The Goods and Services Tax (GST), launched on July 1, 2017, was hailed as a transformative reform to unify India’s indirect tax system. Over the past eight years, GST has expanded the tax base and boosted revenues – annual gross collections doubled from ₹11.37 lakh crore in FY2020–21 to a record ₹22.08 lakh crore in FY2024–25. The number of registered taxpayers surged from about 60–65 lakh in 2017 to over 1.51 crore active registrations by April 2025, reflecting a broadening of compliance. Monthly GST inflows now routinely exceed ₹1.5 lakh crore, with April 2025 hitting an unprecedented ₹2.37 lakh crore.
Yet, this eight-year journey has also exposed significant pain points for stakeholders. Consumers, businesses, tax practitioners, and the tax bureaucracy have each grappled with structural and procedural challenges.
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From complex tax rates and compliance burdens to technical glitches, input credit hurdles, and delayed dispute resolution, the GST regime’s “one nation, one tax” promise has been tempered by persistent gaps.
In this attempt, we critically examine eight major pain points that have emerged, offering a balanced assessment from each stakeholder’s perspective (with a slight emphasis on the issues voiced by tax practitioners).
(Note: All amounts are in Indian rupees. ₹1 lakh crore = ₹1 trillion = 100,000 crore.)
Multiplicity of Tax Rates and Classification Anomalies
One of the foremost pain points for consumers and businesses has been the complex rate structure under GST. Instead of a simple rate, GST launched with five primary slabs (0%, 5%, 12%, 18%, 28%) and additional special rates for certain goods (e.g. 3% on gold, 0.25% on rough diamonds). While this was meant to balance revenue and equity considerations, in practice it led to arbitrary classification disputes and odd outcomes. For example, popcorn is taxed differently based on flavor – salted popcorn attracts 5% GST, while caramelized popcorn is taxed at 18%. In another case, a bakery found that a bun with cream was taxed higher than a plain bun, prompting customers to request cream separately – a discrepancy so absurd that the restaurateur’s complaint went viral, even drawing an apology to the Finance Minister. Such quirks have confused consumers and forced businesses to alter products or billing to fit lower-tax categories.
Beyond specific items, broader concerns linger about certain goods being overtaxed relative to their nature or social need. For instance, cement and two-wheelers (motorbikes) remain in the highest 28% slab – ostensibly treated like luxury goods – despite their mass usage in housing and transportation. Tax professionals note it is questionable if cement or an entry-level scooter is truly a “luxury” in India. These high rates directly impact consumers by inflating costs of homes and mobility. They also hurt businesses in those sectors by dampening demand. A GST practitioners’ association letter in 2024 highlighted “high tax rates on essential items like cement and two-wheelers” as a critical problem, urging rate cuts to provide relief to consumers and traders.
Furthermore, important commodities like petroleum products (petrol, diesel) and certain building materials (e.g. electricity, real estate in part) lie outside GST’s ambit. This exclusion means businesses cannot claim input tax credit on these, leading to a cascading tax burden. It also means consumers pay high excise/VAT on fuel on top of embedded taxes in goods transport. Indeed, petrol and diesel face excise/VAT totaling nearly 100% of their price, a situation described as “taxing both Peter and Paul,” hurting oil companies and consumers alike. The failure to subsume key items in GST undermines the “one tax” ideal and keeps prices high, contrary to GST’s promise of reducing the tax burden on the common man. A critical assessment seven years in noted that “many items, such as petrol, diesel, cement, and steel, are excluded from GST…leading to a cascading effect where indirect taxes add to costs” and exports are not fully zero-rated when such input taxes sneak into the supply chain. From the consumer perspective, these unresolved structural issues have meant uneven price outcomes – while GST made some goods (e.g. daily groceries) cheaper, it failed to deliver broad-based reduction in living costs as initially envisioned. The Finance Ministry’s own study claimed GST saved households 4% on monthly expenses by lowering tax on essentials, but any such savings for consumers were offset by higher taxes on services (18% GST on telecom, insurance, etc., up from 15% service tax) and persistently high fuel and housing costs.
In summary, the multiplicity of rates and exclusions under GST created confusion and compliance headaches, with consumers bearing the brunt of inconsistencies. Businesses had to devote resources to tax classification strategies, and policymakers face continued pressure to rationalize the rate structure. Notably, the GST Council has made some progress – e.g. pruning items in the top 28% slab from 227 initially down to just 35 by 2023 – but a simpler rate regime remains a key unfinished agenda.
