Yet, it is a job half done, and the next round of reforms is unavoidable. 

The Long March To A Single Tax

GST was not built in a hurry. It was argued over for the better part of two decades.

The idea entered official machinery in 2000, when the Atal Bihari Vajpayee government set up an Empowered Committee of State Finance Ministers, chaired first by West Bengal’s Asim Dasgupta, to design a national value-added tax. In 2003 and 2004, the Vijay Kelkar task force on fiscal reform argued for a comprehensive GST to replace the tangle of Central and state levies.

The first firm date came in the 2006 Budget. Finance Minister P. Chidambaram announced that GST would be rolled out from 1 April 2010. That deadline came and went. So did several after it.

The politics were the hard part. States feared losing their fiscal sovereignty. The Centre feared losing revenue. A Constitution (115th Amendment) Bill was introduced in 2011 and lapsed. The Constitution (122nd Amendment) Bill, moved by Arun Jaitley in 2014, finally cleared both Houses in 2016. It became the Constitution (101st Amendment) Act, 2016. It created the GST Council, the federal chamber where the Centre and the states vote together on rates.

At midnight on 1 July 2017, GST went live. It subsumed more than a dozen Central and state taxes and a thicket of cesses into a single chain of credit running from factory to shop counter. Whatever its flaws, it was the largest indirect-tax reform in the nation’s history.

The bargain that made it possible is worth naming, because it echoes into today’s arguments. To win the states over, the Centre guaranteed them 14% annual revenue growth over a 2015-16 base for the first five years, and funded that guarantee through a special compensation cess. That five-year window closed in June 2022. The cess that paid for it has now, in 2025, been folded away. The politics of trust that built GST did not end at launch. It is still being renegotiated.

The Numbers Have Arrived

If the promise of GST was a wider, better-captured tax base, the collection numbers have delivered.

In July 2017, its first month, GST brought in ₹92,283 crore. That figure now reads like a relic. Average monthly gross collections have climbed almost without pause:

Until September 2025, a compensation cess sat on top of GST, funding the payments promised to states for their revenue losses. GST 2.0 folded that cess away. Most of it went from 22 September 2025; the tobacco cess followed on 1 February 2026.

Former Finance Secretary Subhash Chandra Garg’s recent claim was that the government compared unlike with unlike. This year’s collections no longer include the cess. Last year’s baseline still does. Strip out that mismatch, he argues, and the five-month growth for April to August 2026 falls to 4.08% gross and just 1.30% net, which he dubbs “a pathetic performance.” 

The rebuttal, from the Central Board of Indirect Taxes and Customs and SBI’s Soumya Kanti Ghosh, is that Garg is comparing apples with oranges. The cess was a temporary levy. Once a tax is legally extinguished, they say, keeping it in the comparison “measures something other than the movement of the actual tax base.” Ghosh points to a high base last year, inflated by a one-off telecom spectrum payment, and notes that, on a like-for-like reading, the tax grew about 11.2% over April-August, ahead of nominal GDP growth of 10.3%.

The data show this: refunds in August 2026 surged nearly 68%. The GST Appellate Tribunal has taken years to stand up. For a small manufacturer, the compliance load remains real. The imperfections have been softened. They have not been solved.

These are not footnotes. They are among the biggest own-revenue sources the states control. That is exactly why they were left out: they are the price the Centre paid for the states’ consent in 2016. But every business that cannot claim credit on its fuel and power, and every citizen who pays tax-on-tax at the pump, bears the cost.

The Case For An All-Inclusive GST

The logic of a value-added tax is that the credit chain must be unbroken. Every break is a hidden tax on production.

When diesel, power, and rent sit outside GST, a factory pays embedded taxes it can never recover. Those taxes ride into the final price. The clean idea of taxing only value added leaks at four large seams. An all-inclusive GST would plug them. It would lower the real tax on manufacturing, reduce cascading, and remove the system's single largest distortion.

The states’ fear is understandable and must be met, not dismissed: no state will surrender its most reliable revenue on a promise. The answer is a credible, time-bound fiscal settlement, with a guaranteed floor and a transparent formula, not another indefinite deferral. 

The 2017 compensation model is the template, even if its exact terms are not. Petroleum, which needs no constitutional amendment and only a Council notification, is the natural place to start. Bring in fuel first, prove the settlement holds, and the harder cases become easier to argue.

The lesson from abroad is consistent. Fewer rates and fewer exemptions mean less litigation, lower compliance costs, and higher buoyancy: Simplicity is not an aesthetic preference. It is a revenue strategy.

Ten Structural Reforms

The road from a good tax to a great one runs through ten steps.

Firstly, bring petroleum products under the GST. And so with electricity. Over time, bring real estate, converging stamp duty into GST rather than stacking it on top.

Then, set a roadmap for alcohol, accepting that the constitutional amendment is a long game worth beginning.

Further, move towards a single standard rate, letting 5% and 18% converge on a revenue-neutral rate, keeping only a merit rate and the 40% demerit rate. Prune exemptions and the nil list to broaden the base and end classification wars. Kill inverted duty structures and clear refunds fast.

Operationalise the GST Appellate Tribunal fully and give the Council a standing dispute-resolution arm. Simplify compliance for micro, small, and medium enterprises (MSMEs) with a single return, quicker registration and fewer classification traps.

Lastly, publish one transparent, comparable data series. The Garg episode is proof that credibility is now a reform in its own right.

Job Unfinished

The collections are real. The simplification of 2025 was overdue and welcome. But a tax that leaves fuel, power, liquor, and land outside its ambit, a tax that still runs several rates, and one that cannot agree with its critics on how to count its own growth, is a house that is standing but not finished.

The genius of GST was that the Centre and the states chose to build it together. The next stage will demand the same bargain, struck again with fresh trust.

(The writer is a former civil servant. Views expressed are personal.)