If there’s one reform that has defined India’s fiscal story in the last decade, it is the Goods and Services Tax. Announced with fanfare on 1 July 2017, GST was billed as “one nation, one tax, one market.” The idea was to replace the complex, cascading web of central excise, service tax, VAT, entry taxes, octroi, and local levies with a simplified system. The result was historic: for the first time since independence, a truly unified national indirect tax regime came into being.
The “why” of GST was as important as the “how.” Before GST, goods moved across India more slowly than they did across borders. Trucks stopped at multiple checkpoints, businesses filed dozens of state-specific returns, and tax cascading inflated consumer prices. GST promised to change that — by creating seamless input-tax credits across states, eliminating border levies, and widening the tax base through technology-driven compliance.
The implementation, of course, wasn’t without teething troubles. Small businesses struggled with compliance deadlines, software glitches plagued the GST Network (GSTN), and multiple rate slabs confused consumers. But year by year, the system matured, compliance improved, and collections soared — a sign that the tax base had widened and the economy was adjusting to its new fiscal backbone.
Eight Years, Rising Revenues
GST collections tell the story better than any speech. In FY18, the first year of its rollout, gross collections stood at Rs 7.19 lakh crore. By FY20, despite the economic slowdown, the kitty had risen to Rs 9.99 lakh crore. The pandemic year of FY21 pulled collections back to Rs 9.54 lakh crore, but what followed was nothing short of remarkable.
FY22: Rs 11.55 lakh crore
FY23: Rs 14.83 lakh crore
FY24: Rs 18.07 lakh crore
FY25: Rs 20.45 lakh crore (provisional, up to August)
From under Rs 8 lakh crore in its debut year to crossing Rs 20 lakh crore in FY25, GST has more than doubled in eight years. Monthly revenues, too, have been consistently climbing. In FY25, the monthly average crossed Rs 1.7 lakh crore, compared to just Rs 90,000 crore in FY19. April 2024 alone recorded a historic Rs 2.1 lakh crore collection — the highest ever.
This revenue buoyancy has mattered for both the Centre and the states. GST now contributes over 60 per cent of India’s indirect tax revenue and has given states a more predictable stream of funds through compensation and settlement mechanisms.
GST 2.0: A New Chapter
From 22 September 2025, the government has rolled out GST 2.0. What does that mean? In simple terms: fewer slabs, simpler compliance, and deeper technology adoption.
The new regime is expected to collapse the current five-slab structure (0, 5, 12, 18, 28 per cent plus cess) into just three broad categories: essentials at 5 per cent, a standard rate of 18 per cent, and a luxury/de-merit rate of 40 per cent. Electric vehicles and green technologies to stay at the incentivised 5 per cent slab.
Compliance, too, is being overhauled. GST 2.0 will bring in a single, nationwide e-invoicing system for all businesses above Rs 5 crore turnover, AI-driven fraud detection, and a unified GST return that reduces filing from monthly to quarterly for most MSMEs. The focus is squarely on simplification and plugging revenue leakages.
Why does this matter? Because India’s economy is at a tipping point. Consumption is recovering, exports are rebounding, and manufacturing is benefiting from PLI schemes. A simpler GST ensures that this growth doesn’t get strangled by compliance drudgery or distorted by tax arbitrage.
Outlook
The next 20 years will test whether GST can truly become India’s fiscal backbone. Economists say three big trends will define its future. First, buoyant revenues. With GDP expected to double over the next decade, GST revenues could cross Rs 40 lakh crore by FY35 and Rs 75 lakh crore by FY45. That’s enough fiscal firepower to fund India’s ambitious infra and welfare programmes.
Second, digital deepening. GST’s tech backbone will only get smarter — e-invoicing for all, AI-driven audits, and near real-time settlement between the Centre and states. This will not just improve compliance but also give policymakers a live dashboard of economic activity.
Third, global integration. As India eyes deeper trade pacts and supply-chain integration, GST provides a harmonised tax structure that exporters and multinationals can work with, making India a more attractive investment destination.
Challenges remain: rationalising rates without hurting revenue, handling State-Centre tensions over compensation, and ensuring small businesses are not overwhelmed by compliance. But the trajectory is clear. GST 2.0 promises to be less about plugging leaks and more about powering growth.
Simply put, GST has turned India into one market, increased tax revenues, and boosted transparency. As 2.0 arrives, it could do for indirect taxes what highways and railways have done for physical connectivity — simplify, accelerate, and integrate.
Eight years ago, sceptics wondered if GST would ever work in a country as diverse as India. Today, with collections soaring past Rs 20 lakh crore and compliance stabilising, the debate has shifted. The real question now is: can GST 2.0 become the fiscal engine that powers India’s growth for the next two decades? |
