GST at 8: India’s Most Ambitious Economic Integration Success

By | June 27, 2025 | Uncategorized

Economic Reforms, GST, Inflation

As India marks eight years of the Goods and Services Tax in June 2025, GST stands out as one of the country’s most consequential economic reforms since liberalisation. It is more than a change in tax rates; it has unified India’s fragmented tax landscape into a single, cohesive system. By removing barriers that once slowed interstate trade, GST has enabled smoother movement of goods, reduced costs, and contributed to greater price stability.

Industry feedback supports this achievement. The latest Deloitte GST@8 survey shows that 85 percent of Indian businesses express confidence in the system, up sharply from 59 percent in 2022. As India’s economy grows more formal, digital, and interconnected, GST’s role in enhancing efficiency and competitiveness is increasingly evident.

Creating a Single, Modern, and Efficient National Market

GST’s introduction was a critical step toward removing the tax barriers that historically fragmented India’s market. Before its rollout, interstate commerce faced cascading taxes, multiple registrations, and long delays at state check posts.

By harmonising rates and removing these obstacles, GST created a unified system that enables goods to move seamlessly across state borders. The result is seen in interstate trade’s share of GDP, which grew from 23.5 percent in 2018 to 35 percent in 2025, reflecting a more integrated national market.

This integration has been strongly supported by digitisation and automation. The adoption of e-invoicing, automated return filing, and improved GSTN portal connectivity has made compliance easier and more transparent, reducing manual errors and enabling faster credit access.

These improvements have been particularly important for MSMEs, whose satisfaction with GST rose from 78 percent in 2024 to 82 percent in 2025. By formalizing their operations and lowering compliance costs, GST has given smaller firms tools to compete on fairer terms with larger businesses. This digital shift has also helped expand the tax base and reduce evasion, supporting broader fiscal goals.

Lowering Costs, Containing Inflation, and Supporting Business Confidence

GST’s structure has significantly reduced the cascading tax burden by unlocking input tax credits across supply chains. Many essential goods have seen marked rate reductions: soaps and hair oil moved from 28 percent to 18 percent, electrical appliances from 31.5 percent to 12 percent, and various food items from 6 or 2.5 percent to 5 percent or even nil.

Such changes have made supply chains more cost-efficient, helping businesses offer competitive pricing while limiting inflationary pressures for consumers.

Beyond price benefits, GST’s efficiency has real fiscal impact. The Prime Minister’s Economic Advisory Council estimated that GST helped save over ₹4.3 lakh crore in taxes within a single year, underscoring its role in streamlining the indirect tax system.

Industry surveys show that these changes are recognized widely. The Deloitte GST@8 survey highlights growing positive perceptions across sectors, including consumer goods, technology, financial services, healthcare, and MSMEs. Importantly, 100 percent of surveyed businesses reported being at least partially prepared to handle audits and regulatory notices, indicating a significant leap in compliance readiness.

India’s Economic Integration Success and the Road Ahead

Eight years after its introduction, GST has helped reshape India’s economic landscape. By creating a unified national market, lowering costs, simplifying compliance, and adopting technology-driven processes, GST has delivered clear benefits for businesses and consumers alike. However, the system’s success also depends on continuous improvement.

Industry feedback points to certain areas needing attention. While 85 percent of respondents reported a positive experience, 67 percent noted that government clarifications helped resolve disputes in 2025, up from 55 percent in 2024. Yet many large and very large enterprises (45 percent and 47 percent, respectively) still seek better dispute resolution mechanisms.

MSMEs continue to call for rate rationalisation to address inverted duty structures, as well as demands for uniform audit practices, simplified export rules, and standardised registration procedures. Businesses have also raised concerns about delayed refunds, limited understanding of digital business models by authorities, and aggressive tax interpretations.

These challenges are opportunities for thoughtful, next-generation reforms that can make GST even more effective. As India’s economy grows and evolves, GST remains central to supporting integration, competitiveness, and sustainable development.

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