As India commemorates 8 years since the implementation of the Goods and Services Tax (GST) on 1st July 2025, the occasion invites not just celebration, but also introspection. Billed as the most ambitious tax reform in post-independence India, GST was expected to streamline the indirect tax system, reduce compliance burden, and create a unified market. However, eight years on, while several milestones have been achieved, a host of unresolved challenges continue to cast shadows over its success.
The Promise of GST
When GST was launched on 1st July 2017, it was envisioned as a “Good and Simple Tax”, aimed at eliminating the cascading effect of multiple indirect taxes such as VAT, service tax, excise, and others. The reform was to promote ease of doing business, improve tax compliance, and boost formalization of the economy. But has the promise been fulfilled? Or are we still being kept in an illusion of promises?
Reality Check: Persistent Challenges After 8 Years
Despite notable progress, several negative aspects of the GST system remain deeply entrenched:
1.Complex Compliance Structure
Contrary to the promise of simplification, GST has become highly compliance-intensive, especially for small and medium businesses. Multiple returns (GSTR-1, GSTR-3B, GSTR-2A, GSTR-2B, annual returns), reconciliations, and monthly filings have made tax compliance burdensome.
“Ease of doing business” under GST has remained largely aspirational for micro and small enterprises.
2. Flawed Input Tax Credit (ITC) Mechanism
One of the most contentious issues has been the denial or reversal of Input Tax Credit (ITC) due to a mismatch or default by suppliers. Honest taxpayers continue to suffer due to the non-compliance of others—something that contradicts the basic principle of fairness in taxation.
ITC has become a tool of harassment rather than facilitation, with genuine taxpayers being penalized for reasons beyond their control.
It is often failed to understand that “Genuine” businesses will have flaws in documentation!! Because their entire focus is on building a business and not on documentation. And secondly, Small businesses are dependent on “unqualified” staff for these documents due to their low-salary paying capacities.
3.Technological Glitches and Portal Failures
The GSTN portal, though vastly improved compared to its early days…, has faced repeated technical breakdowns, particularly during peak filing seasons. Inadequate server capacity, delays in registration, and errors in auto-populated data have led to compliance fatigue. This is a complete waste of professional time, effort, and energy.
4. Frequent Changes, Circulars, and Confusion
Over the years, the GST law has been amended countless times through notifications, circulars, and clarifications, resulting in uncertainty and ambiguity. Businesses and tax professionals are often left struggling to keep up with the ever-changing rules.
And the worst part, the effective dates of these notifications are so inconsistently applied that recalling them is more challenging than remembering dates from history and UPSC textbooks. The changes shall effectively begin from the beginning of a month, quarter, or say financial year, so that it’s easier to remember and also easier to give changes in the accounting policies for better clarity.
5. Burden on Working Capital
The slow refund processing,(though the Act prescribes timelines, the practical reality is not hidden), coupled with blocked credits, provisional assessments, and irregular demands, has severely impacted working capital, especially for exporters and service providers with zero-rated supplies.
6. Rising Litigation
Instead of reducing disputes, GST has become litigation-prone, with thousands of cases piling up across appellate forums and high courts. Many involve interpretational issues or penal action for minor lapses, reflecting a trust deficit between the administration and the taxpayer.
7. GST-Tribunal a dream for many
In this 8 years of GST implementation, lakhs of cases has been disposed by the FAA, which the taxpayers are unsatisfied of, being helpless they are bound to approach the Writ Courts for resolutions, which again are in turn already over-burdened by the pending GST cases.
Setting up GSTAT at the earliest is the need of the hour.
The Way Forward
If GST is to truly become a “good and simple tax,” the following reforms are urgently needed:
- Overhaul the ITC framework to ensure credit is not denied to compliant buyers
- Rationalize tax rates and reduce classification disputes
- Speed up refund and grievance redressal mechanisms
- Introduce a robust appellate structure, including the long-pending GST Appellate Tribunal
- Empower and support small taxpayers with simplified compliance norms
- Introduce GST-Amnesty for time-barred Appeals to dispose of genuine cases and de-clog the system.
Conclusion: Reform Still a Work in Progress
The GST, while ambitious and necessary, has fallen short of the expectations placed on it. While the Centre and States have made continuous efforts to improve the regime, the core issues of complexity, compliance burden, and credit mismatch remain unresolved even after eight years.
As we observe the 8th GST Day, it is crucial that policymakers shift focus from mere revenue generation to creating a tax ecosystem that is fair, predictable, and facilitative. Only then can GST achieve the transformative potential it was envisioned to deliver.
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