Inflationary Pressures and Anti-Profiteering Scrutiny
From a consumer standpoint, another pain point has been the inflationary impact and mixed price outcomes in GST’s early years. The government had pitched GST as a “Good and Simple Tax” that would reduce prices through elimination of cascading taxes. Indeed, GST subsumed multiple state and central levies, theoretically lowering the overall tax incidence on many goods. However, in the months after July 2017, consumers complained that certain products and services became more expensive. Part of this was perception – earlier taxes like excise were hidden in prices, whereas GST was visible on receipts. But in other cases, genuine price increases occurred, especially in services. For example, telecom bills and bank fees saw taxes rise from 15% to 18%. Restaurant dining initially became costlier under a uniform 18% GST for air-conditioned eateries (later rationalized to 5% without input credits). Small businesses below the GST threshold who previously did not charge tax now had to charge GST once they crossed turnover limits, pushing prices up.
The government responded by establishing an anti-profiteering mechanism – the National Anti-ProfiteeringAuthority (NAA) – to ensure tax rate reductions were passed on to consumers. In theory this protected consumers from price-gouging. In practice, the anti-profiteering regime became a source of litigation and uncertainty for businesses, and its record in curbing inflation is debatable. Large companies like Hindustan Unilever and Nestlé faced high-profile NAA investigations and penalties for allegedly not reducing prices in line with GST rate cuts. Businesses argued the methodology to calculate “profiteering” was ambiguous and did not account for cost increases. Nonetheless, between 2017 and 2021, hundreds of NAA orders were issued, and many were challenged in courts. This added to the compliance burden for companies, even as consumers saw only modest relief. Headline inflation did dip in late 2017, but other factors (like global oil prices and supply constraints) dominated inflation trends in subsequent years, muting GST’s effect.
Another aspect hurting consumers has been continuing high taxes on petrol and diesel, as noted earlier. These fuels being out of GST meant the significant excise and state taxes on them remained. Fuel price hikes fed into transportation costs and general inflation, affecting all consumers indirectly. The period of 2021–2022 saw a sharp rise in global oil prices, and because India taxed fuels heavily outside GST, retail petrol/diesel prices hit record highs. This “taxation on essentials” runs counter to GST’s consumer-friendly goal. Critics point out that in countries with GST/VAT covering fuels, input credits and unified taxation soften the burden, whereas India’s approach “robbed both Peter and Paul” – squeezing producers and consumers simultaneously.
Overall, while GST did eliminate the “tax on tax” in many supply chains and brought down effective tax rates on some goods, the net effect on consumer prices has been mixed. The government’s own figures showed average household savings of 4% due to GST, but for big-ticket expenses (fuel, vehicles, housing materials), consumers did not feel much relief. The need for constant monitoring via anti-profiteering measures and rate cuts by the GST Council (over 400 rate adjustments in four years) suggests that ensuring consumer benefits was more challenging than anticipated. For consumers, the pain point has been this “teething inflation” and the complexity in understanding whether they benefited from GST or not. Many now accept GST as the new normal, but the early expectation of markedly cheaper goods and services remains only partially fulfilled.
Compliance and Filing Burdens on Businesses
For businesses, especially small and medium enterprises (SMEs), GST’s implementation brought a significantly higher compliance workload. The tax was meant to simplify indirect taxation by replacing a “maze” of state taxes, and indeed GST did unify laws and online filing through the GST Network (GSTN) portal. However, the initial design of returns was highly complex – taxpayers were expected to file three returns every month (GSTR-1 for sales, GSTR-2 for purchases, GSTR-3 for net tax) plus an annual return. This proved impractical; within a few months, the GSTR-2 and GSTR-3 matching system was suspended due to technical glitches, and a simplified summary return (GSTR-3B) was introduced. Even with simplifications, an average business today files GSTR-1 and GSTR-3B monthly (or quarterly for smaller firms) and a GSTR-9 annual return, in addition to handling e-way bills and e-invoices. The volume of compliance has been daunting.
Filing statistics illustrate the burden. In the first month of GST (July 2017), about 65.9 lakh GSTR-3B returns were filed. This climbed to 84.6 lakh by October 2018, as more taxpayers came into the net, but then dropped to around 74 lakh by May 2019 – indicating many initial registrations became inactive or businesses struggled to keep up with filings. Compliance slowly stabilized as taxpayers adapted and the government eased deadlines. By FY2021–22, with over 1.25 crore taxpayers, on-time filing percentages improved significantly. For instance, the average monthly GST filings in FY2021–22 were around 95 lakh, which jumped to about 1.5 crore in FY2022–23, tracking the expanding taxpayer base. As of mid-2025, about 1.3–1.4 crore GSTR-3B returns were filed each month, demonstrating much higher compliance than in the initial years. The GSTN now reports over ₹1.8 lakh crore collected monthly in FY2024–25 on average, implying that most registered businesses are filing and paying regularly.
