by Sri Varshith Kumar Reddy E
Nine years on, a tale of two economies: National revenues hit record highs while Jammu and Kashmir’s formalisation gains remain sector-specific.
Nine years after India dismantled a maze of central and state levies to build a single indirect tax regime, the Goods and Services Tax stands as the country’s most consequential fiscal reform since liberalisation. The verdict on its success, however, depends heavily on where one stands to observe it, a booming national exchequer or a border region still negotiating the terms of its own economic integration.
National Ledger
When GST replaced Central Excise Duty, Service Tax, VAT, Octroi and a dozen other levies at midnight on July 1, 2017, the Constitution’s 101st Amendment created a federal tax architecture governed jointly by the Centre and states through the GST Council. The taxpayer base has since surged from around 65 lakh registrants at launch to nearly 1.65 crore in 2026, a growth that signals genuine formalisation of enterprises that once operated outside the tax net. Gross collections touched an all-time high of Rs 23.11 lakh crore in FY 2025-26, with April 2026 alone contributing a record Rs 2.42 lakh crore.
The momentum has carried into the current fiscal year. June 2026 collections rose 13.9 per cent year-on-year to Rs 1,94,812 crore, with net revenue after refunds climbing to Rs 1,62,377 crore. Cumulative collections for April-June 2026 reached Rs 6,31,699 crore, an 8.4 per cent expansion over the same period last year, driven substantially by a 34.6 per cent jump in import-linked GST rather than domestic consumption alone. Maharashtra retained its position as the largest domestic contributor at Rs 30,714 crore for June, followed by Karnataka and Gujarat, while Uttar Pradesh posted a striking 19 per cent rise. Several smaller states told a different story, with Sikkim’s collections falling 53 per cent, Puducherry dropping 28 per cent, and Himachal Pradesh and Uttarakhand both registering double-digit declines, exposing how uneven the reform’s regional dividends remain.
Structural reform accompanied the revenue story. In September 2025, the GST Council collapsed the old four-slab system into a simpler two-rate structure of 5 per cent and 18 per cent, alongside a 40 per cent demerit rate for luxury and sin goods, eliminating the contentious 12 per cent and 28 per cent brackets. The move lowered costs on daily essentials, medical devices and construction materials such as cement, offering middle-class consumers tangible relief while easing compliance burdens that businesses had complained about for years. The long-delayed GST Appellate Tribunal also became operational, clearing litigation backlogs that had accumulated since the tax’s inception.
Behind the Numbers
GST’s evolution from a filing mechanism into an intelligence-driven administration deserves separate attention. E-way bills introduced in 2018 eliminated the notorious queues of trucks idling at interstate check posts, while e-invoicing, expanded progressively since 2020, created a digital audit trail that has made revenue leakage considerably harder to sustain. Persistent friction remains around blocked input tax credits and refund delays, issues that continue to strain working capital for manufacturers and logistics operators despite nine years of iterative fixes.
The compensation mechanism promised to states during GST’s first five years also tested India’s federal bargain severely during the pandemic, when collapsing revenues forced prolonged disputes over how shortfalls would be funded. That episode revealed a structural tension embedded in the reform through states surrendered independent taxation powers over VAT and entry tax in exchange for a share of a common pool, and any slowdown in that pool immediately becomes a federal flashpoint rather than a state-level problem alone.
Kashmir’s Parallel Journey
Jammu and Kashmir’s experience with GST illustrates both the reform’s integrative power and its uneven regional reach. Registered dealers in the union territory expanded from roughly 72,000 in 2017-18 to over 2.2 lakh by 2024-25, a threefold jump that reflects genuine widening of the formal tax base. Monthly revenue collections climbed from around Rs 200 crore in the year GST was launched to Rs 723 crore by 2024-25, pushing annual collections from Rs 2,402 crore to Rs 8,673 crore over the same period.
Behind those headline figures, sector-specific distress tells a more complicated story. Handicraft exports fell more than 35 per cent in a single year, a decline linked partly to elevated GST rates and delayed refund cycles that starve exporters of working capital. Tourism operators continue to flag the 18 per cent tax slab as a competitiveness barrier against destinations in neighbouring countries, while horticulture farmers report rising input costs with limited relief despite lower GST on packaging materials. The region’s economic strain deepened further following security disruptions that hit consumption hard enough that observers anticipated a decline in collections even as GST 2.0 reforms rolled out nationally.
Small and medium enterprises in Kashmir have been particularly vocal about the compliance burden GST imposes on businesses with thin margins and seasonal cash flows. Industry associations have called for a streamlined structure tailored to the region’s distinct economic conditions, arguing that national uniformity sometimes ignores local realities. The government’s own communications point to GST 2.0’s rate cuts from 12 per cent to 5 per cent as a mechanism poised to enhance affordability in the region going forward.
The Agenda for GST@10
Closing the gap between formalisation and genuine sectoral prosperity requires attention on several fronts as GST enters its tenth year. Refund processing timelines need statutory tightening, since exporters in sectors like Kashmiri handicrafts continue losing working capital to delays that a digitised system should have eliminated years ago. Input tax credit blockages, a recurring grievance across manufacturing and logistics, call for automated matching mechanisms that reduce discretionary intervention by field officers.
Rate rationalisation must extend beyond the September 2025 slab simplification to address sector-specific anomalies, particularly the 18 per cent bracket that tourism operators in border states argue undermines their competitiveness against neighbouring destinations. A differentiated compliance framework for regions with seasonal or conflict-affected economic cycles, rather than a uniform national template, would better serve union territories like Jammu and Kashmir, where consumption shocks recur unpredictably. States such as Sikkim and Puducherry, which saw collections fall sharply in mid-2026, need a transparent diagnostic framework to distinguish genuine economic distress from data or reporting anomalies before compensation debates resurface.
The GST Appellate Tribunal’s recent operationalisation should be followed by aggressive backlog clearance targets, since litigation delays of the kind that plagued GST’s first eight years erode business confidence disproportionately among smaller firms lacking legal resources. Strengthening AI-based fraud detection, already improving revenue intelligence at the national level, should be paired with proportionate safeguards so that automated flagging does not translate into harassment of genuinely compliant small taxpayers. Finally, the GST Council would benefit from institutionalising a permanent regional equity review, ensuring that states and union territories lagging behind the national revenue curve receive structural attention rather than periodic, reactive fixes.
Nine Years of Evidence
The national and Kashmiri experiences converge on a shared truth that GST succeeded most visibly at building administrative infrastructure by digital returns, invoice matching, and a common national market, while leaving harder questions of sectoral equity and regional balance only partially resolved. Revenue growth at the national level has been genuinely impressive, moving from a fragile launch phase into a data-driven administration capable of flagging fraud through automated scrutiny rather than years-later audits. Federal disputes over compensation and states like Sikkim, watching collections halve in a single month, suggest the reform’s benefits remain far from evenly distributed.
Kashmir’s trajectory offers a microcosm of this broader duality. Its formal economy has expanded measurably under GST’s discipline, evident in tripled dealer registrations and multiplying revenue, yet specific sectors that anchor local livelihoods, such as handicrafts, tourism, and horticulture, continue to struggle under rate structures and refund timelines poorly calibrated to their circumstances. A reform designed to erase the difference between doing business in Kashmir and doing business anywhere else in India has, after nine years, narrowed that gap considerably without closing it entirely. Whether GST’s tenth year finally delivers the sector-specific facilitation that formalisation alone cannot provide will determine if the promise of one nation and one tax extends fully from Kashmir to Kanyakumari.
(The author is a pracademic working on government policy and public institutions. Ideas are personal.)
