Government Betting On Consumption Boost With GST Cut

Sources said that the GST on several items, including electronic goods and those that are needed for daily use, which attract a 18 per cent GST rate, could be brought down. Rationalisation of GST rates and slabs is not only expected to augment consumption, but also aimed at improving ease of doing business.

The sources added that several items, which currently attract 12 per cent GST, could be rejigged as well.

“As GST accruals keep rising, the benefit of higher collections will be passed on to the end consumers,” Ashok Dhingra, Senior Partner at Ashok Dhingra Associates (ADA), a firm offering services under tax, customs and regulatory laws told The Secretariat.

GST collections have been steadily improving since its launch on July 1, 2017. A senior government official on condition of anonymity said that the “GST journey is an ongoing process”, for which decisions are taken by the GST Council.

“The plan was always to rationalise the GST slabs and rates with the stabilisation of exercise. It is a continuous process and we are always willing to make course corrections as and when required,” the official added.

Importantly, the insurance industry has been demanding that the GST rate of 18 per cent for insurance plans be brought down. While many have suggested that the GST rate needs to be slashed to 5 per cent, others feel it should be made nil, a move that will push more Indians to buy insurance products.

The decision on this key issue has been long pending.

Steady Rise In GST Collections 

The gross collections in 2017-18 stood at Rs 7.19 lakh crore. In 2023-24, it surged to Rs 20.18 lakh crore. Though collections in February 2025, at Rs 1.84 lakh crore, was a tad lower than Rs 1.96 lakh in January 2025, overall GST accruals for the financial year have risen. The collection in April 2024 was the highest ever at Rs 2.10 lakh crore.

Despite GST collections steadily rising, problems due to multiple rates and slabs have often come as a hurdle for businesses.

Last year, a video of Srinivasan, the owner of Chennai’s Sri Annapoorna restaurant, highlighting the challenges and confusion over GST to Sitharaman during a public interaction, had taken the internet by storm.

The restaurant owner explained how a bun attracts no GST but the same — if sold with cream — is taxed at 12 per cent, and such discrepancies lead to confusions for the small and mid-sized businesses.

Data released by the Directorate General of GST Intelligence (DGGI) revealed that frauds amounting to Rs 2 lakh crore were registered in the financial year 2023-24 — double of the Rs 1.01 lakh crore identified in 2022-23 across 4,872 cases.

GST Headache 

While GST — touted as "one nation, one tax" — was launched to streamline the country’s tax structures by weeding out intricacies in filing and adhering to compliance, it has also led a surge in disputes and litigations due to discrepancies in interpretation and training. Frequent changes in GST rules and structures have added to the problem.

The worst affected are the small and medium businesses, many of which are still grappling with the GST filing exercise that is online. According to estimates, India has about 633.9 lakh MSMEs, of which over 95 per cent are categorised as micro-enterprises. The complications in GST filing have further affected the already struggling MSME sector.

The government official pointed out that the Finance Ministry is continuously monitoring the situation and is aware of most of the problems. 

“GST Council has gone into great detailing of looking item by item to see where rate reduction can happen. And equally, four rates or three rates or two rates or collapse into one rate is also being discussed,” Sitharaman said in the Rajya Sabha in December.   

Though the GST exercise has boosted tax collections, multiple problems on the ground continue to be a hindrance for businesses leading to a surge in legal disputes. Eight years into the journey, the GST structure along with rates and slabs need to be simplified.