Goods and Services Tax (India)
The Goods and Services Tax is an indirect tax introduced in India on 1 July 2017, replacing a range of pre-existing taxes like VAT, service tax, central excise duty, entertainment tax, and octroi. GST unified the country's tax structure, simplifying the taxation of goods and services and eliminating the need for multiple taxes previously levied by both central and state governments.
GST is a comprehensive, multistage, and destination-based tax. It is considered comprehensive because it has replaced most indirect taxes, with a few exceptions for state taxes. The tax is multi-staged as it is levied at every stage of the production process, but is refunded to all parties involved, except the final consumer. Its destination-based nature means that the tax is collected at the point of consumption, rather than at the point of origin, marking a significant departure from previous tax systems.
The tax came into effect from 1 July 2017 through the implementation of the One Hundred and First Amendment to the Constitution of India by the Government of India. 1 July is celebrated as GST Day.
GST was initially structured with multiple tax slabs—0%, 5%, 12%, 18%, 28%, and 40%. However, certain goods such as petroleum products, alcoholic beverages, and electricity were excluded from GST and continued to be taxed separately by state governments under the previous tax system. Additionally, specific items like rough precious and semi-precious stones attracted a special rate of 0.25%, while gold was taxed at 3%. A cess of 22% or other rates applied on top of the 28% GST for certain luxury items such as aerated drinks, luxury cars, and tobacco products. Preceding the implementation of GST, the statutory tax rate for most goods was approximately 26.5%, with post-GST rates generally falling in the 18% range.
In a move to stimulate consumption amidst lagging consumer spending and stagnant wages and to mitigate the potential impact of tariffs imposed by the second Trump administration, the Indian government announced a significant reduction in GST rates on several goods on 3 September 2025. These changes, which came into effect on 22 September 2025, reduced the number of GST slabs from six to three, consolidating them into just two primary rates: 5% and 18%. This restructuring aimed to simplify the tax system and make goods more affordable to consumers.
The tax rates, rules and regulations are governed by the GST Council which consists of the finance ministers of the central government and all the states. The establishment of the GST, or, more precisely, its implementation, has received significant criticism. Positive outcomes of the GST includes the reduction in travel time in interstate movement, which the Ministry of Road Transport and Highways claims dropped by 20% owing to the disbanding of interstate check posts.
History
Formation
The reform of India's indirect tax regime was initiated in 1986 by V. P. Singh, the Finance Minister in Rajiv Gandhi’s government, with the introduction of the Modified Value Added Tax. Subsequently, Prime Minister P. V. Narasimha Rao and the Finance Minister Manmohan Singh initiated preliminary discussions on a Value Added Tax at the state level. A single common Goods and Services Tax was proposed and endorsed in 1999 during a meeting between the Prime Minister Atal Bihari Vajpayee and his economic advisory panel, which comprised three former RBI governors I. G. Patel, Bimal Jalan and C. Rangarajan. Vajpayee set up a committee headed by the Ministry of Finance of West Bengal, helmed by Asim Dasgupta, to design a GST model.The Asim Dasgupta committee, which was also tasked with putting in place the back-end technology and logistics, later came out for unveiling a uniform taxation regime in the country. In 2002, the Vajpayee government constituted a task force under Vijay Kelkar to recommend tax reforms. In 2005, the Kelkar committee recommended rolling out GST as suggested by the Twelfth Finance Commission.
After the defeat of the BJP-led NDA government in the 2004 Indian general election and the ascension of a Congress-led UPA government, the new Finance Minister P. Chidambaram, in February 2006, continued the efforts to implement GST and proposing its rollout by 1 April 2010. However, in 2011, with the Trinamool Congress routing CPI out of power in West Bengal, Asim Dasgupta resigned as the head of the GST committee. Dasgupta admitted in an interview that 80% of the task had been done.
The UPA introduced the 115th Constitution Amendment Bill on 22 March 2011 in the Lok Sabha to bring about the GST. It ran into opposition from the Bharatiya Janata Party and other parties, and was referred to a Standing Committee headed by the BJP's former Finance Minister Yashwant Sinha. The committee submitted its report in August 2013, but in October 2013, Gujarat Chief Minister Narendra Modi, who eventually became the Prime Minister in 2014, raised objections that led to the bill's indefinite postponement. Jairam Ramesh, the Minister for Rural Development, attributed the GST Bill's failure to the "single handed opposition of Narendra Modi".
