The GST template

Key Highlights:

• The GST Council unanimously approved reforms in September 2025, reducing the number of tax slabs from four to two [5% and 18%], with a 40% rate for luxury and sin goods.
• Life and health insurance premiums have been exempted under the new GST regime.
• The GST taxpayer base has expanded from 66 lakh in 2017 to over 1.5 crore at present.
• GST collections have risen sharply, with the tax base increasing from Rs 45 lakh crore to Rs 173 lakh crore over the past decade at a CAGR of 14.4%.

Detailed Insights:

• The idea of Goods and Services Tax (GST) was first conceived in 1985, with initial steps taken through MODVAT in 1986, but progress was slow due to concerns over state autonomy and revenue loss.
• The creation of the GST Council, comprising the Union finance minister and all state finance ministers, marked an unprecedented instance of pooled sovereignty in India's federal system.
• The latest GST reforms address criticisms of complexity, aiming for easier classification, fewer disputes, and smoother administration, benefiting citizens, businesses, and policymakers.
• The Group of Ministers, chaired by Bihar's Deputy Chief Minister Samrat Choudhary, played a crucial role in steering negotiations and securing unanimous endorsement for the reforms.
• The Revenue Secretary estimated a short-term revenue impact of about Rs 48,000 crore based on 2023-24 consumption, but simpler structures are expected to enhance compliance and buoyancy.
• The success of GST hinges on ensuring that benefits reach the common consumer, small and medium enterprises, and industry more broadly, with potential extensions like allocating a share of GST proceeds to urban local bodies.

Key Concepts Involved:

• Goods and Services Tax (GST): A comprehensive indirect tax levied on the supply of goods and services.
• GST Council: A constitutional body responsible for making recommendations on GST-related issues.
• Revenue Buoyancy: The responsiveness of tax revenue to changes in economic activity or income.