As the Goods and Services Tax (GST) completes eight years of implementation on July 1, tax experts acknowledge its successes but say a lot more work needs to be done in terms of simplification and rationalisation of rates. Among the big reforms suggested are the inclusion of fuel in the GST regime, the reduction in the number of tax slabs, and streamlining audits and investigations.
GST was implemented on July 1, 2017, and brought the country under a single indirect tax regime — goods and services sold in the country were taxed at the same rate across all states and union territories.
“In 2024–25, GST recorded its highest-ever gross collection of ₹22.08 lakh crore, reflecting a year-on-year growth of 9.4%,” the Ministry of Finance said in a release on Monday. “The average monthly collection stood at ₹1.84 lakh crore.”
Tax experts acknowledge that GST is much simpler than the previous regime where the sale of the same item could be taxed differently in each state. They added that, even in the last eight years, significant simplification has been brought in the GST system. However, they also point out that now it is time for the next phase of reforms in the indirect tax system.
The next phase, GST 2.0, must focus on four priorities: expanding the tax base by bringing in sectors like petroleum and electricity, rationalising the GST rate structure, minimising input tax credit restrictions, and streamlining audits and investigations,” Bipin Sapra, Partner and Indirect Tax Policy Leader at EY India said.
He added that, as India moves towards the ambition of becoming a $5 trillion economy, the GST system must move towards being a “stabilising force” to becoming a “strategic enabler of ease of doing business, investment, and inclusive growth”.
A report by PwC, too, has recommended that petrol, diesel, natural gas and other petroleum products should be included in GST. Currently, the GST law has a provision for the inclusion of these items, but it requires the GST Council — comprising the Union and State Finance Ministers — to approve the decision to include them.
“Excluding these products, which make up a large part of costs for industries such as oil and gas, transport and logistics, has resulted in significant tax cascading and has caused cash flow problems for businesses,” the PwC report noted. “A policy change that includes these items under GST, along with a system to protect state revenues would simplify the tax structure, ease cash flow issues for businesses, and support the original goals of GST.”
The other issue, according to Karthik Mani, Partner – Indirect Tax at BDO India, is the procedural hassles that come with GST.
“While the Government has initiated steps to simplify the law by rationalising the tax slabs and automating the compliance system, it would be essential for the Government to address the procedural challenges and high value litigations on minor issues that are overshadowing the efforts of the Government,” Mr. Mani said.
The PwC report also talks about how, given the “substantial number of cases currently pending, exacerbated in part by the absence of a GST Appellate Tribunal (GSTAT), there is an opportunity to revisit and strengthen the dispute resolution framework under the GST law to enhance efficiency and timely redressal”.
The third broad suggestion by the tax experts was to reduce the number of tax slabs under GST. Currently, there are five slabs — 0%, 5%, 12%, 18% and 28% — not counting the special rates of 0.25%, 1% and 3%, on various kinds of gold, silver, and diamonds. In addition, the Centre imposes a GST Compensation Cess on the items in the 28% slab.
The Hindu had previously reported on how the GST Council, in its next meeting, would discuss how best to minimise the number of items in the 12% slab.
Published – June 30, 2025 08:14 pm IST