In the 2014 Indian general election, the Bharatiya Janata Party -led NDA government was elected into power. With the consequential dissolution of the 15th Lok Sabha, the GST Bill—approved by the standing committee for reintroduction—lapsed. Seven months after the formation of the Modi government, the new Finance Minister Arun Jaitley introduced the GST Bill in the Lok Sabha, where the BJP had a majority. In February 2015, Jaitley set another deadline of 1 April 2017 to implement GST. In May 2016, the Lok Sabha passed the Constitution Amendment Bill, clearing the way for the GST. However, the Opposition, led by the Congress, sought that the GST Bill be again sent back for review to the Select Committee of the Rajya Sabha due to disagreements on several clauses in the Bill relating to taxation. In August 2016, the Amendment Bill was passed, becoming The Constitution Act, 2016. Within the next 15 to 20 days, 18 states ratified the Bill, and President Pranab Mukherjee gave his assent to it.
A 21-member selected committee was formed to look into the proposed GST laws. After the GST Council approved the Central Goods and Services Tax Bill 2017, the Integrated Goods and Services Tax Bill 2017, the Union Territory Goods and Services Tax Bill 2017, and the Goods and Services Tax Bill 2017 were passed by the Lok Sabha on 29 March 2017. The Rajya Sabha passed these Bills on 6 April 2017, whereupon they were enacted as Acts on 12 April 2017. Thereafter, the legislatures of different states passed their respective State Goods and Services Tax Bills. After the enactment of various GST laws, the Goods and Services Tax was launched all over India with effect from 1 July 2017. The Jammu and Kashmir state legislature passed its GST act on 7 July 2017, thereby ensuring that the entire nation was brought under a unified indirect taxation system. There was to be no GST on the sale and purchase of securities. That continues to be governed by Securities Transaction Tax.
Implementation
The GST was launched at midnight on 1 July 2017 by the President of India, and the Government of India. The launch was commemorated by a symbolic midnight session of both the houses convened at the Central Hall of the Parliament. Though the session was attended by distinguished dignitaries from the business and the entertainment industries, it was boycotted by the opposition due to its apprehension over looming concerns for the middle and lower class Indians following its implementation. The tax was strongly opposed by the largest opposition party, the Indian National Congress. It is one of the few midnight sessions that have been held by the parliament, the others being the declaration of India's independence on 15 August 1947, and the silver and golden jubilees of that occasion.Members of the Congress boycotted the GST launch altogether. They were joined by members of the Trinamool Congress, Communist Parties of India and the Dravida Munnetra Kazhagam. The parties reported that they found virtually no difference between the GST and the existing taxation system, claiming that the government was trying to merely rebrand the current taxation system. They also argued that the GST would increase existing rates on common daily goods while reducing rates on luxury items, and affect many Indians adversely, especially the middle, lower middle and poorer income groups, who constitute the vast majority of Indians.
Dissolution of the National Anti-Profiteering Authority (NAA)
Introduced as part of the original GST rollout in July 2017, the anti-profiteering framework was established through Section 171 of the Central Goods and Services Tax Act, which mandated that any reduction in tax rates or the availability of input tax credits be passed on to consumers through a commensurate reduction in prices. To enforce this, the government set up the National Anti-Profiteering Authority in November 2017 as a statutory body tasked with investigating unfair profiteering practices by registered suppliers.Initially constituted for a two-year term, the NAA was granted multiple extensions as profiteering concerns persisted. However, the institutional structure underwent gradual modification: from 1 December 2022, the authority to handle anti-profiteering complaints was transferred to the Competition Commission of India. A subsequent notification dated 1 October 2024 empowered the Principal Bench of the GST Appellate Tribunal to assume adjudicatory jurisdiction. The same notification also set 1 April 2025 as the official sunset date for the anti-profiteering provisions under GST law, after which no new complaints would be accepted. Existing complaints lodged before this date continue to be adjudicated by GSTAT.
The government cited simplification of compliance and a reliance on market forces for the discontinuation of the statutory anti-profiteering mechanism, though the long-term impact on consumer protection remains to be assessed.