Structural Transformation And Economic Recalibration: An Analysis Of India's Next- Generation Goods And Services Tax Rationalisation
- IJLLR Journal
- May 7
- 1 min read
Gracy Tanwar, National Law University Odisha
I. INTRODUCTION
The implementation of the Goods and Services Tax (GST) on July 1, 2017, marked the most profound structural shift in India's indirect tax framework since the nation attained independence. By consolidating a fragmented landscape of numerous central and state levies into a unified, destination-based consumption tax, the reform achieved several critical objectives: the elimination of tax cascading, the creation of a seamless national market, enhanced compliance transparency, and increased formalization of economic activity. The initial success of the GST was inextricably linked to the constitutional mandate enshrined in the 101st Constitution Amendment Act, 2016, which conferred simultaneous power upon the Parliament and State Legislatures and established the Goods and Services Tax Council (GST Council) under Article 279A to govern the system collaboratively. This foundational constitutional mechanism ensured that the new regime, despite its complexities, remained rooted in the principles of cooperative fiscal federalism.
However, the GST regime, in its initial eight years, presented persistent structural friction stemming largely from the compromise required to introduce such a sweeping reform in a diverse federal economy. The original four-tier rate structure (5 percent, 12 percent, 18 percent, and 28 percent), supplemented by special rates and the Compensation Cess , while politically necessary for initial consensus, inherently complicated the tax landscape. This multi-rate architecture led to ongoing classification disputes, administrative burdens, and reduced ease of compliance, particularly for Micro, Small, and Medium Enterprises (MSMEs).
