In Kautilya’s Arthashastra, taxation is likened to the work of a bee—drawing nectar without harming the flower. This ancient wisdom finds renewed relevance in India’s modern fiscal journey, most recently with the announcement of sweeping reforms to the Goods and Services Tax (GST). Introduced in 2017 as India’s most significant tax reform since Independence, GST unified a labyrinth of state and central levies into a common framework. It was hailed as a triumph of fiscal federalism and an institutional leap towards efficiency.
Now, with the rationalisation of GST slabs proposed in 2025, India signals not just continuity but evolution—refining an already transformative measure into a more peoplefriendly, growth-oriented tool. The reform seeks to simplify the current four-tier system into two principal slabs: 5 per cent for essential and merit goods, and 18 per cent for standard goods and services, while retaining a higher bracket for luxury and “sin” items.
This restructuring is more than an administrative measure. It reaffirms the principle that taxation must be equitable and transparent, lowering the burden on the everyday consumer while ensuring the economy remains fiscally sound. By shifting items from the 12 per cent and 28 per cent categories into the lower brackets, the reform directly benefits households, small businesses, and aspirational consumers, reaffirming the GST as a “Good and Simple Tax”, as was envisioned by the then Finance Minister, the late Arun Jaitley. Economists have long argued for such simplification.
Arvind Subramanian, who chaired the GST design committee, described GST as a “transformational piece of legislation” with scope for continuous refinement. Michael Keen of the IMF has highlighted how wellstructured value-added taxes, such as GST, reduce distortions while improving revenue productivity. Similarly, Govinda Rao observed that GST’s design directly supports ease of doing business and fiscal buoyancy, while Vijay Kelkar has underscored its alignment with the vision of a modern, unified Indian market.
These academic voices converge on a central insight: reforms like the current rationalisation are not cosmetic—they sustain the very logic of GST as a driver of growth. The broader narrative here is one of confidence. India’s journey to a $5 trillion economy by 2027, as projected by the IMF, requires reforms that are carefully designed, inclusive, and executed with precision. GST rationalisation is precisely such a reform. Monthly GST revenues have already crossed Rs 1.5 lakh crore on average in FY 2024-25, marking a 12 per cent year-on-year growth, and compliance levels have risen with over 90 per cent of taxpayers now filing returns on time, according to the Finance Ministry.
These outcomes show that the reform is not a crisis-driven measure but a thoughtful step, informed by experience and shaped by consensus. It reflects a vision of governance where efficiency, clarity, and inclusion are not trade-offs but complementary goals, and where taxation becomes an enabler of growth rather than an obstacle. In terms of fiscal outcomes, the reform is equally promising.
Despite initial revenue shortfalls after 2017, GST collections have grown steadily and consistently, with buoyancy suggesting not only stronger compliance but also a widening tax base. Rationalisation, by reducing interpretative ambiguities and making the system more transparent, is set to reinforce this trend while reducing litigation. A cleaner structure also strengthens the fiscal compact between Centre and states, ensuring stability in revenue-sharing. Together, these shifts signal not just improved efficiency but a deepening of trust in the system—an essential foundation for sustainable growth in a rapidly expanding economy. What distinguishes the 2025 announcement, however, is the clarity of its vision. Prime Minister Narendra Modi’s leadership has consistently underscored the need for reforms that combine scale with sensitivity, and efficiency with inclusivity.
The new GST structure embodies this spirit by making essentials more affordable, empowering middle-class households, and easing compliance for small enterprises, while still ensuring luxury and harmful goods bear higher levies. It is a balancing act that speaks not just to fiscal prudence but to democratic responsiveness, where the state listens and adapts to the needs of its citizens. The reform is also deeply strategic in its economic implications. By lightening the indirect tax load on essentials and aspirational products, it is expected to encourage consumption, one of the central drivers of India’s growth. For small and medium businesses, simplified compliance and clarity of rates reduce costs and litigation risks, opening pathways for innovation and expansion.
The longterm dividend lies not just in higher consumption but in building trust in taxation as an instrument of national development, rather than a burden. Placed against the broader sweep of India’s economic history, GST reform is a reminder that progress comes in phases. The 1991 liberalisation opened India to global markets. The 2017 GST unified those markets internally. And the 2025 rationalisation now consolidates this journey by making the system simpler, fairer, and more inclusive. It is this arc that makes the reform not a mere technical adjustment but a chapter in India’s democratic story of development.
As India moves towards its Viksit Bharat 2047 vision, rationalising GST is both symbolic and substantive— a gesture of continuity with the reformist past and a signal of confidence in the future. In harmonising equity with efficiency, and growth with inclusion, the reform embodies the very spirit of Kautilya’s injunction: a system that strengthens the flower while allowing the bee to flourish.
Kartikeya Sharma is Member of Parliament (Rajya Sabha).
