As India marks eight years since the implementation of the Goods and Services Tax (GST), the reform stands at a defining point in its trajectory. For businesses, GST has been both a watershed moment and an enduring challenge — reshaping indirect tax strategy, financial planning, compliance frameworks and supply chain structures.
The initial promise of GST was straightforward: to simplify India’s complex web of indirect taxes and build a unified, technology-led tax regime. While GST has undoubtedly streamlined multiple levies, it has also introduced new-age complexities that demand continuous attention from senior finance and tax leadership.
Transformation from back-end function to board-room level strategic priority:
As a single, pan-India levy, GST significantly impacts working capital, pricing, procurement and group structures. This has made CFOs and tax heads key drivers of the business strategy.
Over eight years, constant legislative, judicial and policy changes have made adaptability essential, keeping businesses in a state of continuous vigilance.
Transitional Credit Claims: Among the most litigated early GST issues, these were riddled with technical glitches, filing deadlines, and interpretational ambiguities. Litigation centred on whether procedural lapses could override taxpayers’ vested rights to carry forward pre-GST credits.
Related Party Transactions: Taxability of employee secondment, inter-company services, and corporate guarantees has seen conflicting judicial views, creating unexpected tax exposures, especially for multinational and group structures.
Marketing Schemes and Discounts: Post-sale discounts, promotional schemes, and product returns have led to tax demands due to rigid procedural requirements, causing ongoing compliance stress.
Sector-Specific Disputes: These include ongoing litigation on the taxability of online gaming, extra-neutral alcohol (ENA), renewable energy projects, and real estate transactions — many of which lack consistent regulatory guidance.
GSTR Reconciliations: System-driven reconciliation between GSTR-1, 3B, and 2A/2B, while conceptually robust, has become a major operational challenge. Credit denials, delayed refunds, and exhaustive reconciliation efforts have turned routine compliance into a high-stakes, resource-intensive function.
Despite interventions by courts and the GST Council, these recurring issues remain contentious, underscoring the need for centralized and consistent interpretation.
On the other hand, proactive clarifications from the GST Council and key court rulings have helped resolve several issues — such as the non-taxability of ocean freight under RCM (Mohit Minerals case) and clarity around liquidated damages.
One of GST’s key achievements is its robust digital infrastructure—e-invoicing, e-way bills, and auto-populated returns have improved transparency and modernized compliance. Yet, for businesses operating across multiple States, challenges persist. System-generated notices, manual enforcement, and transit detentions due to minor clerical errors often require physical visits to resolve—failing which, steep penalties may apply—highlighting that the digital transition is still a work in progress.
Additionally, while the GST framework is centrally designed, inconsistent legal interpretations across States create inconsistencies.
From a strategic standpoint, several areas, such as the following, still require focused policy clarity and structural reform:
Rate simplification: Concerns over high GST rates coupled with multiple rate bands and frequent classification disputes require a more simplified and lower-rate framework.
Credit Reform: The current restrictions on ITC, especially in sectors like real estate, logistics and services, need re-evaluation to preserve the value-added nature of GST.
Faster Dispute Resolution: The GST Appellate Tribunal remains pending. A centralized, time-bound system is key to reducing litigation and offering certainty to businesses.
Curbing over-aggressive enforcement: Despite guidelines, many taxpayers face undue pressure during investigations, including summons and coerced payments. Clearer protocols and oversight are needed to ensure fair treatment.
Administrative Ease: Delays and inconsistencies in GST registration and other procedural requirements hinder the ease of doing business. Streamlining processes and enforcing strict timelines is essential.
Strengthen AAR System: Conflicting rulings by State-level AARs create confusion. A centralized structure with judicial members and uniform applicability can ensure consistency.
Fix Inverted Duty and credit accumulation Issues: A large number of sectors like renewables, e-commerce, start-ups and electronics are seeing significant working capital blockages due to this. Rationalisation and a refund mechanism can provide much-needed relief.
Crypto and Digital Assets: With crypto and blockchain businesses growing rapidly, the lack of GST guidance on classification, supply and taxability creates uncertainty. Clear rules are needed to enable the sector.
By addressing these gaps through coordinated legislative and administrative action, GST can better deliver on its goals of simplicity, transparency and efficiency.
As GST enters its next phase, there is a growing need to conceptualize a GST 2.0 framework—one that strikes the right balance between preserving the fiscal autonomy of States and ensuring seamless, uniform tax administration across the country. A harmonized yet cooperative federal model—backed by clear rules, joint dispute resolution mechanisms, and shared digital infrastructure—can empower States while giving businesses the consistency and predictability they need to thrive in a unified market.
As GST matures, what’s needed is not added complexity but greater clarity, consistency, and trust between taxpayers and the State. To support India’s growth and global competitiveness, GST must become a business-enabler—not a bottleneck.
About the authors: Darshan Bora is a Partner and Teesta Banerjee is a Principal Associate at Economic Laws Practice.
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