Subject: Economy

The implementation of Goods and Services Tax (GST) in India marks a significant economic reform towards creating a unified national market through the principle of 'One Nation, One Tax'. This transformative tax reform has consolidated multiple indirect taxes under a single umbrella since July 1, 2017.

Indirect Taxes Subsumed Under GST

Central Level Taxes

• Central Excise Duty and Additional Excise Duty previously levied on manufacturing of goods.
• Service Tax charged on provision of various services.
• Countervailing Duty and Special Additional Duty of Customs on imports.

State Level Taxes

• State VAT/Sales Tax and Central Sales Tax on inter-state trade.
• Entertainment Tax (except those levied by local bodies).
• Octroi and Entry Tax charged by states on goods entering their territory.
• Purchase Tax, Luxury Tax, and taxes on lottery, betting, and gambling.

Revenue Implications of GST

Positive Implications

• Robust Revenue Growth: GST collections reached ₹2.01 lakh crore in May 2025, marking a significant 16.4% year-on-year increase.
• Record Collections: April 2025 witnessed historic collections of ₹2.37 lakh crore.
• State-wise Performance:
  • Maharashtra leads in total GST collection for FY2024.
  • Gujarat showed 13% growth reaching ₹14,970 crore in April 2025.

Challenges and Concerns

• Initial revenue shortfalls for some states requiring compensation.
• Compliance burden on MSMEs.
• Delays in compensation payments to states.
• Implementation challenges in the initial phase.

Way Forward

• Government targets 11% rise in GST earnings, aiming for ₹11.78 lakh crore.
• Focus on improving tax compliance and reducing evasion.
• Strengthening the GST Network (GSTN) for better tax administration.

The GST regime has demonstrated its potential as a game-changing reform, with recent collection trends showing robust growth and improved compliance, though continuous refinement of the system remains crucial for addressing existing challenges and ensuring sustainable revenue growth (e.g., implementation of e-invoicing and e-way bill systems).