Why the GST regime has been such a game-changer

The rollout of the Goods and Services Tax (GST) in July 2017 marked a tectonic shift in India’s fiscal architecture, unifying the country into a single economic market for the first time since Independence.

- Shehzad Poonawalla

The genesis of GST dates back to the Atal Bihari Vajpayee government, which set up an empowered committee of state finance ministers to explore the idea in 2000. The Modi government introduced the GST Bill in Parliament in December 2014. Within two years, the 101st Constitutional Amendment was passed with broad support and ratified by more than half the states. The GST Council was instrumental in shaping the consensus. There have been 55 meetings of the Council, and all but one decision was reached unanimously. This isn’t just a legislative triumph, but also a case study in cooperative federalism.

GST replaced over 17 taxes and 13 cesses with a single, harmonised system. It ended the cascading effect of indirect taxes, dismantled the border check-post system and brought formalisation and transparency. Logistics improved dramatically—trucks now travel 44% more daily than before and interstate trade has jumped to 35% of GDP in FY22 from 23.5% in FY18. With over 1.4 crore registered taxpayers, GST has significantly expanded India’s tax base and reduced the effective tax burden. The average pre-GST indirect tax rate was 15%; by March 2023, it had dropped to 12.2%.