8 years of GST: How Modi's landmark tax reform reshaped India

India Today

a day ago

July 2025 marks the eighth anniversary of 'One Nation, One Tax', which made India a unified, common market, with a single, destination-based, multi-stage tax on the supply of goods and services, right from manufacturing to consumption. Credits of input taxes paid at each stage are available in the subsequent stage of value addition. This makes the GST, or Goods and Services Tax, essentially a tax only on value added at each stage.advertisementGST collection in May this year was Rs 2.01 lakh crore. In April, it was Rs 2.37 lakh crore. The average monthly GST revenue has been Rs 1.84 lakh crore in FY25. It was Rs 1.68 lakh crore in FY24 and Rs 1.51 lakh crore in FY23. GST thus showcases the combining of grand vision with seamless execution.GST was first implemented in France in 1954, with the standard rate largely being 20 per cent. It came into being in New Zealand in 1986 at 10 per cent, before moving to 15 per cent. GST was initiated in Singapore at three per cent in 1994 and then went up to seven per cent.
The indirect tax rate in Indonesia is largely between 10 and 35 per cent, while in Brazil, though the average tax rate for food products is seven per cent, the average value-added tax for most other items is 17–20 per cent, with an additional cess on inter-state supplies at 4–25 per cent. This shows that there is no single GST rate, and allegations that India's GST is inefficient because it's multi-tier are uncalled for.advertisementThe Indian variation of GST is unique because of the sheer array of numbers involving a country of over 1.4 billion people. When GST was introduced in July 2017, the idea was to have a revenue-neutral rate of 15.5 per cent, 2–3 years hence. But this rate is merely 11.4 per cent today.Today, fewer than 28 items attract a tax rate of 28 per cent, and these are largely sin goods like tobacco, aerated drinks, high-end sedans, etc. GST is largely pro-poor and pro-middle class. GST for all religious tours has been fixed at five per cent. GST for air travel in economy class is five per cent, and 12 per cent for business class. For movie tickets costing up to Rs 100, it was brought down from 18 to 12 per cent, and for those priced above Rs 100, it went from 28 to 18 per cent. GST on sanitary pads is down from 13.5 per cent earlier to zero now.Interestingly, of the 160-odd countries that have adopted GST, only 49 follow one tax slab module, 28 countries have two slab tax modules, and all others have modified the GST structure to align it to country-specific needs, which essentially means there is no 'one size fits all' approach.advertisementAn e-Way Bill is now mandatory for interstate transport of goods, required to be generated for interstate movement beyond 10 kilometres. It is a paperless technology solution and a critical anti-evasion tool to check tax leakages. Along with GST, the e-Way bill, with RFID tags for motor vehicles, has been a gigantic step in the right direction in improving tax compliance. Over 12.26 crore e-Way bills were generated in May, the second-highest figure after the all-time high figures of 12.45 crore in March.The Narendra Modi government reduced GST on under-construction houses from 12 per cent to five per cent, and in the 'affordable housing' segment, it was reduced from eight per cent to a mere one per cent, once again endorsing a pro-people approach.India's fuel economy, post-GST, is more competitive, having eliminated the need for truckers to wait endlessly to pay octroi and entry taxes at inter-state check posts. Among other concessions, services rendered to all Jan Dhan accounts are now completely tax-exempt, showcasing that the Modi government's clarion call of 'Sabka Saath, Sabka Vikas, Sabka Vishwas' is not a mere platitude.To curb corruption, tax leakages and fraud using fake invoices, the Centre brought in e-Invoicing in 2020, for those with turnovers of more than Rs 500 crore. That limit now extends to those with Rs 5 crore turnovers. From about 495 forms that needed to be filed in the pre-GST era, that number in the post-GST era has come down to just a handful of 12-odd forms.advertisementThe GST structure chooses to tax demerit goods at the highest rate to disincentivise 'sin goods', while keeping tax rates for items of mass consumption at zero or five per cent.The GST model strikes just the right balance between the tax base and tax rates, thereby preventing the tax structure from becoming regressive. The voting structure of the GST Council is such that states together have a two-thirds weightage of the vote. The Centre has a third of the weightage. In other words, the overwhelming majority of decisions taken by the GST Council have been through a unanimous consensus of both the states and the Centre.The best thing about GST is that there are no hidden taxes, and what you see is what you get. Efficiency gains, higher compliance, prevention of tax leakages, lower rates, wider base, export friendliness and tax neutrality have brought down the overall tax burden for the middle class and enhanced the ease of doing business, especially for small industry bodies.advertisementOne Nation, One Tax, embodied by GST, is the single biggest indirect tax reform in India's economic landscape, and it is truly creating a unified and integrated market in more ways than one.(Sanju Verma is an economist, national spokesperson of the BJP and bestselling author of 'The Modi Gambit')- Ends(Views expressed in this opinion piece are those of the author)