India’s industry leaders are pushing for a major shake-up of the Goods and Services Tax (GST) system. They’ve formally asked the government to bring key sectors like petroleum products, electricity, and real estate under the GST umbrella. The goal? To broaden the tax base and, in turn, reduce overall GST rates for everyone.
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Currently, petroleum, electricity, and real estate operate outside the GST framework, leading to a “tax-on-tax” situation that increases costs for businesses and consumers. Industry argues that including these sectors would:
- Expand the Tax Base: Bringing these significant economic activities under GST would boost government revenue.
- Eliminate Cascading Taxes: This would streamline the tax process, reducing the overall tax burden and making things cheaper for businesses.
- Enhance Compliance: A simpler, more unified tax structure, especially with fewer restrictions on Input Tax Credit (ITC), would encourage greater adherence to tax laws.
Industry’s Specific Recommendations
- Petroleum Products: A phased inclusion, starting with aviation turbine fuel (ATF) and natural gas, where the government already has more control.
- Electricity: Bring it fully under GST to remove cascading taxes, ultimately lowering operational costs across all industries.
- Real Estate: Begin by removing Input Tax Credit (ITC) restrictions on construction-related goods and services, which would promote compliance and reduce inefficiencies.
The Current Landscape and Challenges Ahead
Despite robust GST collections—reaching ₹2.01 lakh crore in May 2025, a 16.4% year-on-year increase—the exclusion of these sectors remains a sticking point. While industry is eager for these reforms, getting them through won’t be easy.
Past attempts to include ATF under GST have been rejected by the GST Council, largely due to strong opposition from states (both ruling and opposition parties). These states rely heavily on revenue from these sectors to fund their finances. Similar reservations have also been voiced regarding real estate and electricity.
The industry’s call for reform highlights a crucial need for structural changes to keep the GST framework aligned with India’s evolving economy. Whether the Centre takes these demands to the upcoming GST Council meeting remains to be seen, but the pressure for a more integrated and efficient tax system is certainly building.
