as-gst-turns-10-focus-shifts-to-ai-led-compliance

As the Goods and Services Tax (GST) enters its 10th year, India's indirect tax regime is moving beyond implementation towards a new phase focused on efficiency, technology and ease of compliance. The government is increasingly leveraging artificial intelligence (AI), data analytics and integrated digital platforms to simplify tax administration, reduce compliance costs, accelerate refunds and strengthen enforcement against tax evasion.

Authorities are also integrating GST, income tax and customs databases to enable better risk assessment, minimise manual intervention and improve taxpayer services. The emphasis is on making compliance easier, particularly for micro, small and medium enterprises (MSMEs), while using technology to detect irregularities more effectively.

Widely regarded as one of India's most significant economic reforms, GST has helped broaden the tax base, improve compliance and strengthen government revenues since its launch on July 1, 2017. The unified indirect tax replaced a complex structure comprising 17 central and state taxes and 13 cesses, creating a common national market and eliminating the cascading effect of multiple taxes.

 

Also read: Seed firms have 20-30 pc surplus stock for kharif season: FSII

Over the past nine years, the registered taxpayer base has expanded substantially, rising from 66.5 lakh at the time of launch to around 1.6 crore in 2026, reflecting increasing formalisation of the Indian economy.

 

The rollout

GST was officially launched at the stroke of midnight on July 1, 2017, in the Central Hall of the old Parliament building by then President Pranab Mukherjee. Prime Minister Narendra Modi described the reform as a "good and simple tax" that would eliminate multiple layers of taxation and reduce harassment for traders and small businesses.

Reaching political consensus on such a landmark reform required years of negotiations between the Centre and states. Former Finance Minister Arun Jaitley played a pivotal role in building agreement across political parties and state governments.

Reflecting on the reform, Jaitley had described GST as "the monumental restructuring of one of the world's clumsiest indirect tax systems," highlighting the scale and complexity of the transition.

 

Evolution of the rate structure

GST was initially introduced with four tax slabs of 5, 12, 18 and 28 per cent, along with a compensation cess on luxury, sin and demerit goods. As revenues stabilised, compliance improved and the technology ecosystem matured, policymakers initiated long-awaited rate rationalisation.
Beginning September 22, 2025, India rolled out a next-generation GST structure featuring two principal tax slabs. Most essential goods and services were placed under a 5 per cent rate, while standard goods and services attracted an 18 per cent tax. A separate 40 per cent rate was retained exclusively for luxury and demerit products.

The rationalised structure reduced the tax burden on several products, resulting in lower prices for consumers. Finance Minister Nirmala Sitharaman said the reforms would leave more disposable income in the hands of citizens while making the tax system simpler and more efficient.  GST rates continue to be decided by the GST Council, comprising representatives of the Centre and all states and Union Territories.

 

Revenue growth and compliance

GST collections have witnessed steady growth over the years. Average monthly collections have increased from Rs 89,700 crore during 2017-18 to Rs 1.85 lakh crore in FY26, marginally higher than the Rs 1.84 lakh crore recorded in FY25.

Gross GST revenue rose 8.3 per cent year-on-year to Rs 22.27 lakh crore in 2025-26, following a 9.4 per cent increase to Rs 22.08 lakh crore in the previous financial year. The sustained rise reflects greater compliance, expanding economic activity and increased formalisation.

The steady improvement in collections has also eased concerns initially expressed by several states regarding potential revenue losses after subsuming taxes such as VAT, central sales tax, entertainment tax and octroi into GST.

Petroleum remains outside GST

One of the key unfinished aspects of GST continues to be the inclusion of petroleum products. Although crude oil, petrol, diesel, aviation turbine fuel (ATF) and natural gas were included within the constitutional framework of GST, the decision on when to bring them under the tax regime rests with the GST Council.

While discussions have taken place regarding the inclusion of aviation turbine fuel, states have so far not supported the proposal, largely due to concerns over potential revenue implications.

 

Industry outlook

According to Deloitte's GST@9 report, around 99 per cent of businesses surveyed reported either a positive or neutral experience with GST. The study identified digitisation, improved compliance systems and rate rationalisation as the biggest benefits for industry while recommending that the next phase of reforms focus on AI-driven compliance, greater automation and data-based dispute resolution.

EY India echoed similar views, stating that reforms such as e-invoicing, digitised return filing, rate rationalisation and the operationalisation of appellate mechanisms have significantly strengthened the GST framework.

However, EY India Tax Partner Saurabh Agarwal noted that while substantial progress has been made, several structural and procedural reforms are still required to fully realise the objective of building a seamless, efficient and taxpayer-friendly GST system. As GST enters its tenth year, experts believe the focus will increasingly shift from policy creation to smarter implementation powered by technology and simplified compliance.