However, this compliance success has come at a cost to businesses. Small firms had to invest in new accounting software, train staff or hire consultants, and dedicate more time to tax matters. Multiple due dates (for GSTR-1, GSTR-3B, tax payments, TDS/TCS where applicable, etc.) mean constant vigilance. A missed filing attracts late fees and interest (GST imposes 18% annual interest on late tax payments, which practitioners argue is punitive and far above market rates). During 2017–2019, the frequent extensions of deadlines were testimony to businesses struggling to comply and the system struggling to accept returns. Even in 2023–24, the GST Council had to offer amnesty schemes for non-filers to clear backlogs of unfiled returns and reduce late fee burdens. The government has now moved to harden compliance – from July 2025, returns older than 3 years cannot be filed at all, effectively time-barring non-compliance. This is intended to instill discipline, but experts caution it might “lead to permanent denial of input tax credit” for buyers if a seller’s old return is locked out. In other words, compliant businesses could suffer if their vendors fail to file within the cutoff.
Businesses also face a steep learning curve with constant rule changes. The GST Council met 50+ times in eight years, often tweaking rates, thresholds, and procedures. While many changes were in response to industry feedback (e.g. raising the registration threshold to ₹40 lakh for goods, simplifying composition scheme), the flip side is policy instability. A mid-sized business’s finance team has had to monitor a stream of notifications – for example, e-invoicing thresholds were lowered in phases from ₹500 crore turnover in 2020 to ₹5 crore by 2023, bringing more businesses into its fold; the frequency of GST returns for small taxpayers changed from monthly to quarterly (with QRMP); new restrictions like time-limits on claiming credits were added etc. Such changes, often announced with little lead time, created uncertainty and compliance anxiety for businesses.
In summary, the compliance burden remains a pain point. GST did standardize and digitize tax filings, which improved transparency and probably reduced evasion, but the cost of compliance for honest businesses went up in terms of time and money. Surveys by industry bodies show mixed feelings – while larger corporations have largely adjusted to GST (and appreciate the input credit and seamless interstate trade), many SMEs still find it “fussy” and demanding. Tellingly, a recent analysis noted that “GST isn’t new anymore… expectations are higher now. Businesses [want] GST 2.0 to move past teething problems”. Compliance simplification thus remains an ongoing agenda to truly make GST a “Good and Simple Tax” for businesses of all sizes.
Tech Glitches and GSTN System Bottlenecks
GST was envisioned as a fully digital tax, with all processes – registration, invoice uploading, return filing, payments, refunds – happening online through the GSTN portal. This was a leap forward from the paper-based, state-wise filings under the old system. However, the initial years of GST were marred by severe technical glitches that frustrated taxpayers and practitioners alike. Because of a hasty rollout, the system was not adequately tested under load, and as a result the portal crashed frequently in 2017–18, especially around return due dates. The situation got so bad that deadlines had to be extended repeatedly to allow filings after the site capacity was enhanced.
Tax professionals recall this period as chaotic – “the extreme load on the system led to many crashes, which continued for more than a year”. These glitches effectively punished those trying to comply, undermining confidence in the new regime. The government had to bring in Infosys (GSTN’s software vendor) for multiple rounds of firefighting and even opened temporary filing facilities in tax offices to help users.
As the GSTN infrastructure stabilized by 2019, new digital challenges arose with the introduction of e-way bills (in 2018) and e-invoicing (phased from 2020). Each of these systems also encountered initial hiccups. The e-way bill portal crashed on its first day (Feb 2018) and had to be withdrawn for upgrades before relaunch. Over time, both systems have become robust: for instance, 5,577 lakh (557.7 million) e-way bills were generated in FY2018–19 alone, growing further in subsequent years as the tool to track movement of goods. The sheer volume of data is huge – by 2023, billions of e-invoices and e-way bills have been recorded, helping authorities detect tax evasion. But taxpayers and transporters had to adapt to these digital tools, often needing to invest in IT upgrades or middleware software to integrate with GSTN. This was especially taxing for small businesses with limited IT capability. Even minor portal issues (like slow response times or auto-population errors in forms) could delay compliance for thousands of users. Each new feature introduced – be it GSTN’s invoice matching tool, the annual return reconciliation, or new payment modules – came with a learning curve and occasional bugs that had to be ironed out.
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Tax practitioners have been vocal about ongoing GSTN portal frustrations. As late as June 2024, the Rajasthan Tax Practitioners’ Association in its memo to the Finance Minister listed “simpler procedures” and fixing GSTN problems among key demands. One specific grievance was the inability to amend submitted returns: once a GSTR-3B is filed, the system doesn’t allow modifications, even if an error is discovered. Unlike income tax where a revised return can be filed, GST’s rigid portal design means any mistake necessitates cumbersome adjustments in subsequent returns or may lead to notices.
Similarly, registration on GSTN became more onerous over time due to frauds – by 2023, the process included compulsory physical verification of premises for most new registrations. This “100% verification” mandate has caused delays and inconsistencies (as officers in different areas follow different processes), leading to procedural pain for genuine new businesses.
From the bureaucracy’s perspective, the digital architecture has been a double-edged sword: it massively increased data availability and transparency (helping boost revenues through analytics-driven enforcement), but it also meant the tax administration had to rapidly build IT expertise.
