Goods and Services Tax (GST) completes eight years on July 1, 2025. Introduced to streamline the indirect tax regime, GST replaced multiple Central and State levies with a unified tax structure. By eliminating the cascading effect of taxes, it laid the foundation for a common national market — realising the vision of “One Nation, One Tax.”

Among the key achievements, the most significant is the expansion of the taxpayer base. Registered taxpayers rose from 67.83 lakh to 1.47 crore as of August 2024, reflecting deeper formalisation of the economy. This has been accompanied by a rise in monthly GST collections, which are consistently nearing ₹2 lakh crore.

Another success has been the significant digital enablement. GST has streamlined critical processes such as registration, return filing, tax payments, and refunds. Further, the implementation of e-way bills, e-invoicing, and invoice matching has improved compliance and reduced evasion. The next phase focuses on litigation management. The gradual move towards electronic issuance of notices and queries through the portal with virtual hearings (a move towards faceless assessment), marks a shift towards a more efficient and transparent dispute resolution framework.

An often-overlooked contributor to GST’s success has been the proactive role of the GST Council. Since inception, it has issued circulars, FAQs, and sector-specific guidance to address industry concerns and ease implementation. Yet, challenges around classification and rates persist. Additionally, key sectors still remain outside the GST net, retrospective amendments to safeguard revenue, and the absence of a functional appellate tribunal adds complexity for taxpayers.

Prioritise GSTAT

As GST enters its ninth year, operationalising the GST Appellate Tribunal (GSTAT) becomes a structural priority. While significant progress has been made, the tribunal is not yet functional. A fully operational GSTAT is critical for faster and more effective dispute resolution.

As adjudication reforms take shape, attention must also turn to tax design. While the GST Council is considering a shift to a three-rate slab structure, product categorisation also needs re-evaluation.

As consumer behaviour evolves, several goods previously considered luxury or discretionary are increasingly seen as essential. For instance, many food products (such as butter, ghee, and packaged items), toiletries, and personal care products taxed at 12 per cent and 18 per cent merit reclassification. Two-wheelers and air-conditioners taxed at 28 per cent serve critical needs.

Re-evaluating the tax slab for such items could enhance affordability and align tax design with present-day realities, without significantly affecting revenue collection.

Another area requiring policy attention is the GST treatment of life and health insurance. Insurance penetration in India remains low, and rising healthcare costs make adequate coverage essential. Reducing GST on term and health insurance from 18 per cent to 5 per cent or nil could help expand coverage and support public policy goals.

Further, building on experience from the rollout of GSTR-2A and GSTR-2B, the Invoice Management System (IMS), launched in October 2024, should be made mandatory. This would standardise credit reconciliation, reduce mismatches, and minimise disputes, supporting a more stable compliance environment.

In addition, true economic unification remains incomplete without including petroleum products and electricity within the GST framework. These continue to be taxed under legacy laws, leading to cascading costs. A phased inclusion starting with natural gas or ATF and a review of existing exemptions could broaden the tax base and improve cost efficiency.

To minimise cascading, easing restrictions on input tax credit is essential. Allowing credit for all legitimate business inputs used in the course or furtherance of business would reinforce foundational principle of GST as a value added tax.

Given the current buoyancy in GST collections and with Vision 2047 in sight, this is an opportune moment to implement these reforms.

The writer is Tax Partner, EY India. Vikram Chawla, Tax Professional, EY India, also contributed to the article

Published on June 25, 2025