
autonomy, a dual system was adopted. This design preserves the federal
balance but introduces administrative intricacies, particularly for inter-
state transactions (IGST), where the Centre collects revenue and then
distributes it to the destination state. This necessitates a robust IT
backbone (GSTN) for accurate reconciliation and settlement. This
structure, therefore, reflects a pragmatic solution to India's federal
realities, signifying that the "One Nation, One Tax" motto refers more to a
unified framework rather than a single tax rate or a single administrative
authority. The inherent complexity in revenue distribution, especially IGST
settlement, requires continuous coordination between central and state
authorities, as well as robust IT systems to manage the flow of funds.

3.2 Operational Mechanism of Dual GST

The operational mechanism of India's dual GST system is designed to

ensure efficient tax collection and proper revenue distribution:

 Intra-State Transactions: When a supply of goods or services

occurs within the same state or Union Territory, both CGST and
SGST (or UTGST) are levied simultaneously. For instance, if the total
GST rate applicable to a product is 18%, then 9% will be charged as
CGST and 9% as SGST (or UTGST).2

 Inter-State Transactions: For transactions involving the

movement of goods or services between different states, only IGST
is levied. The entire IGST amount is collected by the Central
Government. Subsequently, this collected IGST is apportioned
between the Central Government and the destination State
 GST (GOODS & SERVICES TAX)

Government, ensuring that the tax revenue ultimately accrues to

the state where the consumption takes place. 2

 Input Tax Credit (ITC) Utilization Rules: The seamless flow of

credit is a hallmark of GST, but its utilization is governed by specific
rules to maintain fiscal balance between the Centre and States:

o CGST credit can only be utilized to offset CGST liability.

o SGST/UTGST credit can only be utilized to offset SGST/UTGST

liability.

o IGST credit has a more flexible utilization hierarchy: it must

first be used to pay IGST liability. If any IGST credit remains, it
can then be utilized to pay CGST liability, and subsequently, if
a balance still exists, it can be used to pay SGST/UTGST
liabilities, in that specific order.

o Crucially, CGST credit cannot be used for the payment of

SGST/UTGST, and similarly, SGST/UTGST credit cannot be
used for the payment of CGST.5

These precise rules for ITC utilization are not arbitrary; they are
fundamental to maintaining the fiscal balance between the Central and
State governments within the dual GST framework. By restricting the
cross-utilization of CGST and SGST, the system ensures that each
government's revenue stream from intra-state transactions is protected.
The flexibility of IGST credit, allowing it to offset both central and state
taxes, is critical for the destination-based principle of GST, ensuring the
consuming state ultimately receives its share of the tax revenue from
inter-state trade. Without these precise rules, there could be significant
revenue leakages or imbalances between the Centre and States. This
intricate ITC mechanism underscores the complexity inherent in managing
a dual GST system in a large federal economy. While it prevents cascading
and ensures fair revenue distribution, it places a significant burden on
businesses to accurately track and utilize their credits, requiring
sophisticated accounting systems and increasing compliance vigilance to
avoid discrepancies and penalties. It represents a delicate balancing act
between simplification for taxpayers and fiscal integrity for governments.

4. GST Rates and Classification

4.1 Overview of GST Slabs (0%, 5%, 12%, 18%, 28%, 3%, 0.25%)

The Goods and Services Tax in India is structured around a multi-tiered

rate system, designed to accommodate the diverse economic landscape
and social objectives of the country.
 GST (GOODS & SERVICES TAX)

 Primary Slabs: The core of the GST rate structure comprises four
main tax slabs: 5%, 12%, 18%, and 28%.10 Most goods and services
fall within these categories.

 Exempted/Nil-Rated (0%): To ensure affordability of essential

items, a significant category of goods and services is either exempt
from GST or taxed at a 0% rate. This includes basic essentials such
as unbranded food grains, fresh vegetables, milk, eggs, curd, lassi,
kajal, as well as critical services like education and healthcare. 9

 Special Rates: Beyond the primary slabs, certain specific items

attract special GST rates:

o 3%: This rate is specifically applicable to gold and jewelry. 17

o 0.25%: A very low rate is levied on rough precious and semi-

precious stones.17

 Cess on Luxury and Sin Items: In addition to the 28% slab, a

compensation cess is imposed on certain luxury goods and demerit
goods (often referred to as "sin items"). This includes high-end
motorcycles, consumer durables like air conditioners and
refrigerators, luxury vehicles (e.g., BMWs), cigarettes, tobacco, and
aerated drinks. The cess rates can vary significantly, ranging from
1% to as high as 204%, serving both as a revenue enhancer and a
deterrent for consumption of these items.10

 Services: Similar to goods, most services are categorized within the

four main GST slabs (5%, 12%, 18%, 28%). Essential services like
healthcare and education are exempt from GST. Professional
services, including those provided by legal professionals, chartered
accountants, and healthcare providers, as well as consultancy,
courier, and IT services, are typically taxed at an 18% GST rate. 19

This multi-tiered rate structure, while seemingly complex and appearing to

deviate from the "one nation, one tax" ideal, is a pragmatic approach
adopted to balance various policy goals. The 0% and exempted categories
address social equity concerns by keeping essential goods and services
affordable for the common populace. The higher rates and cesses on
luxury and demerit goods serve as significant revenue generators for the
government and act as tools for discouraging the consumption of certain
items. This approach also facilitated a smoother transition from the highly
differentiated tax regime that existed before GST, allowing for a gradual
adjustment for various industries and consumers. This rate structure
highlights the inherent trade-off between simplifying the tax system and
achieving broader socio-economic objectives, such as equity, discouraging
 GST (GOODS & SERVICES TAX)

harmful consumption, and ensuring revenue stability. While it maintains a

degree of complexity for businesses in classifying products and services, it
is a necessary compromise in a diverse economy like India's, reflecting the
government's attempt to use taxation as a tool for both fiscal and social
policy.