The early GSTN failures were an embarrassment for the government, prompting high-level interventions. Over time, proactive improvements have been made – auto-population of data between GSTR-1 and 3B, better server capacity, dashboards for officers, etc. – and by FY2024, Deloitte’s GST survey found industry acknowledging “enhanced features on the GST portal” and a need to further evolve it into a more effective 2.0 version. There is now discussion of a next-generation GSTN system to address remaining user experience issues and add capabilities (like a more seamless refund processing and dispute resolution interface).
In conclusion, technology infrastructure issues have been a significant implementation bottleneck. While they have been gradually resolved, the initial “teething troubles” lasted far longer than expected – arguably 2–3 years of GST’s rollout were spent troubleshooting IT rather than reaping policy benefits. This eroded trust among taxpayers and made compliance more burdensome than it should have been.
The lesson has been that digital reforms require robust planning and user-testing. GSTN’s experience has since informed other projects (e.g. the upcoming Income Tax portal revamp took cues from GSTN’s mistakes).
For stakeholders, the hope is that a mature GSTN will truly make compliance frictionless; until then, technical glitches remain a pain point that occasionally resurfaces, especially when new features or changes are introduced.
Input Tax Credit Hurdles and Working Capital Strain
At the heart of GST is the Input Tax Credit (ITC) mechanism – the promise that businesses can credit the taxes paid on inputs against their output tax liability, eliminating the cascading effect of taxes. While ITC has indeed been a boon to businesses in principle, in practice availing and retaining input credits has been one of the most contentious and painful aspects of GST for businesses and their tax advisors.
Several factors contributed to this: procedural complexities, frequent rule changes to curb fraud, and counterparty compliance dependencies.
One major pain point has been the rule that a buyer’s ability to claim ITC depends on the supplier’s compliance. If a vendor fails to file their return or pay the tax, the purchaser’s ITC can be denied or later “blocked,” effectively making it the buyer’s problem to police their suppliers. Tax practitioners argue this is fundamentally unfair: “There is no other way for the buyer to ensure their input credit is safe… how would an ordinary buyer know if a seller is bogus or non-compliant?”. Yet under GST law, especially after Rule 36(4) was introduced, buyers can only claim ITC that matches the invoices uploaded by sellers (with a small provisional gap). The Rajasthan practitioners’ memo (2024) cited blocking of ITC when the seller does not file returns or is declared fake as the first problem on their list. They noted that the government should recover tax from the delinquent seller rather than debiting the buyer’s credit ledger without notice. This issue has led to numerous litigations, with high courts often sympathizing with genuine buyers. Nonetheless, until systemic solutions (like better taxpayer ratings or invoice locking) take hold, businesses face the risk of ITC reversals through no fault of their own.
Another ITC headache was the time limit on claiming credits. Initially, businesses had to claim any missed input credit by the September following the financial year (later extended to October/November via amendments). Missing this deadline, even if tax was paid by the supplier, meant the credit lapsed. In FY2018–19, many businesses and consultants raced to reconcile invoices by the due date to avoid losing credit – a task complicated by GSTN’s patchy matching tool. The letter from practitioners highlights Section 16(4) – loss of ITC if return is filed late as “absolutely unfair” because “the Government receives the full tax, but due to the timeline, it becomes double taxation for industry”. They pleaded for an amnesty for initial years to resolve such ITC issues. Indeed, the government eventually provided some reliefs (like extended deadlines during COVID, and in 2022 allowing amendments for a longer window), but the general rule still stands, pressuring businesses to be prompt and accurate in credit claims or risk permanent loss.
Working capital blockage due to delayed refunds has also been a pain point, especially for exporters and those in inverted duty structures. GST was supposed to streamline refunds (with promises of 90% provisional refund in 7 days for exporters), but the reality saw significant delays and procedural hurdles in the first few years. Exporters in 2017–18 reported refunds stuck for months, leading to liquidity crunch. The government cited fraud prevention as a reason for stringent verification. Over time, processes improved – online refund applications, quicker processing – yet as late as 2021, industry surveys found refund timeliness needing improvement.
In inverted duty cases (where output tax rate is lower than input tax rate, e.g. textiles for a period), businesses accumulated ITC that couldn’t be used except via refund, effectively a tax on working capital until refunded. The GST Council did take steps (refunding accumulated ITC for some sectors, raising some output tax rates to reduce inversion, etc.), but in certain sectors, complaints persist that “refunds under inverted structure still take too long and tie up funds.” The annual GST collection numbers indirectly reflect this – if refunds are delayed, gross collections stay higher. The record collections in FY2021–22 and FY2022–23 were partly attributed to stricter controls on fake ITC and slower refunds, which boosted net revenue but at the cost of business liquidity, critics argue.
