GST 2.0 Shows India’s Journey from 2017 to 2025 with Steady Strategic Progress

On September 3, the GST Council approved a major rationalisation, reducing the previous multi-tiered GST structure to two main slabs—5% and 18%—with a higher rate applied to “sin” goods. Taxes on a wide range of everyday items have been lowered, compliance procedures simplified, sending a clear message: India is moving from design to implementation, transforming GST from a market-unifying tax to a tool that simultaneously drives consumption and formalisation.

To understand the significance of this move, it helps to look back. In July 2017, India undertook a bold step that few complex federations had managed: merging numerous central and state levies—excise, service tax, VAT, octroi, and more—into a destination-based GST administered jointly by the Centre and the states. For a vast and diverse economy, the dual GST model, overseen by a council that decided by consensus, was the only feasible design. While critics labelled it messy, it was, in reality, pragmatic statecraft. Building a single market in India cannot be done by decree; it must be carefully stitched together, layer by layer, respecting federalism and consensus.

The early years of GST demanded patience. The multiple slabs were not a flaw but a deliberate feature—a stabiliser for a country where a single tax on both milk and a Mercedes would have been disastrous. Given India’s income levels and disparities in 2017 (and still in 2025), a regressive structure was never an option. Poorer households spend a larger share of their income on consumption, so essential goods had to be taxed at lower rates. Those who argued for a single rate in 2017 failed to grasp that it would have burdened the poor. While a uniform rate of 12% or 18% might have been administratively simpler and easier to promote, it would have worsened poverty rather than alleviated it. Conversely, taxing everything at 5% or lower would have jeopardized government revenues. Hence, the multiplicity of rates—from minimal taxes on essentials to higher levies on sin goods—was essential during GST’s formative years.

There was another crucial reason behind GST 1.0’s design in 2017: securing the buy-in of states with varying revenue structures while keeping inflation under control. The staggered design was a political economy strategy, a compromise to build trust. Today, with the GST Council’s institutional capacity strengthened and data visibility vastly improved, the system can handle simplification without triggering fiscal stress. This is the essence of good governance: sequencing reforms wisely and pacing them according to capacity.

Since the Centre and states embraced shared sovereignty in 2017, the GST Council has remained proactive, continuously recalibrating rates, resolving initial challenges, and strengthening the system’s infrastructure: implementing e-way bills to curb evasion, phasing in e-invoicing (now mandatory for businesses with turnover above Rs 5 crore), and deploying analytics to detect fraud. Gradually, GST evolved from a one-time reform into a routine practice. The results are clear: collections reached a record Rs 2.10 lakh crore in April 2024, followed by an even higher Rs 2.37 lakh crore in April 2025—demonstrating growing compliance and an expanding formal economy.

Having established stability, the Modi government has chosen the opportune moment to simplify GST. The rate rationalisation now minimizes disruption while maximizing impact. The new two-slab system, with higher levies reserved for sin goods, lowers compliance costs for millions of businesses, clarifies pricing for consumers, and frees administrative resources from micro-classification disputes, allowing authorities to focus on major enforcement priorities.

This reform is part of a broader pattern. The Modi years have emphasized execution at scale—designing, delivering, and iterating with precision. Insolvency reforms cleaned up a credit culture long burdened by evergreening; UPI revolutionized payments, bringing kiranas into the digital mainstream; and supply-side initiatives like Gati Shakti and PLI reduced the friction of doing business. Similarly, GST 1.0 created a seamless market, simplifying trade and improving ease of doing business.

So, what does GST 2.0 deliver for citizens and small firms? First, it puts money back into household wallets through lower rates on a wide range of everyday goods and services, while maintaining higher rates on sin products. Second, it streamlines administration: two slabs reduce invoice-level disputes, speed up audits, and free working capital trapped in classification battles. Third, it promotes formalisation, boosting tax compliance and revenue, as adherence becomes easier than navigating bureaucratic hurdles. Fourth, it encourages entrepreneurship by lowering compliance costs for new businesses.

Taking a broader view, the picture becomes even clearer. Over the past decade, India has risen into the world’s top four economies, driven by infrastructure growth, expanding financial inclusion, and the routine digitisation of public services. But sustainable growth depends on simplifying life for the many, not the few—and that is exactly what this GST reform achieves. It rewards honest businesses, respects consumers, and treats compliance as a service rather than a burden.

The journey from 2017 to 2025 is not a U-turn; it is a deliberate progression. India began with the only viable GST structure for a complex federation, then strengthened it through steady, often quiet improvements. Now, reforms are being implemented at the optimal moment, transforming a good tax into a better one, and a single market into an even more powerful engine for growth. This is the Modi method: design for India as it is, and deliver for India as it aspires to be.

Also Read: GST Reforms to Drive Consumption Growth, Says Mukesh Ambani