4.2 HSN and SAC Codes for Goods and Services

To ensure uniformity and clarity in the application of GST rates across the
country, a standardized classification system is employed for both goods
and services.

 HSN (Harmonized System of Nomenclature) Code: This

internationally recognized system is used for the classification of
goods under GST. It provides a multi-digit code for various products,
enabling consistent identification and taxation regardless of where
they are traded within India.17

 SAC (Services Accounting Code) Code: Developed by the

Service Tax Department of India, the SAC code system is specifically
used for the classification of services. Similar to HSN, it provides
unique codes for different types of services, ensuring uniform
application of GST rates.17

 Compliance Requirement: Businesses are mandated to mention

the correct HSN/SAC codes on their invoices. This requirement is
crucial for accurate tax calculation, proper reporting in GST returns,
and facilitating the seamless flow of Input Tax Credit. It also aids tax
authorities in verifying compliance.7

The HSN/SAC system is crucial for standardizing the application of GST

rates across the country, thereby reducing ambiguity and facilitating inter-
state trade by ensuring consistent taxation for the same product or
service. This standardization is a key element of the "one nation, one tax"
framework. However, the immense diversity of goods and services means
that accurately classifying items can be a complex task. Disagreements
on the applicable GST rate for specific goods or services are a common
cause of contention, leading to potential litigation and increasing the
compliance burden, especially for businesses dealing with a wide array of
products or services.22 While HSN/SAC codes are essential for the
systematic functioning of GST, their implementation highlights a practical
challenge: the inherent difficulty of categorizing every possible good and
service without ambiguity. Businesses need to invest in understanding
these codes and ensuring accurate application to avoid penalties and
disputes, underscoring that even standardized systems require diligent
interpretation and compliance.
 GST (GOODS & SERVICES TAX)

4.3 Recent Rate Rationalization and Exemptions

The GST Council, as the apex decision-making body, periodically reviews

and revises GST rates and exemptions. These adjustments are made in
response to evolving economic conditions, feedback from industries, and
broader policy objectives.

 Examples of Rate Changes and Exemptions:

o Green Energy Initiatives: The GST Council approved a

significant reduction in GST rates on all electric vehicles, from
12% to 5%, and provided an exemption from GST for electric
buses with an occupancy capacity of more than 12 people.
This aims to promote sustainable transportation. 14

o Real Estate Sector: Under a special scheme, the effective

GST rate for under-construction properties was reduced from
12% to 5% for non-affordable housing and from 8% to 1% for
affordable housing schemes, providing a boost to the sector. 14

o COVID-19 Relief: During the pandemic, the Council

rationalized duties on specified COVID-related goods,
demonstrating responsiveness to public health crises. 14

o Streamlining 28% Slab: A significant rationalization effort

involved reducing the number of items under the highest 28%
GST slab from 227 to just 35, simplifying the tax structure and
reducing the burden on many consumer goods. 14

o Specific Exemptions: Recent recommendations include

waiving GST on Extra Neutral Alcohol (ENA) used for
manufacturing alcoholic liquor for human consumption, fully
exempting GST on gene therapy, and exempting certain
services provided by Indian Railways to the common man,
such as platform tickets and cloakroom services. Corporate
guarantees are also exempt if full Input Tax Credit is
available.18

o Imports: IGST on imports of aircraft tool kits and certain

renewable energy devices has been reduced to 5%.17

These continuous adjustments reflect the GST Council's role as an

adaptive policymaking body. The changes are driven by a need to
stimulate specific sectors (e.g., green energy, housing), provide economic
relief (e.g., during COVID-19), address industry-specific concerns, and
simplify the tax structure by reducing the number of items in the highest
slab. This dynamic approach showcases responsiveness to economic
 GST (GOODS & SERVICES TAX)

realities and stakeholder demands. While beneficial for targeted sectors

and consumers, frequent rate changes can concurrently create
uncertainty and increase the compliance burden for businesses, as they
must constantly update their systems and pricing. This highlights the
ongoing tension between the need for a stable, predictable tax
environment and the government's desire for flexibility to achieve specific
economic and social objectives. It also underscores the critical importance
of the GST Council in fine-tuning the tax system post-implementation.

Table 1: Key GST Slabs and Examples of Goods/Services

This table provides a clear and concise overview of the different tax rates
and concrete examples of items falling under each slab, aiding in the
comprehension of the multi-tiered GST rate structure.