Moreover, numerous restrictions on ITC ebiligility has left taxpayers aggrieved. GST law blocks ITC on goods/service like motor vehicles, club memberships, travel benefits to employees, construction of immovable property, etc., when used for business. Some of these were carried from the old regime, but businesses hoped GST would be more liberal. For example, ITC on company cars or even work horses like scooters and motorcycles is disallowed (except under specific uses) – a policy that SMEs find onerous since two-wheelers are essential for operations but they can’t credit the GST paid on them. The rationale was to prevent personal use claims, but many feel a conditional credit would have been better than a blanket block. The 2024 practitioners’ memo calls the vehicle ITC block “unreasonable… now that GST revenue has stabilized, it should be lifted with safeguards”. Additionally, businesses faced confusion on documentation for ITC – e.g. needing proper tax invoices, GSTIN of suppliers, etc. – and any mistake could lead to credit denial. One listed challenge was “unclear list of documents required to claim ITC”, urging the government to clearly define and not arbitrarily disallow credits on procedural grounds.
Because of these complexities, ITC has been a major source of disputes and notices. It is telling that “most notices are related to input credit, and … the biggest flaw is that the system holds the buyer responsible if the seller defaults”. In the pre-GST era, a VAT or service tax payer had issues but at least was not directly penalized for the vendor’s non-payment in most cases. Under GST, however, the credibility of the credit chain is paramount and honest businesses feel unjustly targeted when one link breaks. To address fraud (like fake invoice rackets), the government hardened rules: e.g. requiring a proportion of tax to be paid in cash for risky profiles, and imposing penalties on availment of fake credit. While these anti-evasion measures have improved compliance and revenue, they also cast a wide net that at times inconveniences legitimate taxpayers (e.g., real businesses getting flagged as risky due to anomalies, suspension of GST registration, etc.).
In conclusion, the input tax credit mechanism – the core “value-added” feature of GST – has proven to be a double-edged sword. It undoubtedly benefits businesses by reducing overall tax costs and prices (the Deloitte survey notes “seamless Input Tax Credit flow” as a key positive cited by 85% of respondents). But the seams have been quite rough: procedural hurdles, strict timelines, dependency on counterparty behavior, and evolving rules made ITC a minefield in GST’s first eight years. For CFOs and tax practitioners, managing ITC is now a critical compliance function in itself, requiring careful vendor due diligence, timely reconciliations (e.g. matching purchase data with GSTR-2A/2B statements), and sometimes legal recourse to defend genuine credits. This area remains one where further simplification and trust-building could significantly ease industry’s GST experience.
Rising Litigation and Lack of a GST Tribunal
A key promise of GST was a more efficient and uniform tax administration that would reduce disputes. In reality, the GST era has seen a surge in litigation and a strain on dispute resolution mechanisms. The causes are manifold: ambiguity in new provisions, conflicting advanced rulings, aggressive tax audits focused on revenue, and – critically – the absence of the GST Appellate Tribunal (GSTAT) for almost the entire eight-year period. For taxpayers and tax practitioners, the inability to get quick resolution of GST disputes has been a major pain point, leaving them stuck in protracted fights in high courts or quasi-judicial forums.
To start, the design of GST introduced new legal concepts that took time to settle. Many provisions were open to interpretation – for example, what constitutes a supply, how to value certain transactions, whether particular goods fall in one rate category or another, etc. The Authority for Advance Rulings (AAR) was meant to provide clarity, but AAR rulings often varied from state to state and were not binding except on the applicant. This led to divergent positions and confusion, sometimes prompting businesses to litigate to get certainty. Additionally, the anti-profiteering provisions (discussed earlier) created an entirely new genre of litigation. Public interest litigations were also filed challenging aspects of GST (such as the constitution of the GST Council, the method of IGST settlement, etc.), adding to the docket.
However, the single biggest structural gap was the delay in setting up the dedicated GST tribunal. Under the GST laws, the GSTAT was supposed to be the forum for appeals beyond the first appellate authority, replacing the old VAT/Service Tax tribunals. But due to legal challenges (a 2019 Madras High Court judgment struck down aspects of the GSTAT structure for having too many technical members over judicial members) and prolonged Center-State discussions, the tribunal was not operational for years. It was only in 2023 that Parliament passed amendments to fix the tribunal’s composition, and as of mid-2025 the government has finally notified the GSTAT rules and started the process of appointing members. In the interim, taxpayers with disputes had no choice but to approach High Courts via writ petitions for issues that would normally be tribunal matters. This led to an overflow of GST cases in the court system, adding to judicial backlog and costs for businesses. Indeed, GST-related disputes have increased significantly, driven by evolving interpretations and procedural uncertainties. A professional guide on GST disputes by the Institute of Chartered Accountants observed that “as GST approaches its eighth anniversary…it has significantly modernized the tax landscape. However, GST-related disputes have also increased”. The absence of appellate forums “forced taxpayers to rely on High Courts for remedy, adding to judicial backlog”.
