GST re-labelling misleads and obscures the true revenue picture
“What’s in a name? That which we call a rose by any other name would smell as sweet.” Alas, Shakespeare’s Juliet was not right about names. Consider as an example the saga of the Goods and Services Tax (GST).
Since September 2025, parts of the GST system have changed their names, with two real consequences. Observers of revenue performance have been misled, since headline numbers for the newly defined GST suggest that receipts are booming, even as overall performance has declined sharply. And cooperative federalism has suffered, as states are receiving a smaller share of the overall GST kitty, amounting to between Rs.15,000 and 20,000 crore annually. Consider each in turn.
Until September 2025, the GST system comprised two types of taxes: regular “GST” (hereafter designated with inverted commas) and the Compensation Cess. The two kitties were created by the GST Council because revenues from them would be deployed in different ways. But from the perspective of the consumer, the distinction was moot: they were both just indirect taxes that consumers paid on the goods and services they bought.