GST Applicability/
Examples of Goods/Services
Rate Category

Unbranded food grains, Fresh

Essential Goods & vegetables, Milk, Eggs, Curd, Lassi,
0%
Services Kajal, Education services, Health
services 17

Rough Precious & Rough precious and semi-precious

0.25%
Semi-Precious Stones stones 17

3% Gold & Jewelry Gold, Jewelry 17

Domestic LPG, Roasted Coffee Beans,

PDS Kerosene, Skimmed Milk Powder,
Household
Cashew Nuts, Footwear (< ₹500),
5% Necessities, Basic
Apparels (< ₹1000), Spices, Life-
Services
saving drugs, Transport services,
Food/drinks at non-AC restaurants 17

Butter, Ghee, Computers (some

Processed Food, types), Processed food, Almonds,
12% Certain Goods & Mobiles, Fruit Juice, Packed Coconut
Services Water, Umbrellas, Business hotels,
Poultry keeping machinery parts 17

18% Standard Goods & Hair Oil, Capital goods, Toothpaste,

 GST (GOODS & SERVICES TAX)

GST Applicability/
Examples of Goods/Services
Rate Category

Industrial Intermediaries, Soap, Ice-

cream, Pasta, Toiletries, Corn Flakes,
Soups, Printers, Consultancy
Services
services, Professional services,
Courier services, IT services, Loans
and advances 17

Small cars (+1% or 3% cess), High-

end motorcycles (+15% cess),
Consumer durables (AC, fridge),
28%
Beedis, Luxury & sin items like
(+ Luxury & Sin Items
BMWs, Cigarettes (+15% cess),
Cess)
Aerated drinks (+15% cess),
Gambling, Food/drinks at AC 5-star
hotels, Movie tickets over Rs. 100 17

5. Institutional Framework of GST

The effective functioning of GST relies on a robust institutional framework,

involving key bodies responsible for policy, administration, and
technological backbone.

5.1 The GST Council: Composition, Functions, and Decision-

Making

The GST Council stands as the apex decision-making body for GST in
India, embodying the spirit of cooperative federalism.

 Composition: As per Article 279A(2) of the Constitution, the GST

Council is a joint forum comprising members from both the Central
and State Governments. Its composition includes:

o The Union Finance Minister, who serves as the Chairperson.

o The Union Minister of State in charge of Revenue or Finance.

o The Minister in charge of Finance or Taxation, or any other

Minister nominated by each State Government.13

 Functions: Article 279A(4) of the Constitution mandates the GST

Council to make recommendations to the Union and the States on
all crucial matters related to GST. These functions encompass a wide
range of responsibilities, including:
 GST (GOODS & SERVICES TAX)

o Determining which goods and services may be subjected to or

exempted from GST.

o Formulating model GST Laws, principles of levy, and rules

governing the place of supply.

o Setting threshold limits for exemption from GST registration

and compliance.

o Deciding on GST rates, including the establishment of floor

rates with bands.

o Making special provisions for certain states, considering their

unique economic circumstances.

o Addressing any other matter incidental to or connected with

GST.14

 Decision-Making: The GST Council typically strives for a

consensus-based approach during its meetings, fostering
collaborative policymaking. However, in instances where a proposal
is put to a vote, a specific weighted voting mechanism is employed
to ensure equitable representation. The vote of the Central
Government holds a weightage of one-third of the total votes cast in
that meeting, while the votes of all State Governments taken
together have a weightage of two-thirds. A proposal is carried only if
at least three-fourths of the weighted votes are in favor. 14

This unique structure is a constitutional innovation designed to foster

cooperative federalism in tax matters, which was historically a point of
contention between the Centre and States. The weighted voting
mechanism ensures that neither the Centre nor the States can unilaterally
impose decisions, thereby necessitating genuine negotiation and
compromise. This is crucial for the successful implementation and
continuous evolution of a unified tax system in a diverse federal country
like India, where states retain significant fiscal autonomy. It allows for
collective ownership of policy decisions, thereby enhancing stability and
reducing the likelihood of states opposing central tax policies. The
Council's adaptive nature, as evidenced by its continuous rate
rationalization and policy refinements, is a direct result of this
collaborative framework.

5.2 Central Board of Indirect Taxes and Customs (CBIC): Role and
Structure

The Central Board of Indirect Taxes and Customs (CBIC), formerly known
as the Central Board of Excise and Customs (CBEC), is a pivotal statutory
 GST (GOODS & SERVICES TAX)

body operating under the Department of Revenue, Ministry of Finance,

Government of India. Its renaming in 2018 after the introduction of GST
reflects a significant shift in its mandate.23

 Statutory Body: Established under the Central Boards of Revenue

Act, 1963, CBIC is the apex administrative authority for indirect
taxes in India. Its historical roots trace back to 1855, making it one
of the oldest government departments in India. 23

 Key Responsibilities: CBIC is entrusted with a broad range of

duties related to indirect taxation:

o Policy Formulation: It plays a crucial role in formulating

policies concerning the levy and collection of various indirect
taxes, including customs duties, central excise duties (for non-
GST items), Central Goods and Services Tax (CGST), and
Integrated Goods and Services Tax (IGST). 24

o Tax Administration: CBIC oversees the comprehensive

administration of these taxes, including their collection,
ensuring efficient revenue mobilization for the government. 5

o Enforcement: A significant part of its mandate involves law

enforcement activities, such as the prevention of smuggling,
combating illicit financial activities, and regulating and
controlling narcotics through its attached and subordinate
offices.23

o Administrative Authority: CBIC serves as the

administrative head for a network of subordinate
organizations, including Central Excise and Central GST
Commissionerates, Custom Houses, and the Central Revenues
Control Laboratory.24

 Organizational Structure: The CBIC is headed by a Chairperson,

who is the senior-most Indian Revenue Service (Customs & Indirect
Taxes) officer. The Chairperson is supported by several members,
each overseeing specific portfolios such such as Customs, Legal,
GST & Tax Policy, Administration & Vigilance, and Investigation. 23

The renaming from "Excise and Customs" to "Indirect Taxes and Customs"
is symbolic of a fundamental shift in its mandate. Previously, CBEC
managed a fragmented system of excise, customs, and service tax. With
GST, its role expanded to oversee a unified indirect tax regime. This
change reflects the government's commitment to consolidating indirect
tax administration under a single, cohesive authority, moving from a
fragmented approach to a more unified and streamlined system. This
 GST (GOODS & SERVICES TAX)

transformation is crucial for ensuring consistent application of tax laws

and efficient revenue collection in the post-GST era.