Just to illustrate, as of early 2023, it was reported that in Gujarat alone, GST disputes worth about ₹5,000 crore were pending resolution, awaiting a tribunal to be constituted. Multiply that across states and one gets a sense of the magnitude of unresolved cases nationwide. Most of these are stuck at the stage after the first appeal – essentially in limbo until GSTAT benches start functioning. The delay in justice has real financial consequences: demand orders remain hanging, pre-deposits get blocked, and businesses face uncertainty. Tax officers, on the other hand, cannot recover dues until litigation is resolved, affecting revenue realization. It’s a lose-lose scenario that persisted for eight years of GST. Tax practitioners have been among the most vocal about this issue, with one noting that “appellate justice under GST remained incomplete” and urging the government to operationalize tribunals to “ensure quicker resolution of disputes”.
Even at the adjudication stage, aggressive assessments and audits have raised concerns. The Deloitte GST@8 survey found that “expansive pro-revenue legal interpretations by tax authorities” were a major challenge flagged by MSMEs. There is a sense in industry that field officers, under pressure to meet revenue targets, often issue high tax demands (for example, denying input credits on technical grounds, or reclassifying products to higher tax categories) that may not hold up on legal scrutiny. But with no tribunal, businesses had to either settle or fight it out in writs, both unsatisfactory. The GST Council in late 2022 recognized this and announced an Amnesty Scheme for minor legal violations and certain appeals, and emphasized the need to curb “harsh assessments”.
Still, field experience varies widely: some officers follow the law and board instructions, others resort to tactics from the old regime (like target-based “gst raids” or surveys). The Rajasthan association letter explicitly requested “fair treatment by GST officers,” observing that officers often focus solely on revenue and use survey/recovery pressures, whereas “justice should also be considered”. It’s telling that they felt the need to state that “GST officers should be trained to treat taxpayers fairly and follow the law” – indicating gaps in consistency and taxpayer facilitation on the ground.
From the bureaucracy’s viewpoint, not having the tribunal also burdened them – tax departments had to defend writ petitions in dozens of high courts on technical GST points, sometimes getting conflicting decisions. It also meant no institutional mechanism existed to develop uniform jurisprudence for GST, which is crucial for a national tax. The Center and States finally agreed on a tribunal structure with regional benches, and by mid-2025 the process to appoint members was underway. The government notified the GSTAT procedure rules in April 2025. If all goes to plan, GST Tribunals should start functioning in late 2025, clearing the logjam of appeals. This will be a much-needed development to address the backlog and give taxpayers a quicker path to justice.
In summary, the lack of a timely dispute resolution framework has been a glaring gap in GST’s implementation. It turned what should have been routine tax disagreements into constitutional matters for high courts, and left businesses uncertain for years about their liabilities. As GST enters its ninth year, the hope is that the tribunals and improved dispute processes (including likely online e-tribunal portals for e-filing appeals) will alleviate this pain point. Until then, litigation risk and costs remain high – something professionals must navigate carefully when advising clients in the GST regime.
Bureaucratic Challenges: Center–State Finances and Administrative Coordination
The tax bureaucracy and policy-makers themselves faced significant challenges implementing GST, which in turn affected all other stakeholders. One major aspect was managing the fiscal federalism intricacies – ensuring both the Union and the States were on board with rate changes, and dealing with revenue-sharing tensions. Unlike the old system where states had autonomy over sales tax/VAT and the center over excise/service tax, under GST they had to work in tandem. The GST Council became the arena for this coordination, and to its credit, it functioned by consensus for most decisions, forging a “jugalbandi” (harmonious partnership) between Centre and States. Nonetheless, behind the scenes, there were strains, especially on revenue guarantees and compensation.
The GST Compensation Cess was introduced to assure states of 14% annual revenue growth for five years (July 2017–June 2022), with the center paying any shortfall. As it turned out, the economy slowed in 2019 and then COVID-19 hit in 2020, causing huge shortfalls. This led to friction between the Centre and States: the compensation cess fund was insufficient, and states demanded the Centre fulfill the promise. In 2020, a very public dispute arose, with some states threatening legal action. Eventually, the Centre borrowed and released funds to states in 2020-21 and 2021-22 to cover the gap, and extended the cess levy till 2026 to repay the loans. While the crisis was managed, it revealed that GST had initially fallen short of revenue projections, forcing tough negotiations. Indeed, GST revenue growth fell below Union Budget projections in multiple years, necessitating measures like e-invoicing and data analytics to catch evasion.
The Lok Sabha was informed that various steps were taken to address shortfalls, from tightening ITC matching to using AI-based analysis to detect tax leakage. These efforts have borne fruit in rising collections post-2021, but the early years required constant firefighting to stabilize revenues.
