It’s been eight years since India implemented the Goods and Services Tax (GST), a historic reform that subsumed a patchwork of indirect taxes into a single, unified system. Launched on July 1, 2017, GST was envisioned as a “one nation, one tax” structure that would simplify compliance, curb tax evasion, and strengthen the formal economy. As we stand at the cusp of the ninth year, it’s time to evaluate the journey—acknowledging the milestones crossed, the potholes encountered, and the path still to be paved.
GST: A Transformational Reform
GST replaced a multitude of central and state taxes such as VAT, service tax, excise duty, and entry tax. By introducing a destination-based consumption tax model, GST was expected to eliminate the cascading effect of taxation and foster a common national market. For businesses, it promised input tax credit, reduced logistical costs, and streamlined processes through a centralised portal.
Indeed, GST has yielded several benefits. Revenues have generally trended upward post-pandemic, especially with the increased digital monitoring of invoices and e-way bills. The composition scheme has benefitted small taxpayers, and e-invoicing has improved compliance and data accuracy. Yet, the implementation journey has not been without challenges.
Challenges Still Plaguing GST
- Complex Structure
Despite its aim to simplify, the current GST structure remains fragmented. There are multiple tax slabs—0%, 5%, 12%, 18%, and 28%—that create confusion, classification disputes, and compliance headaches. Frequent rate changes also unsettle businesses and disrupt pricing strategies.
- Compliance Burden
For MSMEs and small businesses, monthly and annual return filings can be overwhelming. GSTR-1, GSTR-3B, annual returns (GSTR-9), and reconciliation statements (GSTR-9C) demand a strong accounting infrastructure, often unaffordable for micro enterprises.
- IT Glitches and Portal Issues
The GSTN portal has witnessed significant teething troubles, particularly during peak filing periods. Although improvements have been made, system downtimes and technical snags still cause stress among taxpayers.
- Refund Delays and Working Capital Woes
Exporters and inverted duty structure cases often complain about delayed refunds. This blocks working capital, especially in sectors like textiles and pharma, defeating GST’s objective of supporting liquidity in the supply chain.
- Opaque Advance Rulings and Lack of Uniformity
Different states have sometimes issued contradictory Advance Rulings on the same matter, leading to legal uncertainty. A central appellate authority, promised earlier, remains pending.
Proposed Reforms and the Way Forward
The GST Council and policymakers are aware of these concerns and have proposed several reforms to address them.
- Rationalisation of Tax Slabs
One of the most discussed reforms is merging the 12% and 18% slabs into a single standard rate. This would reduce classification disputes and make GST more predictable for businesses.
- Simplified Returns and Improved User Experience
The government is working to streamline the return filing process. A single-page return and AI-powered reconciliation tools are under consideration, which could ease compliance for small businesses.
- Faster Refund Mechanisms
Reforms to automate and expedite refunds—especially for exporters and inverted duty structure claims—are essential. A robust auto-validation system is likely to reduce human intervention and processing time.
- Strengthening the Advance Ruling System
To address conflicting judgments, setting up a national-level appellate tribunal for GST advance rulings is imperative. This will ensure legal consistency and improve taxpayer confidence.
- Enhanced Grievance Redressal
A more responsive grievance redressal mechanism with defined timelines and escalation routes can help resolve technical issues faster and reduce compliance fatigue.
Conclusion
GST has undoubtedly brought greater transparency and structure to India’s indirect taxation system. But to truly achieve its original vision of being seamless, transparent, and business-friendly, the system must now evolve. Reducing complexity, ensuring faster refunds, streamlining compliance, and addressing technological glitches are critical to its next phase of maturity. The GST Council, which meets periodically, must keep reform momentum alive while balancing revenue needs and industry feedback.
Eight years on, the foundations are firm, but the finishing touches are still pending. The GST journey is far from over—it is, in fact, entering its most defining phase.
(Source – PIB)
