Quick Summary
GST collections have shown strong resilience in the face of repeated rate cuts, with revenues rebounding quickly after short-term declines. The data shows that the GST-to-GDP ratio dipped to 6.1% in FY20 after rate reductions in October 2018 and July 2019 lowered the average effective GST rate to 11.6% from 14.4% when the tax was rolled out in 2017. The ratio fell further to 5.7% in FY21 during the pandemic. However, collections recovered strongly thereafter, rising to 6.3% in FY22 and stabili
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FAQ :
GST revenues have shown strong resilience, rebounding quickly after short-term declines and stabilising at 6.7% of GDP from FY23 through FY25, supported by growth and compliance measures.
Rate reductions in October 2018 and July 2019 lowered the average effective GST rate, causing the GST-to-GDP ratio to dip to 6.1% in FY20. The ratio fell further to 5.7% in FY21 during the pandemic.
Experts believe GST 2.0 reforms will follow a similar trajectory, with initial collection dips expected to rebound due to sustained growth. The simplification of tax slabs is anticipated to expand the tax base and enhance compliance.
The GST Council approved a major rationalisation, collapsing the 12% and 28% slabs into a simplified two-rate structure of 5% and 18%. Over 90% of items have been shifted to the lower bracket, bringing the effective GST rate down to 9.5%.
The Centre has projected a Rs 48,000 crore revenue loss in FY25 against total collections of Rs 10.6 lakh crore, but analysts foresee medium-term gains due to expanded tax base and improved compliance.
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