8. Goods and Services Tax in India: A Stocktaking

The Goods and Services Tax (GST) that was implemented in July 2017 to simplify and harmonize the domestic consumption tax system has taken a firm root and is a reality. However, the potential gains from the reform are yet to be fully realized, and the reform is still a work in progress. In the last five years, the tax has settled, and there are signs of improvement in revenue collections. There have been many gains from the tax, and these include the unification of many domestic trade taxes and harmonized structure, removal of impediments to trade and reduced transaction cost of inter-state transactions, greater formalization of the economy through digitization, getting rid of inter-state tax exportation by converting the tax from origin-based to destination-based, and more efficient supply chain management. However, much more remains to be done to make it “a money machine”, and to lower the collection, compliance, and distortion costs. The paper details the reform agenda for fully realizing the potential gains from the tax in terms of efficiency and revenues.