Next-gen GST: Taking India's reform journey forward

India's vision of a "Viksit Bharat" requires an economy where enterprises of all sizes can thrive, regardless of their location. Over the past decade, the Indian government has worked to create the necessary conditions for such growth. The Goods and Services Tax (GST), introduced in 2017, established a unified national framework for indirect taxation.

Building on nine years of implementation and feedback from taxpayers and states, the next generation of GST was conceptualized under Prime Minister Narendra Modi's leadership. The primary objectives of next-gen GST are to reduce and rationalize tax rates and simplify compliance processes. These changes began on September 22, 2025, and will continue with further process reforms before the GST Council.

The overarching goal is to provide relief to households, increase certainty for businesses, and create a tax system that is easy to navigate for taxpayers. States have been active partners in this process, contributing their priorities and experiences to the GST Council and implementing the decisions. The results of these reforms are promising.

Between October 2025 and July 2026, the value of reported taxable supplies increased by 25.8% compared to the same period the previous year. This growth is attributed to the lighter rate structure and a significant expansion in reported economic activity. The revenue figures also reflect the resilience of the system. Gross GST collections reached ₹12.46 lakh crore during April-September 2026, marking an 11.6% increase from the previous year.

Notably, every month from June to September experienced double-digit growth, resulting in nearly 15% cumulative growth over these four months. Net collections, after refunds, grew by 10.4% over the same half-year. Taxpayer relief has gone hand in hand with this growth in available resources for development. The expansion's breadth is equally important as its scale.

Reported taxable supplies grew across all 11 sector groups and all major states, indicating opportunities for more businesses to participate in expanding markets and for more communities to benefit from increased demand, investment, and employment. Consumer relief, reflected in lower prices for goods and services, directly benefits families by providing them with more purchasing power.

This relief, combined with enterprise growth, creates a mutually supportive relationship. For small and medium enterprises (SMEs), a national market offers a practical route to customers beyond their immediate surroundings. Businesses in tier-2 and tier-3 towns can leverage this national market while continuing to invest and employ locally.

Enterprises expanding into these towns can create opportunities for local suppliers and distributors. The common GST framework supports these connections, and simpler administration is crucial to sustaining these benefits. Participation in the GST framework has been substantial. As of the end of August, there were about 17.1 million GST registrations across central and state jurisdictions, reflecting a nearly 15% increase from the previous year.

During the April-July 2026 tax period, GSTR-3B returns filed by their due dates increased by 12.6%. These improvements underscore the importance of reliable service, clear guidance, and timely resolution of compliance issues to support regular compliance. Another critical aspect of the reform is the functioning of input tax credit.

The post-reform data shows that the share of tax liability discharged through credits has increased, while the accumulated credit has declined relative to taxable supplies. This trend is favorable for businesses that rely on the effective use of eligible credits, such as smaller firms. Working capital determines how easily these firms can purchase inputs, fulfill orders, and take on new ones.

Refunds are an essential component of a well-functioning tax system. During April-September 2026, approximately ₹1.80 lakh crore was refunded to businesses. This process of returning amounts due to businesses is integral to maintaining a functional tax system. Enhanced predictability in this refund process would further empower enterprises to plan their purchases and production with greater confidence.