Goods and Services Tax Day 2025: Salient Features, History, and Significance

Every year on July 1st, India celebrates Goods and Services Tax (GST) Day to commemorate the implementation of one of the country’s most transformative economic reforms. Introduced on July 1, 2017, the Goods and Services Tax subsumed multiple indirect taxes and unified the Indian market under a single taxation system. The observance began in 2018, marking the first anniversary of GST’s rollout.

What is GST?

The Goods and Services Tax (GST) is a comprehensive, destination-based indirect tax levied on the supply of goods and services. It is designed to be a single tax that flows through the entire supply chain — from the manufacturer to the end consumer — with provisions for input tax credit at each stage.

This means GST is effectively a tax only on value addition, as businesses can claim credit for the taxes paid on their purchases. Only the final consumer bears the tax, charged by the last seller in the supply chain. Being consumption-based, the revenue from GST accrues to the state where the goods or services are ultimately consumed.

Historical Background of GST in India

The idea of GST was first proposed in 2000 when a committee was formed under the then Prime Minister to draft a GST model. The aim was to replace the complex, multi-layered tax structure that hindered India’s economic potential.

Key Milestones:

• 2000: Committee set up to draft GST framework
• 2006: GST proposed in the Union Budget speech
• 2009: First discussion paper on GST released
• 2011: Constitution (115th Amendment) Bill introduced
• 2014: Constitution (122nd Amendment) Bill re-introduced and passed in 2015
• August 2016: Parliament passed the Constitution (101st Amendment) Act
• September 2016: Formation of the GST Council
• May 2017: Council finalized GST rules and tax rates
• July 1, 2017: GST officially launched across India
• July 1, 2018: First GST Day celebrated

Salient Features of GST

1. One Nation, One Tax

GST has replaced multiple central and state taxes such as excise duty, service tax, value-added tax (VAT), entry tax, and others. This uniform tax structure eliminates the cascading effect of taxes and creates a single national market.

2. Dual GST Model

India follows a dual GST structure:

• CGST (Central GST) collected by the central government
• SGST (State GST) collected by the state governments
• IGST (Integrated GST) for interstate transactions

3. Destination-Based Taxation

GST is levied where the goods or services are consumed, not where they are produced, ensuring revenue goes to the consuming state.

4. Input Tax Credit (ITC)

One of GST’s defining features is seamless credit flow. Businesses can claim ITC on the tax paid for inputs, which significantly reduces the effective tax burden and prevents tax-on-tax.

5. Threshold Exemption and Composition Scheme

• Small businesses with turnover below prescribed limits are exempt from GST.
• The Composition Scheme allows small taxpayers (turnover below ₹1.5 crore) to pay a fixed tax rate and enjoy simplified compliance.

6. Online Compliance via GSTN

All GST-related functions like registration, returns filing, and tax payments are done through the GST Network (GSTN) portal, promoting digital governance.

7. Anti-Profiteering Measures

To prevent unfair pricing and ensure benefits of reduced taxes reach the consumers, the National Anti-Profiteering Authority (NAA) was established to monitor and penalize violators.

8. Transparency and Increased Compliance

By digitizing records and linking with PAN and Aadhaar, GST has curbed tax evasion and increased accountability in the tax system.

9. Sector-Specific Exemptions

Essential sectors like healthcare and education are either exempt or taxed at reduced rates, maintaining affordability.

10. Account Settlement Between Centre and States

GST includes provisions for compensation and credit transfers between the Centre and States to maintain fiscal balance.

GST Rate Structure (As of 2025)

GST is divided into five main slabs:

• 0% – For essential items like fresh fruits, vegetables, and food grains
• 5% – On items of mass consumption
• 12% and 18% – On most goods and services
• 28% – On luxury items and demerit goods
• Compensation Cess – Applied to sin goods like tobacco, aerated drinks, and luxury cars

The government is currently working on a proposal to move to a three-rate structure in the near future for further simplification.

Top 10 States by GST Revenue (April 2025)

India’s GST collections have seen consistent growth. In April 2025, GST revenues reached an all-time high of ₹2.37 lakh crore, marking a 12.6% growth from the previous year.

Rank	State	GST Collection (₹ Crore)
1	Maharashtra	41,645
2	Karnataka	17,815
3	Gujarat	14,970
4	Haryana	14,057
5	Tamil Nadu	13,831
6	Uttar Pradesh	13,600
7	West Bengal	8,188
8	Telangana	6,983
9	Rajasthan	6,228
10	Andhra Pradesh	4,686

Significance of GST

The implementation of GST has had far-reaching impacts on the Indian economy, simplifying tax structures and fostering growth.

Impact on MSMEs

• Simplified tax regime
• Greater formalization of businesses
• Easier interstate trade and logistics
• Broader access to finance and capital

Impact on Consumers

• Reduction in average tax burden
• Lower prices on daily consumables like cereals, sugar, edible oils, and snacks
• Increased transparency in pricing
• Estimated 4% savings on monthly household expenditure

Impact on Logistics Sector

• Elimination of check-posts reduced travel times
• Streamlined warehouse operations
• Boost in investments and modernization

GST: A Reform That Continues to Evolve

Though GST has significantly transformed India’s taxation landscape, it continues to evolve. From rationalization of rates to improving digital infrastructure and compliance procedures, the government and GST Council work continuously to enhance the system’s efficiency and inclusivity.