5.3 Goods and Services Tax Network (GSTN): Role and Functions

The Goods and Services Tax Network (GSTN) is a pivotal non-profit, non-
government company that serves as the technological backbone of India's
GST regime. Its establishment was crucial for the successful
implementation and ongoing administration of GST, given the reform's
digital-first approach.12

 Nature and Vision: GSTN was created to provide a common and

shared IT infrastructure and services to the Central and State
Governments, taxpayers, and other stakeholders for the seamless
implementation of GST. Its vision is to be a trusted National
Information Utility (NIU) that provides a reliable, efficient, and robust
IT backbone for the smooth functioning of the GST regime. 25

 Core Functions and Services: GSTN manages the entire IT

ecosystem crucial for GST operations, acting as the primary
interface between taxpayers and the government. Its key
responsibilities include:

o Registration: Enabling taxpayers to register under GST and

obtain a unique Goods and Services Tax Identification Number
(GSTIN).12

o Return Filing: Providing a robust online platform for

taxpayers to file their various GST returns (e.g., GSTR-1, GSTR-
3B, GSTR-9).12 The system is designed to handle billions of
invoices and returns from millions of taxpayers monthly. 12

o Tax Payment: Facilitating online payment of GST dues

through various modes such as net banking, credit/debit
cards, and NEFT/RTGS, integrating banking networks with tax
payment details.12

o Refund Processing: Managing the processing of GST

refunds, aiming for timely disbursement to eligible
taxpayers.12

o Invoice Matching: Supporting the reconciliation of sales and

purchase invoices uploaded by taxpayers, which is critical for
preventing tax evasion and ensuring accuracy in tax
payments and Input Tax Credit claims.12
 GST (GOODS & SERVICES TAX)

o Data Security: Implementing robust security measures to

safeguard taxpayer data and ensure confidentiality and
integrity.12

o System Integration: Integrating with other government

systems (like e-way bill system, e-invoicing portals) and
databases to streamline processes and facilitate information
exchange.12

o Taxpayer Services: Offering various support services,

including helpdesk assistance, taxpayer education, and
addressing compliance-related queries.12

o IGST Settlement: Responsible for calculating and settling

Integrated GST (IGST) payments, acting like a clearinghouse
for inter-state transactions.25

 GST Suvidha Providers (GSPs): GSTN has also fostered an

ecosystem of third-party service providers, known as GST Suvidha
Providers (GSPs). These GSPs develop innovative applications and
interfaces (desktop, mobile, etc.) that connect with the GST system
via secure APIs, offering taxpayers additional convenience and
specialized solutions for GST compliance, such as converting data
into GST-compliant formats and automatic reconciliation of purchase
records.29

The digital foundation provided by GSTN is critical for the system's

efficiency and transparency, enabling seamless compliance and reducing
errors. The successful doubling of registered taxpayers to 14-15 million
and the processing of billions of invoices and returns underscore its vital
role in the formalization of the Indian economy and the smooth
administration of this complex tax reform.25

5.4 Directorate General of GST Intelligence (DGGI): Role and

Functions

The Directorate General of GST Intelligence (DGGI) is a specialized law

enforcement agency operating under the Ministry of Finance, Government
of India. Its primary mandate is to combat tax evasion within the Goods
and Services Tax regime.32

 Formation and Evolution: Established in 1979 as the Directorate

General of Anti-Evasion, it was later renamed the Directorate
General of Central Excise Intelligence. Following the introduction of
GST, the agency was renamed Directorate General of GST
Intelligence (DGGI).33
 GST (GOODS & SERVICES TAX)

 Core Functions: The DGGI's core function involves meticulous

intelligence gathering, collation, and dissemination related to the
evasion of Goods and Service Tax. Through vigilant monitoring,
advanced data analysis, and surveillance techniques, the DGGI aims
to detect and prevent tax evasion effectively.32 Since 2004, the
agency has also been responsible for detecting cases of service tax
evasion.33

 Operational Structure: The organization is staffed by officers of

the Central Board of Indirect Taxes and Customs (CBIC) and operates
with zonal units in major cities like Chennai, Delhi, Kolkata, and
Mumbai.33 DGGI is also part of NATGRID, a national intelligence
grid.33

6. Comparison with Value Added Tax (VAT)

The introduction of GST marked a significant departure from the previous

Value Added Tax (VAT) regime, addressing many of its inherent limitations
and aiming for a more streamlined and efficient indirect tax system.

6.1 Key Differences and Advantages of GST over VAT

While both VAT and GST are consumption-based indirect taxes, their
implementation, framework, and impact on businesses and consumers
differ considerably.

 Applicability:

o VAT: Was primarily levied on the sale of goods at the state

level. Services were subject to a separate Central Service Tax. 3

o GST: Is a comprehensive tax applied on both goods and

services, unifying the tax base under a single levy. 3

 Cascading Effect:

o VAT: Suffered from a "cascading effect" or "tax on tax."