Another bureaucratic challenge was administrative coordination and training. Thousands of state VAT officers and central excise/service tax officers had to be retrained on the new law, and dual jurisdiction issues had to be sorted (initially an assessee could be audited by either state or central officials based on turnover split). This sometimes caused turf issues or inconsistent approaches, adding to taxpayer confusion. The GST Council had to issue clarifications and standard operating procedures to align practices. It took time for a truly integrated tax administration culture to evolve, and it is still evolving – many taxpayers feel the approach to audits and enforcement differs from state to state. For example, some states aggressively use “GST enforcement drives” (road checks, inspections for e-way bills etc.), whereas others are more relaxed, leading to an uneven experience.
The Rajasthan association’s mention of “target-based GST” and arbitrary demands due to state revenue targets hints at this issue: they claimed some states set collection targets and conduct surveys to meet them, which they found an “impractical trend” that should be stopped. This suggests that at the field level, the pressure to raise revenue can sometimes override a uniform, facilitative approach.
The bureaucracy also had to respond to new types of fraud and evasion that emerged under GST. While GST was expected to curb evasion by digitization and input credit trails, unscrupulous elements found loopholes, especially by obtaining fake registrations and issuing fake invoices to claim refunds or credits. Tackling this required department to mount nationwide crackdowns. As mentioned earlier, this led to stringent measures like Aadhaar verification for registrations, physical checks, and even arrest provisions being invoked for GST frauds.
Tax officials have booked thousands of cases of fake ITC claims. However, such enforcement, when overzealous, occasionally affected genuine businesses (e.g. mass suspension of registrations based on risk parameters that also flagged legitimate firms). It’s a challenging balance for administrators: they must prevent revenue leakage (estimated in some studies to be significant despite GST, given the gap between expected and actual collections in initial years) but also not stifle honest trade. The implementation of e-way bills and e-invoicing has been a game-changer in this regard, giving officers tools to detect mismatches and catch transit without tax.
The GST Council’s notable decisions include these very measures – e-Way Bills, e-Invoicing for B2B transactions above a threshold, etc., which have been credited with improving compliance. Indeed, the government proudly notes that these digital integrations reduced tax evasion and even “unclogged highways” by removing state check-posts. That said, the enforcement-heavy aspects of GST have sometimes made businesses uneasy, reinforcing the need for a calibrated approach that the Council has been working on (e.g., recent instructions for officers to avoid “tax terrorism” and focus on facilitation).
Finally, from a policy perspective, the bureaucracy had to frequently recalibrate GST rates and rules in light of economic realities. For example, during the COVID-19 pandemic, GST rates on essential medicines, PPE, oxygen equipment etc. were cut or exempted as relief. Such responsiveness was positive, but it also meant mid-year changes that systems and businesses had to quickly implement. The frequent rate changes – over 400 changes in GST rates in the first 4 years – were a headache for accounting and pricing systems of companies, and indicate that the initial rate-fitment may not have been optimal. Each GST Council meeting’s decisions (from granting relief to real estate in 2019 by cutting GST on affordable housing, to decisions on nature of certain supplies like ocean freight, to tweaking the composition scheme, etc.) required timely notifications and outreach to be effective. The bureaucracy often had to issue clarificatory circulars because industry found certain provisions unclear. In several cases (e.g. taxation of online gaming vs gambling, or applicability of GST on certain royalties), lack of clarity led to prolonged disputes until clarified. This shows that implementation bottlenecks were not just technological but also regulatory – drafting and issuing clear guidance in a timely manner was a challenge in a dynamic new tax.
In essence, for the administrators, GST’s eight-year journey has been one of continuous learning and adaptation, arguably more so than for any previous tax reform. They have achieved a lot – revenue has steadied and grown, the tax base is larger and more compliant, and the one-nation-one-tax framework is firmly in place. But the pain points they navigated (fiscal tensions, IT crashes, fraud schemes, public criticism during glitches, need for constant fine-tuning) set the context for why some issues persisted for taxpayers. The slightly critical tone from stakeholders often is a reflection of administrative challenges in execution. The good news is that by year eight, many of those early storms have been weathered, and the system is more mature. Going forward, the bureaucracy aims to simplify GST law (a committee is working on a comprehensive GST 2.0 law rewrite), rationalize rates (a major rate rationalisation exercise is expected, addressing anomalies like inverted duties), and improve compliance ease (for example, the introduction of a single GST registration for groups of companies, etc., is being discussed). These reforms, if done in consultation with industry and executed smoothly, will address several pain points outlined above.
Mixed Outcomes and the Road Ahead
After eight years, it’s clear that GST’s intended outcomes have been partially achieved – but important gaps remain. On the positive side, GST did create a common market in India, removing check-post delays and interstate tax barriers. Logistics efficiency improved; studies show trucking travel times on highways improved by over 30% as bribes and time spent at borders fell away. Businesses can now organize supply chains and warehouses based on operational logic rather than tax avoidance, which is a structural efficiency gain. Consumers benefited from the elimination of cascading taxes in many products (many goods that had 25-30% combined taxes pre-GST now bear 18% or less). Small businesses got relief through higher exemption thresholds (doubled to ₹40 lakh for many, as noted) and composition schemes with simpler compliance. These outcomes align with the stated goals of GST: to make doing business easier, reduce the overall tax burden, and increase transparency. The consistently rising collections – from ₹7.2 lakh crore in FY2017-18 (8 months) to ₹22.1 lakh crore in FY2024-25 – also suggest that formalization has expanded and the tax system is capturing more of the economy. In fact, in FY2024–25, GST revenue reached a new high, growing 9.4% over the previous year and pushing the average monthly collection to ₹1.84 lakh crore. Tax compliance has improved in part due to GST’s digitization and data trail, making evasion harder.
