GST Turns 10: Govt Shifts Focus to AI-Driven Compliance, Faster Refunds

India is moving the Goods and Services Tax (GST) regime toward artificial intelligence-driven enforcement and simpler compliance as it enters its tenth year in 2026. The shift aims to trim compliance costs, speed up refunds and tighten enforcement through technology, data sharing and process simplification.

Officials plan to link GST, income tax and customs databases, using the combined data to gauge risk, curb tax evasion and reduce manual intervention, especially for micro, small and medium enterprises, PTI reported.

The GST rollout also widened the tax base, improved compliance and lifted revenues, making the indirect tax regime one of India's major economic reforms. The registered taxpayer base has grown from 66.5 lakh at launch to about 1.6 crore in 2026.

The government introduced the tax on July 1, 2017, replacing 17 central and state levies and 13 cesses with a single indirect tax system after years of Centre-state negotiations to build a common national market and reduce cascading taxes.

Then President Pranab Mukherjee unveiled GST in the central hall of the old Parliament building at midnight on July 1, 2017. Prime Minister Narendra Modi called it a "good and simple tax" that would end the harassment of traders and small business.

Building political consensus for the sweeping reform was one of the toughest parts of the rollout. The breakthrough came after long negotiations led by then Finance Minister Arun Jaitley. "The monumental restructuring of one of the world's clumsiest indirect tax systems was not an easy task," Jaitley said while reflecting on the reform.

Simplifying Rate Structures

GST began with four slabs of 5, 12, 18 and 28%. A cess sat on top of the 28% slab for luxury, sin and demerit goods.

The GST Council, which has Union and state or Union Territory representatives, sets GST rates. As the system matured, and after revenues stabilised and the tech backend strengthened, policymakers moved to rate rationalisation.

From September 22, 2025, the government rolled out a new two-tier GST, putting most goods and services into 5% and 18% brackets. The government retained a separate 40% rate only for luxury and demerit goods.

After the cut, most prices eased, leaving households with some savings. "The next-gen GST will leave more cash in the hands of people," Finance Minister Nirmala Sitharaman said.

Revenue Growth Trajectory

Gross GST collections rose 8.3% year-on-year to ₹22.27 lakh crore in the 2025-26 fiscal year. The figure was up from ₹22.08 lakh crore in 2024-25, when growth was 9.4%.

Average monthly collections stood at ₹1.85 lakh crore in FY26, compared with ₹1.84 lakh crore in FY25. In the launch year of 2017-18, the monthly average was ₹89,700 crore.

That rise has eased state worries that the new tax would cut into revenue after they gave up powers to levy VAT, central sales tax on inter-state trade, entertainment tax and octroi.

Unresolved Petroleum Challenges

At the time of the launch, the Centre and states had agreed that petroleum products would be brought into the Constitution amendment enabling GST, but they left the GST Council to decide the date for the five products — crude petroleum, petrol, diesel, ATF and natural gas.

Some discussion has taken place in the Council on bringing aviation turbine fuel under GST, but states have not supported the proposal. The Centre will wait for states to come forward with the proposal for the levy.

Industry Feedback Outlook

A Deloitte report titled GST@9 said about 99% of India Inc reported a positive or neutral experience with GST, with digitisation and rate rationalisation emerging as key benefits for businesses. The survey said the next phase should move beyond digitalisation to AI-led compliance and data-led dispute reduction.

EY India said reform steps such as rate rationalisation, digitised return filing, e-invoicing and moves to operationalise appellate forums have strengthened the GST framework and show the government's intent to simplify tax administration.

"However, despite these progressive changes, certain structural and procedural areas continue to warrant reform to fully realise the objective of creating a seamless, efficient, and taxpayer-friendly GST system," Saurabh Agarwal, tax partner at EY India, said.

(With inputs from PTI)