Businesses often paid tax on inputs without full credit for
taxes paid at previous stages, especially across state borders
or between goods and services. This increased the final cost
to consumers.1

o GST: Effectively eliminates the cascading effect through a

seamless and comprehensive Input Tax Credit (ITC)
mechanism. Tax is levied only on the value added at each
stage, leading to lower costs for consumers and more
transparent pricing.1 This is a major improvement, translating
 GST (GOODS & SERVICES TAX)

to reduced manufacturing costs and enhanced

competitiveness for Indian products.

 Uniformity of Rates:

o VAT: Tax rates varied significantly from state to state, leading

to market fragmentation and complexities for inter-state
trade.3

o GST: Introduced uniform tax rates across India for most goods
and services, simplifying pricing and compliance for
businesses operating nationwide.3

 Input Tax Credit (ITC):

o VAT: ITC was limited, often restricted by state boundaries, and

generally not available for Central Sales Tax (CST) paid on
inter-state purchases. This hindered seamless credit flow
across the supply chain.3

o GST: Provides a comprehensive ITC framework, allowing

businesses to claim credits for taxes paid across the entire
supply chain, regardless of whether the transaction is intra-
state or inter-state. This significantly improves cash flow for
businesses and reduces their overall tax burden. 3

 Compliance:

o VAT: Required multiple compliances and registrations across

different states, increasing the administrative burden. 3

o GST: Streamlined compliance procedures with a unified online

portal for registration, return filing, and payments, making tax
administration easier and more efficient.1

 Revenue Sharing:

o VAT: Revenue collected was confined entirely to the state

where the sale occurred.3

o GST: Under the dual model, the collected tax is shared

between the Central and State governments, ensuring a more
equitable distribution of revenue based on the destination
principle.3

 Exemptions: While GST is comprehensive, certain fundamental

goods like petrol, diesel, and alcohol for human consumption remain
outside its purview and are still subject to VAT, reflecting a
 GST (GOODS & SERVICES TAX)

pragmatic approach to revenue generation and state fiscal

autonomy.3

In essence, GST transformed the Indian tax landscape by overcoming

VAT's limitations, offering a more comprehensive, unified, and transparent
tax structure. It has aimed to simplify tax collection, promote economic
efficiency, and reduce the overall tax burden by eliminating the cascading
effect.

7. Business Implications of GST

The implementation of GST has had profound implications for businesses

across India, bringing about both significant benefits and notable
challenges.

7.1 Impact on Compliance and Operations

 Simplified Tax System: One of the primary aims of GST was to

simplify the complex indirect tax regime. By subsuming numerous
taxes like sales tax, service tax, excise duty, and octroi into a single
framework, GST has indeed simplified the overall taxation process
for businesses. This allows businesses to focus more on their core
competencies while maintaining compliance. 1

 Digitalization Burden: The shift to an online taxation system

under GST, managed through the GSTN portal, initially presented a
significant challenge for many businesses, particularly Small and
Medium-sized Enterprises (SMEs). It necessitated additional software
purchases, resource hiring, training for staff, and other operational
changes to adapt to the new digital structure. 7 While most
businesses have gradually adapted, the initial implementation
setbacks were considerable.7

 Increased Operational Expenses: In the initial days, the

transition to GST led to a rise in operational costs for many
businesses. This included expenses related to upgrading IT systems,
purchasing new accounting software, hiring tax consultants or
specialists (e.g., Chartered Accountants) to navigate the
complexities, and training personnel on new compliance
requirements, such as generating e-Invoices with HSN codes and
GSTINs.7

 Compliance Requirements: Adhering to GST regulations involves

several mandatory practices:

o GST Registration: Businesses engaged in manufacturing or

trading goods with an annual turnover exceeding ₹40 lakhs
 GST (GOODS & SERVICES TAX)

(or ₹20 lakhs for services in most states) are required to

register under GST and obtain a unique GST Identification
Number (GSTIN).21 Registration is also mandatory for inter-
state supplies and e-commerce operators, regardless of
turnover.36

o Tax Invoicing: Invoices must include mandatory information

such as the supplier's and purchaser's GSTIN, description of
items, HSN/SAC codes, quantity, per unit price, and applicable
CGST/SGST rates.21

o GST Returns Filing: Businesses must file multiple returns,

primarily GSTR-1 (outward supplies) and GSTR-3B (summary
return), on a monthly or quarterly basis (under the QRMP
scheme). An annual return (GSTR-9) is mandatory for
businesses with turnover exceeding ₹2 crore. Timely filing is
crucial to avoid late fees and interest charges. 21

o Payment of Collected Tax: Businesses must remit the

collected tax to the government.21

o Record Keeping: Maintaining accurate records of all

invoices, credit notes, purchase and sales registers, and other
documentation is essential. These records must be preserved
for at least six years.21

o E-way Bills: For transactions exceeding ₹50,000, an e-way

bill must be generated for the transportation of goods. 21

o Reverse Charge Mechanism (RCM): Compliance with RCM

provisions requires the recipient of specified goods/services to
pay GST, with proper ITC claims for such payments. 36

o Audit Requirements: Businesses with an annual turnover

exceeding ₹2 crore are subject to a GST audit conducted by a
qualified Chartered Accountant.36

 GST Compliance Rating: The GST Act, 2017, includes a provision

for a GST compliance rating (Section 149), where the Central
Government can assess and rate registered taxpayers based on
their adherence to GST rules. Companies with high ratings benefit
from reduced scrutiny by tax authorities, better concessions for
inadvertent issues, improved business image, and enhanced
negotiation power with financial institutions and investors. 21

7.2 Benefits for Businesses

 GST (GOODS & SERVICES TAX)

