Editorial: Eight years of GST and call for reforms

The central government has unsurprisingly patted its own back on the occasion of the GST system completing eight years of implementation.

Firstly, the NDA government managed to get the GST Bill enacted in 2017 while the previous UPA government had failed to do so because of stiff opposition from parties, including the BJP.

Getting the bill passed in Delhi and persuading states to acquiesce required not only the numbers but also persuasion with a hint of coercion. The government claims regarding achieving a broad consensus between the Centre and the states through cooperative federalism is a partial truth, as non-BJP state governments have been repeatedly expressing dissatisfaction with GST on many accounts and on several occasions.

Given the nature of the BJP, it is difficult to gauge the views of state governments run by the BJP and its allies. Of course, some of them are alleged beneficiaries of central largesse.

Secondly, the central government keeps publicising the GST collections as proof of its success. In 2024–25, gross GST collections hit a record Rs 22.08 lakh crore, not only marking a year-on-year growth of 9.4%, but it had doubled in the last five years.

The government interprets it as indicative of increased efficiency and expansion of tax base to over 1.5 crore active taxpayers, which holds water, especially due to the deployment of digital technologies, e-invoicing and AI-based tools for detecting fraud and evasion. Reports of GST continue unabated, though. But, it is debatable as to what extent the GST collection reflects the health of the economy.

There have been occasions when GST collections were at variance with the trends from the traditional and relatively more reliable indices. Though GST is an important barometer of economic growth, to be accepted widely and reliably, the data needs to be more granulated, sector-wise and of course transparent.

Despite the government’s claims, not only the opposition parties, but also industry representatives and policy experts have been urging for GST reforms. The government too seems to acknowledge some of the criticism when it too talks about bringing in a “simplified and easy to comply” GST system. Rate restructuring and a reduction in rates are said to be on the cards.

While the government has used a Deloitte report, which highlights the positives of the GST, a PwC report on the need for GST reforms is also making media rounds. The latter is advocating for some significant reforms and changes, including moving from a 4-tier to a 3-tier system, and the reduction of one tax slab would make a world of difference as increased clarity and certainty would lead to a drastic reduction in disputes.

Reforms are not easy due to multiple contradictions and the complex nature of politics, governance, taxation and industry and consumer demands. Take, for instance, the industry demand to bring aviation fuel within the ambit of the GST regime, which met with stiff resistance from every quarter, thus exposing the challenges and contradictions inherent in the system.

Another example is the growing consumer clamour against the unreasonable levying of 18% GST on medical insurance and life insurance premiums.

Yet nothing has been done about it even after some top ruling party leaders agree it to be unfair. The GST is no doubt an improvement over the past pre-GST system. But making it better is going to be challenging even for this government.