India’s GST, launched in 2017, was intended to unify indirect taxes and balance fiscal power between the Union and States. However, successive rate cuts, the expiration of the compensation guarantee in 2022, and the 2025 three‑tier reform have eroded state revenue, deepening fiscal dependence on the Union.
The guarantee expired in June 2022.
It reduced rates of 178 items from 28% to 18% overnight.
A three‑tier structure of 5%, 18% and 40% was approved, with an estimated annual revenue loss of at least Rs. 48,000 crore.
The reforms were announced on 15 August 2025.
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A2Z Taxcorp · 5 days ago
Vito Tanzi, former IMF Fiscal Affairs Director, has urged India to replace its multi‑rate GST slabs with a single uniform rate for all domestic consumption and to redistribute the entire revenue equally to every citizen via per‑capita digital transfers linked to Aadhaar accounts. The proposal was presented at an international conference on the socio‑economic impacts of GST organised by the Centre for Development Studies.
Pune Mirror · 13 days ago
India’s GST 2.0 reform, effective 22 September 2025, cut the GST on most small cars to 18% and on larger cars and SUVs to a flat 40%, boosting first‑time buyer shares for major manufacturers. The tax reset has lifted demand in the budget‑friendly segment, with Maruti Suzuki, Hyundai and Tata Motors reporting higher first‑time buyer percentages.
BW Legal World · 14 days ago
The Allahabad High Court ruled that disputes arising from contractual obligations linked to GST compliance are arbitrable and do not fall under sovereign taxation functions. The court distinguished between challenges to the validity of tax levies and contractual disputes, allowing arbitration to proceed. The decision clarifies that GST compliance issues can be raised as defenses in arbitration proceedings.
BW Auto World · 19 days ago
The Supreme Court of India has admitted a petition by the Federation of Automobile Dealers Associations (FADA) concerning more than Rs 2,500 crore in blocked compensation cess credits that became unusable after the implementation of GST 2.0. The court has scheduled the next hearing for March 25 2026 and is considering a transitional mechanism to allow these credits to be offset against other GST liabilities. The case could set a precedent for handling legacy tax credits during indirect tax reforms.
The Hindu · about 1 month ago
India’s GST rationalisation introduced a two‑tiered rate structure of 5% and 18% in September 2025, boosting domestic consumption. However, February 2026 saw a sharp rise in import IGST collections—up 17% YoY—driven by a weaker rupee and higher import costs, which may erode the price relief from the new rates.
Storyboard18 · about 1 month ago
The Supreme Court of India ruled that Rooh Afza is a fruit drink under the Uttar Pradesh Value Added Tax Act, removing it from the residual category that had subjected it to a 12.5% VAT rate. The decision places the product under Entry 103 of Schedule II Part A, which historically attracted a 4% VAT rate for the assessment period 2008‑2012. The ruling emphasizes that tax classification must be based on statutory language, not food safety definitions.