Despite the initial challenges, GST has delivered several significant

benefits to businesses:

 Seamless Input Tax Credit (ITC): The comprehensive ITC system

is a major advantage, allowing businesses to offset GST paid on
inputs against their output tax liability. This facility, largely
unavailable in the pre-GST era, reduces the tax burden on
businesses, enhances their cash flow, and contributes to healthier
balance sheets, particularly benefiting small enterprises. 1

 Unified National Market: By eliminating multiple state-level taxes

and check-posts, GST has facilitated the free movement of goods
and services across state borders. This has led to improved logistics,
reduced transit times, optimized warehousing strategies, and
fostered a more competitive landscape for all businesses operating
in India.1

 Reduced Tax Evasion: The digital nature of GST, coupled with

mechanisms like invoice matching and the e-way bill system, has
significantly reduced the scope for tax evasion, promoting greater
transparency and accountability in the tax system. This has
benefited the government in revenue collection and contributed to a
clearer tax environment for businesses.7

 Enhanced Competitiveness: The elimination of the cascading

effect of taxes has led to lower production costs for businesses,
making Indian products and services more competitive both
domestically and in international markets.1

7.3 Challenges Faced by Businesses

The transition and ongoing operation under GST have also presented
businesses with notable challenges:

 Complex Tax Structure and Rates: Despite the aim of

simplification, the existence of multiple GST slabs (0%, 5%, 12%,
18%, 28%, plus special rates and cesses) can lead to confusion in
classifying goods and services. This complexity often requires
businesses to seek external expertise, increasing operational
expenses and the risk of non-compliance due to misclassification. 7

 Technical Glitches on GST Portal: The reliance on the online GST

portal for filing returns and other compliances has been a source of
frustration. Businesses have frequently encountered technical
glitches, making it difficult to file returns on time and sometimes
leading to incorrect filings, which can result in penalties and fines.
 GST (GOODS & SERVICES TAX)

While GSTN has undertaken measures to address these issues,

problems have persisted.20

 High Compliance Costs: For many SMEs, the costs associated with
GST compliance—including registration, regular return filing,
maintaining detailed digital records, and undergoing audits—have
increased significantly. This can make it challenging for smaller
businesses to operate and compete with larger entities that have
greater resources.7

 Input Tax Credit (ITC) Refund Delays: While ITC is a major

benefit, businesses have faced issues with delays in receiving ITC
refunds. These delays can lead to a shortage of working capital,
creating cash flow problems, particularly for businesses with high
input costs or those involved in exports. 20

 E-way Bill System Hurdles: The e-way bill system, essential for
goods transportation, has also encountered technical glitches and
delays in bill generation. Such issues can lead to higher compliance
costs and even the detention of goods, disrupting supply chains. 20

 Litigation: Despite efforts to simplify, disputes over applicable GST

rates, interpretation of notifications, and refund eligibility remain
common, leading to significant litigation for businesses. 22

8. International Context of GST

The Goods and Services Tax (GST) or Value Added Tax (VAT) is a widely
adopted indirect tax system globally, with India's model presenting unique
characteristics shaped by its federal structure and economic diversity.

8.1 Global Adoption of VAT/GST

The concept of a value-added tax was first implemented by France in

1954 to reduce tax evasion. Since then, over 160 countries worldwide
have adopted either a GST or VAT system on both goods and services. 9
This widespread adoption underscores the effectiveness of a consumption-
based tax in modern economies.

8.2 Comparison of Indian GST Model with Global Systems

While India's GST shares fundamental principles with global VAT/GST

systems, its specific design reflects its unique socio-economic and political
context.

 Dual Model vs. Single National VAT: Most countries, such as the
UK (20% VAT), Singapore (7% GST), China (13% VAT), Germany
(19% VAT), and New Zealand (15% GST), operate with a single
national VAT or GST system.9 In contrast, India, similar to Canada
 GST (GOODS & SERVICES TAX)

and Brazil, has adopted a dual GST model (CGST + SGST/UTGST for
intra-state, IGST for inter-state).9 This dual structure is a direct
consequence of India's federal system, where both the Central and
State governments have constitutional powers to levy and collect
taxes. This approach preserves the fiscal autonomy of states while
creating a unified indirect tax framework.

 Tax Rates and Slabs: Many countries typically have a single

standard GST/VAT rate, often complemented by reduced rates or
exemptions for essential goods. For example, the UK has a standard
rate of 20% with reduced rates of 5% and exemptions, while
Singapore has a standard rate of 7% with zero-rated and exempt
supplies.9 India, however, employs a multi-tiered rate structure with
primary slabs of 0%, 5%, 12%, 18%, and 28%, along with special
rates like 3% for gold and 0.25% for rough precious stones. 9 This
multi-tiered approach, while appearing complex, is a pragmatic
compromise to manage the transition from a highly differentiated
pre-GST tax regime and to address socio-economic objectives, such
as keeping essential goods affordable and taxing luxury/demerit
goods at higher rates.

 Thresholds for Applicability: India's GST applicability threshold

(₹40 lakh for goods and ₹20 lakh for services in most states) is
generally lower compared to many other countries. This means a
larger number of small businesses fall under the GST net, potentially
increasing their compliance burden compared to their counterparts
in countries with higher thresholds.9

 USA Contrast: The United States stands as a notable exception, as

it does not have a federal Value Added Tax levied on goods and
services. Instead, it operates a sales tax system governed at the
state level, with rates varying significantly across states. 9

India's GST model, therefore, is a unique blend of global best practices

adapted to its specific federal and economic realities. While it shares the
fundamental objective of taxing consumption and eliminating cascading,
its dual structure and multi-slab rates are distinctive features that reflect
the compromises necessary to achieve a unified indirect tax system in a
large and diverse federal economy.

