The Economic Survey 2025-26 highlights the continued robustness of India’s Goods and Services Tax (GST) regime, underscoring its vital role in revenue stability, formalisation of the economy and sustained tax buoyancy. The period April–December 2025 witnessed record-breaking GST collections, demonstrating the resilience of India’s indirect tax system.
GST Collections at All-Time Highs
Gross GST revenue for April–December 2025 stood at ₹17.4 lakh crore, marking a year-on-year growth of 6.7%. While growth in percentage terms appears moderate due to lower inflation, GST collections in absolute terms have registered multiple all-time highs, supported by strong economic activity and formalisation trends.
The Survey notes that GST revenue growth has closely tracked nominal GDP growth, exhibiting a correlation of 0.92, underscoring GST’s sensitivity to overall economic conditions.
Expanding Tax Base and Strong Transaction Volumes
The GST framework continues to strengthen formalisation:
- Registered taxpayers have expanded from 60 lakh in 2017 to more than 1.5 crore at present.
- E-way bill generation grew 21% YoY during April–December 2025, signalling sustained momentum in goods movement and business operations.
GST 2.0 Reforms: Major Rationalisation for Growth and Compliance
The 56th GST Council Meeting introduced a landmark GST 2.0 rate rationalisation, establishing a simplified structure comprising:
- Standard Rate: 18%
- Merit Rate: 5%
- Special De-merit (Sin Goods) Rate: 40%
This structure subsumes the earlier compensation cess without increasing the overall tax burden. The GST 2.0 overhaul forms the third pillar of major tax reforms, following corporate tax rationalisation (2019) and personal income tax reforms (2025).
Key Sectoral Changes under GST 2.0
- Agriculture & Inputs
- GST on tractors and agricultural machinery reduced from 12% to 5%.
- GST on key fertiliser inputs such as sulphuric acid, nitric acid and ammonia cut from 18% to 5%.
- Automobiles
- GST on small cars, two-wheelers (≤350cc), three-wheelers, buses, trucks and ambulances reduced from 28% to 18%.
- Uniform 18% GST on all auto parts.
- Large motorcycles and non-small-car segments moved to 40% slab, though cess on luxury cars has been removed.
- Consumer Appliances
- ACs, large TVs, dishwashers, monitors and projectors shifted from 28% to 18%.
- Textiles & MSME-intensive Sectors
- GST on man-made fibres reduced from 18% to 5%.
- Man-made yarn reduced from 12% to 5%.
Expected Impact of GST 2.0 Reforms
As articulated in Box II.2 – Expected Channels of Impact, GST 2.0 is projected to:
- Stimulate demand through lower tax incidence.
- Enhance price competitiveness for domestic producers.
- Strengthen compliance, widening the tax base.
- Generate higher consumption volumes, offsetting reduced rates through increased transactions.
The Survey concludes that GST collections will remain resilient, supported by rationalised rates, expanding formalisation, and continued growth in economic activity.
Conclusion
The GST regime, supported by ongoing reforms and robust compliance mechanisms, continues to be a cornerstone of India’s fiscal stability. With the introduction of the simplified GST 2.0 rate structure, the government has reaffirmed its commitment to building an efficient, growth-oriented and taxpayer-friendly indirect taxation framework.
The Economic Survey 2025-26 emphasises that GST’s performance reflects a maturing tax system—one that is responsive to economic conditions, supportive of growth, and aligned with the government’s broader reform agenda.
For complete Economic Survey 2025-26: https://a2ztaxcorp.net/wp-content/uploads/2026/01/Full-Economic-Survey-2025-26.pdf
