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 e ect of taxes, and simplifying the overall
taxation structure. This reform has played a pivotal role in integrating the Indian
economy, enhancing supply chain e iciencies, 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 e ect 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 operations nationwide without the burden of
disparate tax regulations. The result is an enhanced e iciency in supply chains
and a reduction in the overall cost of goods and services for consumers,
 GST (GOODS & SERVICES TAX)

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 e iciency and global competitiveness by unlocking the
full potential of its vast domestic market.

 Eliminating the Cascading E ect 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 e ect 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 a ordable 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 e icient allocation of resources within
the economy. Its e ective 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
 GST (GOODS & SERVICES TAX)

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 o set the tax paid on their purchases against the tax
collected on their sales. This mechanism e ectively eliminates the "tax on tax"
e ect, ensuring that the tax burden is shared across the supply chain based on
value addition, ultimately reducing the e ective tax rate on the final product and
making it more a ordable 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 e iciency 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
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 Constitutional Amendment E orts (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 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
 GST (GOODS & SERVICES TAX)

 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 o icially 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 e orts
made to build the necessary technological infrastructure and train tax o icials
and businesses indicate a recognition that legal changes alone were insu icient;
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 di erent 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
 GST (GOODS & SERVICES TAX)

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

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 e icient
tax collection and proper revenue distribution:
 GST (GOODS & SERVICES TAX)

 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 di erent 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 o set CGST liability.

o SGST/UTGST credit can only be utilized to o set 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 o set 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.
 GST (GOODS & SERVICES TAX)

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 a ordability 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 a ordable 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 di erentiated tax
 GST (GOODS & SERVICES TAX)

regime that existed before GST, allowing for a gradual adjustment for various industries
and consumers. This rate structure highlights the inherent trade-o 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, 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 di erent
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 di iculty 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

 GST (GOODS & SERVICES TAX)

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 e ective GST rate for
under-construction properties was reduced from 12% to 5% for non-
a ordable housing and from 8% to 1% for a ordable 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 e ort 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,
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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 di erent tax rates and concrete
examples of items falling under each slab, aiding in the comprehension of the multi-
tiered GST rate structure.

GST
Applicability/Category Examples of Goods/Services
Rate

Unbranded food grains, Fresh vegetables,

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

Rough Precious & Semi- Rough precious and semi-precious stones

0.25%
Precious Stones 17

3% Gold & Jewelry Gold, Jewelry 17

Domestic LPG, Roasted Co ee Beans, PDS

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

Butter, Ghee, Computers (some types),

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

Hair Oil, Capital goods, Toothpaste,

Standard Goods & Industrial Intermediaries, Soap, Ice-cream,
18%
Services Pasta, Toiletries, Corn Flakes, Soups,
Printers, Consultancy services,
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GST
Applicability/Category Examples of Goods/Services
Rate

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), Beedis, Luxury & sin
28% (+
Luxury & Sin Items items like 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 e ective 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.
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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 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:
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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 e icient 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 o ices.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) o icer. 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 e icient 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
 GST (GOODS & SERVICES TAX)

be a trusted National Information Utility (NIU) that provides a reliable, e icient,

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: O ering 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, o ering taxpayers additional
convenience and specialized solutions for GST compliance, such as converting
 GST (GOODS & SERVICES TAX)

data into GST-compliant formats and automatic reconciliation of purchase

records.29

The digital foundation provided by GSTN is critical for the system's e iciency 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
e ectively.32 Since 2004, the agency has also been responsible for detecting
cases of service tax evasion.33

 Operational Structure: The organization is sta ed by o icers 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 e icient indirect tax system.

6.1 Key Di erences 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 di er 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
 GST (GOODS & SERVICES TAX)

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

the tax base under a single levy.3

 Cascading E ect:

o VAT: Su ered from a "cascading e ect" 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: E ectively eliminates the cascading e ect 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 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 di erent

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 e icient.1

 Revenue Sharing:
 GST (GOODS & SERVICES TAX)

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,
o ering a more comprehensive, unified, and transparent tax structure. It has aimed to
simplify tax collection, promote economic e iciency, and reduce the overall tax burden
by eliminating the cascading e ect.

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 sta ,
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
 GST (GOODS & SERVICES TAX)

 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 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 o set 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 e ect 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 di icult 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
 GST (GOODS & SERVICES TAX)

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 e orts 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
e ectiveness 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.
 GST (GOODS & SERVICES TAX)

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 di erentiated pre-GST tax regime and to address socio-economic
objectives, such as keeping essential goods a ordable 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
 GST (GOODS & SERVICES TAX)

 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 E iciency: 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 di ering 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
di icult for taxpayers to file returns on time, leading to delays, incorrect filings,
and the imposition of penalties and fines.20
 GST (GOODS & SERVICES TAX)

 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

10. Relevant Data and Statistics

The performance of GST in India can be substantiated by various o icial 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

 GST (GOODS & SERVICES TAX)

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

 Reports from the Reserve Bank of India (RBI) highlight rising GST collections,
higher e-way bill generation, and improved consumer sentiment as key
 GST (GOODS & SERVICES TAX)

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 e ect 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, a irms 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.
 GST (GOODS & SERVICES TAX)

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 e icient economy, addressing the remaining
complexities and operational challenges will be crucial for realizing its full potential and
ensuring its long-term stability and e ectiveness 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 e ect of taxes, and simplifying the overall
taxation structure. This reform has played a pivotal role in integrating the Indian
economy, enhancing supply chain e iciencies, 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 e ect 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
 GST (GOODS & SERVICES TAX)

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 e iciency 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 e iciency and global competitiveness by unlocking the
full potential of its vast domestic market.