9. Critical Analysis and Evaluation of GST

Since its implementation, GST has demonstrated both significant

achievements and persistent challenges, reflecting its ongoing evolution
in India's dynamic economic landscape.

9.1 Achievements and Positive Impacts

 GST (GOODS & SERVICES TAX)

 Economic Growth: Empirical evidence suggests a positive

correlation between GST revenue growth and India's economic
growth (proxied by GDP). Studies indicate that GST revenue growth
has a significant and positive impact on economic growth in India in
both the short and long run.16 Rising GST collections, coupled with
increased e-way bill generation and improved consumer sentiment,
are indicators of strengthening economic activity. 39 The Economic
Survey 2025 highlights steady GDP growth (estimated at 6.4% in
FY25) and robust performance in manufacturing, logistics, and
digital services, which contribute significantly to GST collections. 40

 Increased Tax Compliance and Formalization: GST has been

instrumental in formalizing the Indian economy. The number of GST-
registered taxpayers has more than doubled, growing from 6.78
million in 2017 to 14 million by June 2023 30 and further to 15 million
by FY25, with over 2.5 million new registrations recorded in FY25. 31
This expansion in the taxpayer base reflects increased voluntary
registrations, particularly by small enterprises seeking to avail Input
Tax Credits (ITC).43 The growth in taxable revenue base further
signifies the formalization catalysed by GST. 44

 Robust Revenue Collection: GST collections have shown

consistent growth, reinforcing confidence in sustained economic
recovery. Monthly gross GST collections have regularly exceeded
₹1.6 lakh crore, maintaining momentum above ₹1.9 lakh crore since
January 2025.40 April 2025 recorded the highest-ever monthly
collection at ₹2.36 lakh crore, driven by year-end filings and
improved compliance.40 The total GST collection for FY 2023-24
stood at ₹20.18 lakh crore.44 The May 2025 collection was ₹2.01
lakh crore, marking a 16.4% year-on-year growth. 40

 Improved Supply Chain Efficiency: By eliminating inter-state

check-posts and disparate state taxes, GST has significantly eased
the transportation and movement of goods within states. This has
led to improved logistics, reduced warehousing costs, and a more
integrated national market, fostering fair competition. 1

 Enhanced Transparency: The digital-first approach of GST, with all

processes managed online through the GSTN portal, has promoted
greater transparency in tax transactions. Taxpayers can access their
records and transaction history online, fostering accountability and
trust in the system.12

9.2 Challenges and Areas for Improvement

 GST (GOODS & SERVICES TAX)

Despite its successes, GST continues to face several challenges that

require ongoing attention and reform:

 Complexity of Rates: While aiming for simplification, the multi-

tiered GST rate structure (0%, 5%, 12%, 18%, 28%, plus special
rates and cesses) still poses challenges for businesses. Classifying
goods and services accurately under the correct slab can be
confusing, leading to increased compliance costs and potential
litigation due to differing interpretations.7

 Technical Glitches: The reliance on the GST portal for all

compliance activities has been marred by persistent technical
glitches. These issues have made it difficult for taxpayers to file
returns on time, leading to delays, incorrect filings, and the
imposition of penalties and fines.20

 High Compliance Costs: Especially for Small and Medium-sized

Enterprises (SMEs), the initial and ongoing costs associated with
GST compliance remain substantial. This includes expenses for
software, training, professional assistance for registration, return
filing, record maintenance, and audits, making it challenging for
smaller businesses to adapt and compete.7

 Input Tax Credit (ITC) Refund Delays: Despite the seamless

credit mechanism, businesses have frequently reported delays in
receiving ITC refunds. These delays tie up working capital, creating
cash flow issues and hindering business operations, particularly for
exporters.20

 E-way Bill System Issues: The e-way bill system, crucial for goods
transportation, has also encountered technical hurdles, including
glitches and delays in generating bills. Such problems can result in
increased compliance costs and the detention of goods, disrupting
supply chains.20

 Litigation: Disputes related to tax rates, the applicability of

notifications, and refund eligibility remain common under the GST
regime, indicating areas where clarity and simplified provisions are
still needed.22

 Exclusion of Key Sectors: Certain significant sectors, notably

petroleum products, alcohol for human consumption, and specific
aspects of real estate, remain outside the GST framework. This
limits the comprehensiveness of the "one nation, one tax" vision
and prevents the full realization of ITC benefits across these
sectors.3
 GST (GOODS & SERVICES TAX)

10. Relevant Data and Statistics

The performance of GST in India can be substantiated by various official

data points and trends:

10.1 GST Collection Trends

 Recent Monthly Collections:

o May 2025: India's GST revenue stood at ₹2.01 lakh crore,

marking a 16.4% year-on-year growth and continuing the ₹2
lakh crore+ momentum for the second consecutive month. 40

o April 2025: Recorded the highest-ever monthly GST

collection at ₹2.36 lakh crore, indicating a 12.6% year-on-year
growth.40

o March 2025: Collections were over ₹1.96 lakh crore.40

o February 2025: Collections were over ₹1.83 lakh crore.40

o January 2025: Collections were ₹1.95 lakh crore.40

o Monthly GST revenues have consistently remained above ₹1.7

lakh crore for the last nine months, reinforcing confidence in
sustained economic recovery.40