Crucially, industry sentiment towards GST, which was quite negative in the initial years of confusion, has been turning positive as stability sets in. In 2025, a Deloitte survey found 85% of businesses now have a positive view of GST, up from barely 59% three years prior.
This is a notable shift, indicating that many pain points – especially those around understanding the law and basic compliance – have been or are being resolved. Businesses cited factors like “simplified and more transparent processes, seamless ITC flow, elimination of state check-posts, and digitization” as reasons for their positive outlook. For tax practitioners too, while the initial period was harrowing, they have now accumulated experience and are better equipped to handle GST’s nuances. The formation of forums and associations to voice practitioner concerns (like the one from Rajasthan) has also helped bring issues to the government’s attention, some of which have been addressed (e.g. late fee waivers, extension of amendment timelines in recent budgets, etc.).
However, as this report has detailed, several gaps persist even after eight years. Each stakeholder group continues to face specific challenges:
Consumers still deal with high taxes on some goods (fuel outside GST, “sin goods” like aerated drinks at 28% + cess, etc.), and complexity in knowing how much tax is embedded in prices. They also have limited visibility into whether GST cuts are passed on, beyond the now-sunset anti-profiteering authority.
Businesses (especially SMEs) still find compliance onerous – multiple returns, e-invoicing requirements once they grow, and the need to stay updated on frequent GST rule changes. Working capital lock-ins via ITC rules and refund delays can hamper their cash flows. Classification disputes and advance ruling inconsistencies create uncertainty in business planning.
Tax practitioners remain slightly overburdened, acting as the intermediaries between the complex GST law and businesses. They must interpret frequent amendments, ensure clients’ compliance in a timely manner despite system glitches, and defend clients in an evolving legal landscape that only now is getting a proper appellate tribunal. Their call for “GST 2.0” implies that the current system, while improved, still has too many idiosyncrasies and requires streamlining.
The tax bureaucracy has to continue balancing revenue goals with taxpayer facilitation. They face the challenge of completing the institutional architecture (operationalizing GSTAT across the country), reducing the compliance burden without enabling evasion, and achieving a durable consensus with states on the future roadmap (such as bringing petroleum under GST, which would be a politically sensitive but economically beneficial move). They also need to leverage technology more (for example, using AI to pre-empt fraud, providing better analytics to taxpayers for compliance, etc.) while avoiding the mistakes of the initial GSTN rollout.
It is fair to say GST has reached an inflection point at the eight-year mark. The “teething issues” phase is over; expectations are now higher for a stable, fairly administered system that can be refined into a world-class tax framework. Many experts call for a “GST 2.0” – this would include comprehensive rate rationalization (perhaps moving to fewer slabs, like a tiered two-rate structure for most goods, plus a special rate for luxury/sin goods), simplifying the law (removing ambiguities, unnecessary restrictions, and doing a readability overhaul), and enhancing the digital platform (making GSTN more user-friendly, integrating compliance tools, and maybe using blockchain or other tech for invoice verification in the long run). The government appears to be listening: a Group of Ministers has been formed on rate rationalization, and the Finance Ministry is reportedly working on a new GST law draft to address many of the problems identified over these years.
In conclusion, the eight-year report card of GST shows a mix of achievements and ongoing challenges – “hits and misses,” as one commentary aptly puts it. GST has undoubtedly reshaped India’s tax landscape: it boosted transparency, increased the tax base by over 85 lakh new registrants, and kept revenue buoyant even through a pandemic (GST proved more resilient than direct taxes during COVID). But the experience has not been as “simple” for stakeholders as the slogan promised. The pain points – complex rates, compliance costs, tech troubles, ITC disputes, missing tribunals, etc. – have tested the patience of taxpayers and administrators alike. The slightly critical tone that emerges in many assessments is a reminder that implementation matters as much as policy design.
As GST enters its ninth year, the focus is rightly on learning from the past eight years to define the future. The system is now mature enough to handle deeper reforms to address its shortcomings. If the next few years see those eight major pain points mitigated – through policy tweaks, better systems, and more stakeholder-friendly administration – GST could truly fulfill its potential as a good and simple tax that propels India’s ease of doing business and economic growth, while minimizing the frictions that have thus far accompanied this bold reform.
Going forward, stakeholders will watch these metrics alongside qualitative improvements to judge how well GST 2.0 addresses the pain points of GST 1.0.