Next-Generation GST: From Transition to Transformation

When India rolled out the Goods and Services Tax (GST) in July 2017, it was not just a new taxit was a new architecture for the Indian economy. For decades, businesses were trapped in a maze of state-level VATs, octroi, entry taxes, service tax and cesses, each creating its own paperwork, compliance burdens, and opportunities for evasion. Goods were taxed multiple times, cascading costs inflated prices, and consumers ultimately paid the penalty. GST corrected this structural unfairness by replacing a jungle of 17 taxes and 13 cesses with the principle of One Nation, One Tax. Eight years later, the results are undeniable. The taxpayer base has more than doubledfrom 66 lakh in 2017 to over 1.5 crore in 2025. Revenues have surged, with gross GST collections touching `22 lakh crore last year, more than double in just four years. Monthly revenues that averaged `82,000 crore in 201718 now routinely cross `2 lakh crore. A Deloitte survey this year found that 85% of businesses, including MSMEs, are satisfied with GST. Clearly, GST has reshaped Indias economic landscape. However reforms of this scale are never static. The GST that came into force in 2017 was a delicate compromise between the Centre and States. The design had to protect state revenues, shield essentials from high taxes, and simplify compliance for businessesall at once. That balancing act worked, but eight years on, fresh challenges are visible: rate complexity, inverted duty structures, classification disputes, and compliance costs for small firms. The next phase of GST reforms must therefore move from transition to consolidationmaking the system simpler, fairer, and more growth-oriented. Why Rationalisation Matters The case for rate rationalisation is overwhelming. A recent SBI Research paper reminds us that whenever rates were rationalised in the past, revenues dipped briefly during adjustmentonly to rebound stronger once businesses adapted. The same logic applies today: short-term adjustments should not deter reform when the long-term payoff is higher compliance, stronger revenues, and lower costs for consumers. For States, this is particularly crucial. In the pre-GST era, state tax revenues grew at around 89% annually. Today, buoyancy is much higher. Economists C. Rangarajan and K.R. Shanmugam recently noted that even after the expiry of the assured compensation period, state GST revenues grew over 14% between 202223 and 202324. This is not just about fiscal numbersit gives States greater room to fund welfare schemes, build infrastructure, and set their own development priorities with confidence. Gains for Consumers For ordinary citizens, rationalisation will mean immediate relief. Lower rates on food items and medicine reduce household expenditure. Affordable aspirational goodsfrom mobile phones to small carsbring quality within reach of more families. The phasing out of the compensation cess, as loan repayments conclude, ensures that taxpayers are not overburdened. A system with fewer slabs also reduces disputes and litigation, making GST feel fairer. The reforms are not abstract. Take construction: plywood, boards and tools that once carried 12% GST are now at 5%, while cement has come down from 28% to 18%. For the auto sector, smaller vehicles and components have seen taxes drop from 28% to 18%, improving affordability and competitiveness. In handicrafts, rates on wood carvings and engravings have fallen from 12% to 5%, directly supporting artisans and rural livelihoods. Leather goods too benefit from rationalised rates, helping MSMEs and preserving traditional crafts. Across sectors, rationalisation is not only about cheaper goodsit is about sustaining industries, preserving heritage, and creating jobs. The Multiplier Effect Lower input costs make domestic production more competitive. Affordable goods boost consumption. Increased compliance widens the tax base. Stronger revenues give governments more room to invest in welfare and growth. This creates a virtuous cycle where industry, government, and citizens all benefit. Before GST, every state was a separate market, with its own VAT rates, entry taxes at borders, and overlapping audits. Trucks waited hours at checkpoints, costs multiplied, and corruption thrived. Businesses lost productivity and consumers paid higher prices. GST replaced this fragmentation with a unified market. The next phase must cut disputes, rationalise rates, and ensure stability. MSMEs and Small Businesses For small firms, predictability and liquidity are lifelines. Correcting inverted duty structures will free up working capital otherwise stuck in refund claims. Resolving classification disputes will mean fewer court battles and greater clarity. Stable rates will give entrepreneurs the confidence to invest and expand. GST 2.0, in many ways, is about enabling MSMEs to thrivebecause they are the backbone of both manufacturing and services, and the largest source of jobs. Indias Global Ambitions GST reforms are also about keeping pace with Indias global integration. As India positions itself as a reliable hub for global value chains, exporters need a tax system that is seamless. Faster refunds, clearer input credits, and competitive rates are not luxuriesthey are prerequisites if India is to rival other Asian economies as a production and export hub. The Moral Case Taxation is not merely about arithmetic; it is also about fairness. A good tax system must not feel like a penalty for enterprise. It should function as a partnership between citizens, businesses, and the State. Rationalising rates, correcting distortions, and ensuring predictability reinforce that partnership. It builds trust that the tax system is designed to enable growth. The Next Leap Indias GST journey has already transformed the economy once. The next transformation must be about depth and durability. It is not just about higher revenuesit is about creating a tax system that citizens find affordable, businesses find predictable, and States find buoyant. Done right, the next generation of GST reforms will sustain growth, check inflation, and strengthen fiscal health. India has already shown that bold tax reform is possible. Now it must prove that fine-tuning can be just as transformative. The opportunity is clear: to move from One Nation, One Tax to One Nation, One Simple, Fair, Growth-Oriented Tax System. Amit Malviya is the national head of BJPs Information & Texhnology and Sah Prabhari of West Bengal