 Breakup of Collections (May 2025):

o CGST: ₹35,434 Crore

o SGST: ₹43,902 Crore

o IGST: ₹1,08,836 Crore (including ₹50,070 Crore from imports)

o Cess: ₹12,879 Crore.40

 Financial Year Collections:

o FY 2023-24: Total GST collection was ₹20.18 lakh crore. 44

o FY 2022-23: Total GST collection was ₹18.07 lakh crore. 44

o FY 2021-22: Total GST collection was ₹14.83 lakh crore. 44

o FY 2020-21: Total GST collection was ₹11.36 lakh crore

(impacted by COVID-19).40

o FY 2019-20: Total GST collection was ₹12.22 lakh crore. 40

o FY 2018-19: Total GST collection was ₹11.77 lakh crore. 40

o FY 2017-18 (Jul-Mar): Total GST collection was ₹7.19 lakh

crore.40
 GST (GOODS & SERVICES TAX)

10.2 Taxpayer Base Growth

 The number of entities registered to pay GST has significantly

increased since its inception. From 67.83 lakh (6.78 million)
taxpayers in 2017, the base doubled to 14 million by June 2023. 30

 By FY25, the total number of registered taxpayers reached 15

million, with over 2.5 million new GST registrations recorded in that
fiscal year alone.31

 States like Uttar Pradesh, Maharashtra, Gujarat, Karnataka, and

Tamil Nadu each account for over a million registered taxpayers,
with Uttar Pradesh leading in total registrations and Maharashtra in
absolute collections.31

10.3 Economic Impact Data

 Research indicates a significant and positive impact of GST revenue

growth on India's economic growth.16

 Reports from the Reserve Bank of India (RBI) highlight rising GST
collections, higher e-way bill generation, and improved consumer
sentiment as key indicators of strengthening economic activity in
India.39 The RBI also noted positive GST readings in April and May
2025, though a major part of it was from imports. 46

 The Economic Survey 2025 projects India's real GDP growth at 6.4%
for FY25 and identifies high formal-sector activity, strong consumer
demand, and robust performance in manufacturing, logistics, and
digital services as drivers of consistent GST collections. 40

11. Conclusion

The Goods and Services Tax (GST) represents a transformative fiscal

reform in India, fundamentally reshaping the nation's indirect tax
landscape. Its journey, spanning over a decade and a half of intricate
deliberations and constitutional amendments, underscores the profound
complexities inherent in unifying taxation within a large, diverse federal
system. The adoption of a dual GST model, with distinct Central and State
components, stands as a pragmatic compromise, preserving the fiscal
autonomy of states while fostering a unified national market. This delicate
balance, while introducing administrative intricacies, has been managed
through a unique institutional framework, notably the GST Council, which
embodies cooperative federalism in action, and the Goods and Services
Tax Network (GSTN), serving as the indispensable digital backbone.

GST has demonstrably achieved several of its core objectives. It has

largely succeeded in eliminating the cascading effect of taxes through a
 GST (GOODS & SERVICES TAX)

seamless Input Tax Credit mechanism, leading to more transparent pricing

and enhanced competitiveness for businesses. The unification of
numerous indirect taxes into a single levy has simplified compliance,
albeit with initial transitional challenges. Furthermore, the digital
infrastructure has significantly boosted tax compliance and formalized the
economy, evidenced by the substantial growth in the taxpayer base and
consistent, robust revenue collections. Recent data, showing monthly
collections frequently exceeding ₹2 lakh crore and a doubling of registered
taxpayers, affirms GST's positive contribution to economic growth and
fiscal health.

However, the journey has not been without its challenges. The multi-tiered
rate structure, while serving various socio-economic objectives, continues
to pose classification complexities for businesses. Technical glitches on
the GST portal, coupled with high initial and ongoing compliance costs,
particularly for Small and Medium-sized Enterprises, have created
operational hurdles. Issues such as delays in ITC refunds and complexities
with the e-way bill system also persist, leading to cash flow concerns and
increased litigation. Moreover, the exclusion of key sectors like petroleum
products and alcohol from the GST ambit limits its full
comprehensiveness.

In conclusion, GST in India is a living system, continuously adapting and

evolving. Its success hinges on ongoing refinements, technological
enhancements, and a sustained collaborative approach between the
Centre and States. While it has laid a strong foundation for a more
integrated and efficient economy, addressing the remaining complexities
and operational challenges will be crucial for realizing its full potential and
ensuring its long-term stability and effectiveness in India's dynamic
economic environment.

BIBLIOGRAPHY

Official Government Sources:

 Central Board of Indirect Taxes and Customs (CBIC):

o Main Website: https://www.cbic.gov.in/

 GST Council Secretariat:

o Main Website: https://gstcouncil.gov.in/

 Goods and Services Tax Network (GSTN):

o GST Common Portal (for taxpayers): https://www.gst.gov.in/

 GST (GOODS & SERVICES TAX)

o GSTN Corporate Website (About Us, etc.):

https://www.gstn.org.in/

 Ministry of Finance, Government of India:

o Main Website: https://finmin.nic.in/

o Economic Survey of India (check for the latest year's

document, usually available on the budget website):
https://www.indiabudget.gov.in/economicsurvey/

 Press Information Bureau (PIB):

o Main Website: https://pib.gov.in/ (You can use their search

function for "GST" to find relevant press releases.)

 ClearTax: https://cleartax.in/
 TaxGuru: https://taxguru.in/