 Eliminating the Cascading E ect 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 e ect 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 a ordable 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 e icient allocation of resources within
the economy. Its e ective 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 o set the tax paid on their purchases against the tax
collected on their sales. This mechanism e ectively eliminates the "tax on tax"
e ect, ensuring that the tax burden is shared across the supply chain based on
value addition, ultimately reducing the e ective tax rate on the final product and
making it more a ordable 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 e iciency 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
 GST (GOODS & SERVICES TAX)

 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 E orts (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 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,
 GST (GOODS & SERVICES TAX)

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 o icially 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 e orts
made to build the necessary technological infrastructure and train tax o icials
and businesses indicate a recognition that legal changes alone were insu icient;
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

 GST (GOODS & SERVICES TAX)

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

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

 GST (GOODS & SERVICES TAX)

The operational mechanism of India's dual GST system is designed to ensure e icient
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 di erent 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 o set CGST liability.

o SGST/UTGST credit can only be utilized to o set 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 o set 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
 GST (GOODS & SERVICES TAX)

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 a ordability 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 a ordable for the common populace. The higher
rates and cesses on luxury and demerit goods serve as significant revenue generators
 GST (GOODS & SERVICES TAX)

for the government and act as tools for discouraging the consumption of certain items.
This approach also facilitated a smoother transition from the highly di erentiated tax
regime that existed before GST, allowing for a gradual adjustment for various industries
and consumers. This rate structure highlights the inherent trade-o 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, 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 di erent
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 di iculty 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 e ective GST rate for
under-construction properties was reduced from 12% to 5% for non-
a ordable housing and from 8% to 1% for a ordable 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 e ort 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
 GST (GOODS & SERVICES TAX)

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 di erent tax rates and concrete
examples of items falling under each slab, aiding in the comprehension of the multi-
tiered GST rate structure.

GST
Applicability/Category Examples of Goods/Services
Rate

Unbranded food grains, Fresh vegetables,

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

Rough Precious & Semi- Rough precious and semi-precious stones

0.25%
Precious Stones 17

3% Gold & Jewelry Gold, Jewelry 17

Domestic LPG, Roasted Co ee Beans, PDS

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

Butter, Ghee, Computers (some types),

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

Standard Goods & Hair Oil, Capital goods, Toothpaste,

18% Industrial Intermediaries, Soap, Ice-cream,
Services
Pasta, Toiletries, Corn Flakes, Soups,
 GST (GOODS & SERVICES TAX)

GST
Applicability/Category Examples of Goods/Services
Rate

Printers, Consultancy 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), Beedis, Luxury & sin
28% (+
Luxury & Sin Items items like 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 e ective 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.
 GST (GOODS & SERVICES TAX)

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 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
 GST (GOODS & SERVICES TAX)

 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 e icient 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 o ices.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) o icer. 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 e icient 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,
 GST (GOODS & SERVICES TAX)

and other stakeholders for the seamless implementation of GST. Its vision is to
be a trusted National Information Utility (NIU) that provides a reliable, e icient,
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: O ering 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, o ering taxpayers additional
convenience and specialized solutions for GST compliance, such as converting
 GST (GOODS & SERVICES TAX)

data into GST-compliant formats and automatic reconciliation of purchase

records.29

The digital foundation provided by GSTN is critical for the system's e iciency 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
e ectively.32 Since 2004, the agency has also been responsible for detecting
cases of service tax evasion.33

 Operational Structure: The organization is sta ed by o icers 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 e icient indirect tax system.

6.1 Key Di erences 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 di er 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
 GST (GOODS & SERVICES TAX)

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

the tax base under a single levy.3

 Cascading E ect:

o VAT: Su ered from a "cascading e ect" 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: E ectively eliminates the cascading e ect 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 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 di erent

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 e icient.1

 Revenue Sharing:
 GST (GOODS & SERVICES TAX)

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,
o ering a more comprehensive, unified, and transparent tax structure. It has aimed to
simplify tax collection, promote economic e iciency, and reduce the overall tax burden
by eliminating the cascading e ect.

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 sta ,
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
 GST (GOODS & SERVICES TAX)

 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 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 o set 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 e ect 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 di icult 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
 GST (GOODS & SERVICES TAX)

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 e orts 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
e ectiveness 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.
 GST (GOODS & SERVICES TAX)

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 di erentiated pre-GST tax regime and to address socio-economic
objectives, such as keeping essential goods a ordable 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
 GST (GOODS & SERVICES TAX)

 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 E iciency: 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 di ering 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
di icult for taxpayers to file returns on time, leading to delays, incorrect filings,
and the imposition of penalties and fines.20
 GST (GOODS & SERVICES TAX)

 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

10. Relevant Data and Statistics

The performance of GST in India can be substantiated by various o icial 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

 GST (GOODS & SERVICES TAX)

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

 Reports from the Reserve Bank of India (RBI) highlight rising GST collections,
higher e-way bill generation, and improved consumer sentiment as key
 GST (GOODS & SERVICES TAX)

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 e ect 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, a irms 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.
 GST (GOODS & SERVICES TAX)

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 e icient economy, addressing the remaining
complexities and operational challenges will be crucial for realizing its full potential and
ensuring its long-term stability and e ectiveness in India's dynamic economic
environment.

BIBLIOGRAPHY

O icial 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/

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/