GST at Nine Years: Has India Built a Better Indirect Tax System?

Two slabs, ₹22 lakh crore and one big rate cut later, India's GST looks grown-up.

By Fiscal Metrics Research22 August 2026 5

GST at Nine Years: Has India Built a Better Indirect Tax System? — · *Unsplash*

Ask a mid-sized manufacturer in Coimbatore what changed in the past year and you will not get a lecture on cooperative federalism. You will get an invoice. Somewhere on it, a line that used to read 28% now reads 18%, and the customer noticed before the accountant did.

That, in miniature, is the story of India's Goods and Services Tax at nine. The reform that arrived on 1 July 2017 — folding 17 taxes and 13 cesses into a single levy — spent most of its youth being argued about. In its ninth year, it finally did the thing critics had demanded since day one: it simplified its own rate structure.

Whether that makes it a better tax system depends rather a lot on which part of the system you happen to be standing in.

The scoreboard

Begin with the numbers, because they are unusually cheerful.

Gross GST collections for 2025-26 came in at ₹22.27 lakh crore, up 8.3% over the year. (The finance ministry's monthly tables now report gross GST without the compensation cess that is being wound down, which is why the previous year's comparative reads ₹20.56 lakh crore rather than the ₹22.08 lakh crore figure many will remember.) Refunds rose a striking 17.8% to ₹2.92 lakh crore, leaving net collections of ₹19.35 lakh crore, 6.9% higher than the year before.

The current year is running hotter still. July 2026 delivered ₹2.11 lakh crore, 15.4% above July 2025, helped by a 28.8% jump in GST on imports. For April to July, gross collections stand at ₹8.43 lakh crore, up 10.1%.

The base has widened too. From roughly 66.5 lakh registrations at launch, GST counted about 1.65 crore taxpayers by May 2026. A tax that once had to be sold to businesses is now, for most of them, simply how commerce works.

What GST 2.0 actually changed

The ninth year's defining event happened in its opening months. On 3 September 2025, the GST Council's 56th meeting cleared what the government branded next-generation reforms; the new rates took effect on 22 September.

Four slabs became two. The 12% and 28% rates were retired, leaving a 5% merit rate and an 18% standard rate, with a 40% demerit rate parked over tobacco, aerated drinks, luxury vehicles, yachts and online gaming. Roughly 375 items saw their rates cut. Everyday goods — toothpaste, hair oil, packaged snacks, small cars, most medicines, several medical devices — moved down a rung. UHT milk went to nil.

The arithmetic behind this is worth pausing on. The 2015 Chief Economic Adviser's committee had pegged a revenue-neutral rate of around 15.3% for GST. By 2019, the RBI's estimate of the effective weighted average rate had already slipped to 11.6%. SBI Research reckoned GST 2.0 would push it to roughly 9.5%. India, in other words, has spent nine years running a consumption tax at rates materially below the level its own designers said was needed to stay whole — and has kept collections growing anyway, largely on the back of digital enforcement, e-invoicing and a wider base.

“The real test of a tax system is not how elegant its slabs look on a Council press release, but how quickly it returns money it was never entitled to keep.”

Did the revenue survive?

This was the loudest fear in September 2025, and the honest answer is: better than expected, but not for free.

SBI Research put the annual revenue cost at about ₹85,000 crore, roughly 0.24% of GDP, with a partial-year hit of around ₹45,000 crore in 2025-26. Against that, it estimated a consumption boost of ₹1.98 lakh crore. The Union Budget for 2026-27 tells the sober version: the Centre’s own GST receipts are budgeted at ₹10.19 lakh crore, about 2.6% below the ₹10.46 lakh crore revised estimate for 2025-26 — one of the rare years in which a major tax head is budgeted to shrink.

Domestic collections did feel it. Home-grown GST grew 6.4% across 2025-26 against 14.1% for imports. By July 2026, domestic gross collections were back up 10.1% year-on-year, which suggests the volume effect is catching up with the rate cut, though a few more quarters are needed before anyone declares the trade-off settled.

The macro side got a bonus. Retail inflation fell to 0.25% in October 2025 from 1.44% in September — an all-time low in the current series — and the finance ministry pointed to the rate cuts, record festive automobile sales and higher e-way bill generation as evidence that the cuts were doing their job.

Did the consumer actually get it?

Partly, and unevenly. India abolished its anti-profiteering machinery before it cut rates, which left pass-through to competitive pressure and public shaming.

A LocalCircles survey of more than 53,000 consumers across 342 districts, conducted six weeks after the new rates began, found 42% saying they got no benefit at all on packaged foods and 49% reporting none on medicines. Vehicles did far better: 47% reported the full benefit. The main culprit was mundane — old stock being sold at old printed prices while manufacturers and retailers argued over who would absorb the loss. An earlier round of the same survey had shown the position improving week by week, which is roughly what you would expect from an inventory problem rather than a policy failure. Still, "demand-oriented tax cuts can spark consumption, slow price transmission can blunt their economic purpose" is a sentence the Council should keep on a wall.

The plumbing, which is where taxes are actually won

The rate story got the headlines. The administrative story matters more.

