India’s GST reform debate intensifies after nine years of mixed results

Nine years since its inception, India’s goods and services tax has delivered significant administrative benefits but still faces calls for more comprehensive reforms to enhance revenue and competitiveness, with key changes including rate simplification and bringing petroleum products into the fold.

Nine years after its launch, India’s goods and services tax has clearly delivered some of the structural gains its architects promised, but it has not become the broad, buoyant revenue source many had hoped for. The tax has simplified a tangle of consumption levies, reduced overlap between the Union and the states and helped knit together a more unified domestic market, with fewer check posts and lower transport frictions. Yet the compromise design adopted at rollout still leaves the system carrying too many distortions, and the case for a more ambitious reform phase is becoming harder to ignore. According to the business-standard.com commentary, the next round of changes should begin now if India wants a more competitive tax regime by 2047.

The administrative gains have been real. Businesses have benefited from lower compliance and logistics costs, while the abolition of check posts has reduced delays for freight movement. The Ministry of Road Transport and Highways has said truck travel times on long routes are down by about 20 per cent after GST, underscoring the tax’s role in easing movement across state borders. But the implementation has also been marked by familiar complaints: complex slab structures, classification disputes, technical glitches and a heavy compliance load for smaller firms, according to analyses by ClearTax, TaxCorp and Motilal Oswal.

Revenue performance, meanwhile, has been less convincing. The commentary argues that GST was not revenue-neutral at launch and cites the Comptroller and Auditor General of India’s finding that collections in the comparable months of 2017-18 fell short of the taxes the system replaced by about 10 per cent. A separate report by TaxCorp says the CAG later flagged compliance deviations worth ₹21,695 crore, pointing to persistent gaps in monitoring and follow-up. The broader problem is that the tax’s effective take has stayed stuck in a narrow band since the pandemic, suggesting that hoped-for gains from self-enforcement have not fully materialised.

The article’s suggested fixes are blunt but familiar: fewer rates, a lower threshold and a wider base. It argues that the current gap between the main GST slabs still encourages misclassification, and that a move towards one broad rate or, failing that, a tighter two-rate structure would reduce distortions. It also says the registration threshold should be kept at ₹50 lakh so the authorities can focus on larger taxpayers rather than the mass of tiny ones. Most importantly, it calls for petroleum products to be brought into GST so businesses can claim input tax credit on a major industrial input now taxed separately through excise and sales levies, a change that would expand the base and improve competitiveness.