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8 Years of GST: Achievements, challenges, and the future of tax reform
Explore the 8-year journey of GST in India with Saurabh Agarwal, EY India's Tax Partner, as he delves into its achievements, challenges, and future reforms to enhance India's global manufacturing competitiveness.
This episode of the EY on GST podcast explores the transformative journey of the Goods and Services Tax (GST) in India over the past eight years, featuring insights from Saurabh Agarwal, Tax Partner, EY India.
Saurabh discusses the achievements, challenges, and the future of GST, reflecting on how it has redefined the way India does business. Key topics include the role of GST in creating a unified tax regime, the importance of rate rationalization, and addressing structural issues in sectors like automobiles, real estate, and energy. Additionally, he highlights how GST reforms can bolster India’s ambition to become a global manufacturing hub.
Key takeaways
GST has delivered on its promise of “One Nation, One Tax,” increasing taxpayer formalization and enhancing revenue collections.
A data-driven realignment of GST rates can help improve affordability while maintaining revenue neutrality.
Addressing structural inefficiencies in key sectors like automobiles, real estate, and energy is crucial for GST’s overall efficiency.
Streamlining ITC rules and addressing embedded tax costs will strengthen India’s global manufacturing competitiveness.
GST has been a transformative reform for India, delivering on its promise of 'One Nation, One Tax' by creating a unified market and driving formalization across sectors. As we look ahead, addressing structural challenges and aligning policies with evolving economic realities will be key to unlocking its full potential.
Saurabh Agarwal
Tax Partner, EY India
For your convenience, full text transcript of this podcast is available below.
Pallavi
Hello and welcome to this special episode of EY India Insights podcast. In this episode, we reflect on eight years of GST in India. I'm your host, Pallavi, and today we are diving into the transformative journey of Goods and Services Tax – a reform that redefined the way India does business. Joining me is none other than Saurabh Agarwal, Tax Partner at EY India.
Saurabh, who has extensive experience in handling advocacy, strategic indirect tax advisory and litigation, will walk us through the challenges and the future direction of the GST regime. Saurabh, it's an absolute pleasure to have you here today.
Saurabh Agarwal
Thank you. I'm excited to be part of this conversation and share insights on this remarkable journey.
Pallavi
To start off, looking back at the last eight years, what would you say are the most significant achievements of the GST regime?
Saurabh Agarwal
Pallavi, if I have to reflect back over the last eight years, you know, the GST regime has delivered on its core promise of one nation, one tax by subsuming multiple indirect taxes and creating a unified market. We have seen a significant rise in formalization. The taxpayer base has grown from around 68 lakh in 2017 to over 1.47 crore in 2024.
Digitizationhas also been a major success with the GST, enabling seamless registration, return filing, e-invoicing and rebates. These reforms have improved compliances and enhanced revenue collections, with monthly GST revenues now processing over INR2 lakh crore.
Pallavi
Pivoting to rate rationalization. It has been a recurring theme in the policy discussions. According to you, what should be the approach going forward?
Saurabh Agarwal
Rationalization (of GST rates), in my view, should not be viewed purely as a slab reduction exercise. Instead, we should look at reclassifying goods in line with the present day consumption patterns and economic realities. Products like ghee, butter, toiletries and two-wheelers, which were earlier considered discretionary, are now essential to the large section of the population. Similarly, air conditioners amid rising temperatures are no longer luxury items.
A data-driven realignment of rates can help improve affordability while maintaining revenue neutrality. We should also be mindful that India's per capita income had undergone a big change, and different things, which were earlier discretionary, have now become necessary for a consumer, and hence there is a requirement to move the goods from higher slabs to lower slabs.
Pallavi
Thank you, Saurabh. Now shifting the focus towards sectors, which sectors still face structural issues under GST and deserve focused policy attention?
Saurabh Agarwal
Three sectors stand out clearly: automobile, real estate and energy. Automobiles face high tax incidence and are still considered ‘sin’ goods. Typically, hybrid vehicles are taxed similar to internal combustion engine (ICE) vehicles. In real estate, the lack of input tax credit on under-construction property and retrospective changes like in the Safari Retreats case, create working capital strain and litigation risk.
In the energy sector, exclusion of electricity and petroleum products from GST breaks the credit chain and inflates input cost, especially for manufacturing. These structural gaps need to be addressed to ensure GST delivers sector wide efficiency.
Pallavi
Lastly, to promote India as a manufacturing hub further, how can GST reforms support the “Make in India” initiative?
Saurabh Agarwal
Make in India has been something which is very close to my heart.
To support India's manufacturing ambitions, GST needs to enable a frictionless input chain. Exclusion of petroleum products and electricity from GST, all of these things increase the cost of production, making all products uncompetitive in a global market. Streamlining ITC (input tax credit) rules, reducing the embedded tax cost on electricity and fuels will improve cost competitiveness as India integrates deeper into global supply chains.
Pallavi
Thank you, Saurabh. That brings us to the end of this insightful discussion on GST at eight years. A big thank you to you for sharing your knowledge and expertise on the achievements and the road ahead for this landmark reform.
Thank you to all our listeners for tuning in and we hope you find this episode extremely valuable. Don't forget to subscribe to our podcast for more such insightful conversations.
Until next time, stay informed and stay inspired! This is Pallavi signing off.
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