From November 2025, a simplified registration scheme promised approval within three working days for low-risk applicants, and a risk-based system began sanctioning 90% provisional refunds. And after eight years of waiting, the GST Appellate Tribunal finally exists in more than name: launched in September 2025, it began adjudicatory work on 16 February 2026, with a Principal Bench in Delhi and 31 state benches across 45 locations. Backlog appeals against orders communicated before 1 April 2026 were given until 30 June 2026 to be filed — a necessary amnesty, given roughly 1.8 lakh appeals stacked up before first appellate authorities.

Businesses have noticed, and are still not satisfied. Deloitte's GST@9 survey of about 1,100 senior executives found negative sentiment towards GST down to near zero. It also found 77% flagging refund delays, 67% worried about working capital, 65% describing audits as revenue-driven rather than risk-driven, and 87% asking, above everything else, for clarity on interpretation. Among MSMEs, quarterly return filing has gone from 12% adoption in 2023 to 67% — a genuine easing, and evidence that simplification works when it reaches the smallest taxpayers.

What nine years has not fixed

Three things, stubbornly.

Petroleum, electricity, alcohol and real estate remain outside GST, which means the credit chain still breaks at the exact points where Indian industry spends most heavily. Every serious reform note, including Grant Thornton Bharat's agenda for the awaited 57th Council meeting, keeps proposing a calibrated start — natural gas or aviation turbine fuel first. Nobody has moved.

Second, input tax credit remains hostage to supplier behaviour. A compliant buyer who pays tax to a supplier who never deposits it still loses the credit, and litigates for years to say so. Litigation, more broadly, is where GST's simplicity goes to die. Collapsing four slabs into two should shrink the classification disputes that made lawyers rich arguing whether a paratha was a roti — but the legacy pile is enormous. Grant Thornton Bharat estimates that retrospective demands in the online gaming sector alone, flowing from the Gameskraft litigation, run to around ₹2.5 lakh crore. That is more than a tenth of a full year's GST collections riding on the interpretation of a single word.

Third, federalism is fraying at the edges. Compensation cess on tobacco and pan masala fell to nil from 1 February 2026, replaced by central levies — an additional excise duty and a health cess — that do not enter the shared pool in the same way. States have said so plainly. Karnataka told the Centre in January 2026 that its GST growth had fallen from 12% to 5% after the cuts, with a ₹5,000 crore shortfall this year and a ₹9,000 crore annual impact; Kerala has been asking for a fiscal correction package. The Council's consensus has held for nine years. It is being tested harder now than at any point since 2020.

The verdict

Better? Yes, measurably. Simpler slabs, a real tribunal, faster registration, provisional refunds, near-universal acceptance from industry and a base that has more than doubled. Nine years in, GST no longer needs defending as an idea.

Finished? Not close. A tax system that leaves out fuel, denies credit for someone else’s default, and still has three-quarters of its largest taxpayers complaining about refund delays has not yet earned the word "seamless".

The 57th Council meeting, still awaited as this is written, has the easiest brief in Indian tax policy: stop tinkering with rates and start fixing the pipes.

Sources

1. Press Information Bureau — Nine Years of GST: Simplifying Taxation, Strengthening India — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2279318&reg=3&lang=1

2. Press Information Bureau — Recommendations of the 56th Meeting of the GST Council — https://www.pib.gov.in/PressReleaseDetail.aspx?PRID=2163555&reg=3&lang=2

3. Press Information Bureau — Next-Gen GST Overhaul: Staple Foods Tax-Free, Processed Foods at 5% — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2164586&reg=48&lang=2

4. GSTN — Monthly GST revenue data, April 2026 (official tables) — https://tutorial.gst.gov.in/downloads/news/for_publishing_monthly_gst_data_for_apr_2026.pdf

5. GST Council — Report on the Revenue Neutral Rate and Structure of Rates for GST (CEA Committee, 2015) — https://www.gstcouncil.gov.in/sites/default/files/2024-02/cea-rpt-rnr.pdf

6. Union Budget of India — Receipt Budget 2026-27 — https://www.indiabudget.gov.in/doc/rec/allrec.pdf

7. GST Appellate Tribunal — official portal — https://www.gstat.gov.in/

8. Business Standard — Gross GST collections rise 15% in July, led by strong import revenues — https://www.business-standard.com/economy/news/gst-collections-rise-15-percent-to-rs-2-11-trillion-in-july-126080100511_1.html

9. Business Standard — Nine years of GST: How one tax reshaped India’s indirect tax system — https://www.business-standard.com/india-news/nine-years-gst-india-indirect-tax-system-reforms-126070100142_1.html

10. Business Standard — GST rate cuts boost consumption, India set for steady growth: FinMin report — https://www.business-standard.com/economy/news/gst-rate-cuts-boost-consumption-india-set-for-steady-growth-finmin-report-125112700524_1.html

11. Business Standard — GST 2.0: 3-day registration, 90% provisional refunds from November — https://www.business-standard.com/economy/news/gst-2-3-day-registration-90-provisional-refunds-from-november-2025-125090501229_1.html