How has GST performed as a source of revenue?

By the obvious measure, GST looks like a triumph. Monthly collections now routinely cross ₹2 lakh crore and touched a record ₹2.36 lakh crore in April 2025; the full financial year 2024-25 brought in about ₹22 lakh crore, an all-time high. The figure climbs almost every month, and the government points to it as proof the reform is working.

But “collections went up” is a weak test. The economy and prices grew over these years too; almost any tax would gather more rupees in 2025 than in 2017. The sharper question is whether GST raises more as a share of the economy than the tangle of taxes it replaced, and there the answer is, at best, “not by much.” GST revenue has hovered around 6.7 to 6.9% of GDP recently, only a little above where the old system sat. Compared like-for-like with the specific taxes GST subsumed, and once you strip out the temporary compensation cess that propped up the early years, the gain shrinks close to zero. The states’ share of GDP from these taxes has, if anything, slipped (NIPFP).

Why has a reform of this scale not visibly lifted revenue? Two forces are at work. The first is rate erosion. When GST was designed, an expert committee judged that a “revenue-neutral rate” of about 15.3% was needed to match the old taxes’ yield (RNR report). The effective rate has since drifted down to around 11 to 12%, as item after item was shifted to lower slabs. The second is base narrowing: exemptions, and the exclusion of big-ticket items like fuel and electricity (see “Why are petrol, power and property still outside GST?”), keep shrinking what is actually taxed. The September 2025 rate cuts pushed the effective rate lower still.

There is a real bright spot. GST’s “buoyancy,” how much revenue grows for each rupee of GDP growth, has improved, helped by digital tools like e-invoicing and e-way bills that make evasion harder. The collecting machine is getting better at gathering whatever the rules allow. The trouble is that the rules keep giving away rate and base faster than enforcement can claw them back.

The fair verdict is that GST has been a revenue stabiliser more than a revenue raiser. It collects more reliably and is harder to dodge than the patchwork before it, but nine years on it has not clearly delivered the larger tax take its architects hoped for, because the political habit of cutting rates and widening exemptions keeps eating into the base it stands on.