GST's 8-Year Trial: From Public Burden To Political Reversal

India was treated to yet another festival branded in Prime Minister Modi’s style—this time called the “GST Bachat Utsav.” Billed as a celebration of savings, it promised relief for households and simplicity for businesses. Yet behind the optics lies a sobering truth: this was not a victory lap but a reluctant admission of failure. For eight years, the Goods and Services Tax—touted in 2017 as the most transformative reform of independent India—was marred by poor design, endless tinkering, and political marketing. What is now packaged as a gift to the people is, in fact, a belated course correction, pushed through by electoral pressures and global economic headwinds. To understand this “Utsav,” one must revisit the painful legacy of GST—its broken promises, its inequitable burden, and its lessons for Indian democracy.

Eight Harsh Years of GST

For ninety-six months, GST has weighed heavily on India’s poor and middle class. What was once branded the “Good and Simple Tax” turned into a regressive monster that disproportionately hurt vulnerable families. Conceived to unify the country’s complex fiscal system, GST instead deepened inequality—squeezing household budgets while large corporations reaped the benefits.

The Cost of Living Crisis

As inflation eroded incomes, essentials such as food, fuel, and healthcare were subjected to layered taxes. Millions struggled with higher costs, while the recent 2025 reforms finally offer limited relief. The question remains: are these changes born of genuine concern for citizens or are they simply a political recalibration to cushion global shocks like the “Trump effect”?

The reforms have cut health and life insurance premiums from 18% to 12%, making policies more affordable. For families who barely managed to retain medical cover during the pandemic, this translates into savings worth several thousand rupees annually. Education services and rail travel in lower classes have also been shifted into lower slabs, directly easing the load on ordinary families. GST is now repositioned—from a blunt revenue instrument to a tool of social protection.

Consumer and Small Business Relief

From September 22, 2025, households began to feel the difference. Essentials such as food, footwear up to ₹2,500, handicrafts, and wooden products moved into the 5% bracket, cutting expenses by 10–15%. For the middle class, GST on items like TVs, air conditioners, and trucks was reduced from 28% to 18%, freeing disposable income for health and education. Nil GST on certain medicines and food grains directly benefits the poor.

For small businesses and MSMEs—long suffocated by compliance burdens—the reforms are a lifeline. Simplified filing, reduced rates on textiles (cut from 12–18% to 5%), and cheaper tractor parts are expected to ease input costs and create space for expansion. Industry leaders suggest this could boost GDP by 0.5% and revive employment in the informal sector, which employs nearly 80% of Indian workers.

How GST Crushed Consumers

From inception, GST’s multi-slab structure—ranging between 5% and 28%—created distortions that punished low- and middle-income families. Unlike direct taxes that scale with income, GST is blind to earning capacity: a labourer pays the same tax on soap or cooking oil as a millionaire. Studies estimate that nearly two-thirds of GST’s burden falls on the poor and middle class, while the richest contribute just 3%.

Over the years, items like sanitary napkins (initially taxed at 12%), cooking oil, and household goods became costlier, eroding purchasing power in a stagnant wage economy. Hidden multipliers made matters worse: compliance costs trickled down to consumers, making groceries 10–15% pricier in rural India. Urban families with stagnant salaries faced compounded pressures, with 18% GST on dining, electronics, and school fees shrinking disposable income.

During the pandemic, GST on masks and medical gear—initially levied at 18%—was seen as callous. Yet collections soared: by FY 2024–25, GST brought in ₹22.08 lakh crore, growing 9.4% year-on-year. In August 2025 alone, ₹1.86 trillion was collected. But these “record highs” came at the cost of widening inequality.

The Political Backlash

No critique captured GST’s flaws better than Rahul Gandhi’s 2017 coinage—“Gabbar Singh Tax.” The analogy stuck, painting GST as a villain that looted the poor. Gandhi’s charge that the government had made over 1,000 changes to GST in just five years gained traction, highlighting the chaos of constant revisions. He also argued that GST devastated the informal sector—destroying jobs in textiles and petty trade—while giving corporates rebates.

By 2022, he rechristened it the “Grihasti Sarvnaash Tax” (Household Destruction Tax), a phrase that resonated with voters. By 2025, Congress credited reforms to Gandhi’s sustained campaign, claiming that his pressure forced reductions such as lower GST on health insurance. His critique became more than rhetoric—it became the moral lever that eventually pushed the government toward reform.

States, Revenues, and Federal Strains

The 2025–26 budget projected a 22% rise in state GST collections to ₹10.8 trillion, but April–August receipts have grown just 5.8%. With the Union releasing only ₹5.3 trillion of the ₹14.2 trillion earmarked for states, opposition governments allege discrimination and delays. Non-BJP states argue that selective compensation erodes fiscal federalism, turning GST into a tool of political coercion.

The Trump Effect

Global geopolitics sharpened India’s fiscal dilemmas. President Donald Trump’s second term brought punitive tariffs—up to 50% on Indian exports—citing Russian oil purchases and trade imbalances. This is expected to hit India’s exporters by ₹2–3 lakh crore annually, undermining sectors like textiles, autos, and pharma.

The GST reforms, therefore, double as a domestic stimulus: rate cuts on essentials encourage consumption, which drives nearly 60% of India’s GDP. Alongside income tax relief, these measures inject more than ₹5.3 trillion into the economy, cushioning the blow from falling exports. Yet the urgency of this reform also reveals India’s vulnerability to external shocks.

Walking the Fiscal Tightrope

Despite reforms, GST remains a revenue behemoth. FY 2024–25 collections touched ₹22.08 lakh crore, shared between Centre and states. But rate cuts could result in a combined revenue loss of ₹1.57 lakh crore—around 0.05% of GDP. States like Kerala demand a higher share (60:40) to ensure fairness, while the Centre absorbs most of the shortfall through cuts in “sin goods.” Whether buoyant consumption can offset this gap remains to be seen.

Toward a Fairer Tax

Eight years on, GST’s recalibration reflects not triumph but necessity. Political backlash, economic pain, and global turbulence forced the government’s hand. The lesson is clear: taxation cannot be an exercise in extraction alone; it must reflect empathy, fairness, and federal balance.

If implemented faithfully—with fewer slabs, simplified compliance, and equitable sharing—GST can finally fulfil its original promise: to unify India’s tax system while protecting the common man. The ink of reform is still wet. What remains is to ensure it writes a fairer future rather than another chapter of broken promises.

(The writer is a senior political analyst and strategic affairs columnist based in Shimla)