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By Sidheswar Jena, PhD-Scholar in Law

Introduction

When the Goods and Services Tax (GST) was introduced on 1st July 2017, it was hailed as the most transformative reform in India’s tax history. It carried the grand promise of “One Nation, One Tax, One Market” — unifying a fragmented VAT–Excise–Service Tax system into a seamless framework.

Eight years later, however, GST stands at a crossroads. While its intent was noble, its implementation has been marred by loopholes, systemic misuse, and repeated amendments that have done little more than apply a band-aid to structural fractures. From fake invoicing to officer discretion, from fragile legal measures to political tinkering, GST today raises a crucial question: Is it truly a reform, or has it become another political agenda?

This article examines the legal, administrative, and constitutional cracks within the GST framework and argues for structural corrections rather than cosmetic fixes.

1. Registration Loopholes: A Weak Entry Gate

GST registration, governed under Section 25 of the CGST Act, is PAN-linked and state-specific. But here lies the flaw: cancellation of a GSTIN under Section 29 in one state does not automatically bar the same PAN from registering in another state.

Fraudulent taxpayers exploit this gap ruthlessly. A defaulter in one state resurfaces as a “new taxpayer” in another. Officers, armed with discretion but lacking accountability, often approve such registrations.

Finding: By failing to impose a nationwide bar on fraudulent PANs, the Act leaves the door wide open for misuse, while honest taxpayers get entangled in red tape.

2. Fake Billing & ITC Fraud: The Unaddressed Core

GST is fundamentally a self-declaration tax. Taxpayers claim Input Tax Credit (ITC) based on invoices. The law originally envisioned invoice-matching provisions (Sections 42 & 43 of the CGST Act), but they were never fully operationalized.

The result? Fake billing has become a cottage industry. Self-declaration without automated verification effectively means self-certification. Revenue integrity is left to the mercy of fraudsters.

Finding: Without technological enforcement through real-time invoice matching, ITC remains the Achilles’ heel of GST.

3. PAN & Aadhaar Blocking: A Legally Fragile Measure

Recent policy debates suggest “blocking” PAN or Aadhaar of suspected evaders. But here is the constitutional problem:

The CGST Act does not authorize such blocking; it only allows registration cancellation.

Blocking without judicial sanction violates Article 19(1)(g) (right to trade) and Article 21 (right to livelihood and due process).

Worse still, fraudsters can simply float LLPs or private companies with fresh PANs, rendering the measure futile.

Finding: This is not only unconstitutional but also practically ineffective. What looks tough on paper is hollow in practice.

4. Officer Discretion Without Accountability

GST officers wield enormous discretion over registration approvals, cancellations, and revocations. Yet, the law imposes no direct accountability on them for wrongful or negligent orders.

This lack of checks fuels corruption and harassment of genuine taxpayers. Dishonest practitioners even market their ability to secure instant approvals, often in a single day — bypassing mandatory field visits and geo-tagged verifications.

Finding: A system without accountability allows both taxpayers and officers to game the process. Self-declaration is a noble principle, but it must be supported by automated checks and officer responsibility.

5. Mid-Year Reforms: Cosmetic, Not Structural

The GST Council frequently tweaks rates and slabs mid-year. While these decisions grab headlines, they add to business uncertainty. ERP systems, contracts, and compliance frameworks are constantly disrupted, while the larger issues of enforcement and fraud remain ignored.

Finding: Cosmetic reforms may serve political optics, but they distract from systemic failures.

6. Enforcement Without Deterrence

Fraud cases make the news, but very few culminate in convictions. Penalties, when imposed, arrive late and inconsistently. Even complaints of PAN/Aadhaar misuse stagnate at the officer’s desk.

Finding: Without swift adjudication and visible punishment, enforcement is reduced to theatre. A law without deterrence is a law without teeth.

7. Refunds: A Breeding Ground for Corruption

GST refunds, particularly for exporters and high-credit taxpayers, have become a fertile ground for delays, interference, and corruption. Honest taxpayers are left frustrated, while dishonest ones exploit the system through collusion.

An automated, timeline-bound refund mechanism is the only cure.

8. Account Freezing & Compliance Gaps

Account freezing, return mismatches, and auto-restrictions like blocking GSTR-2B/3B data are being used as ad-hoc measures. Courts have repeatedly reminded the department not to indulge in arbitrary practices.

But a half-baked MIS system cannot replace a robust, data-driven compliance structure.

9. ITC Misuse at Scale: The Multiplier Effect

Consider a taxpayer with a turnover of ₹100 crore. By fabricating ₹50 crore worth of invoices, they can siphon off ₹9 crore in fake ITC (at 18%). Multiply this by just 100 taxpayers and the loss escalates to ₹900 crore. With 1.5 crore registered taxpayers, the scale of potential fraud is staggering.

Finding: Even “small” fraud percentages translate into mammoth losses at the macro level. Prevention is not optional; it is imperative.

Recommendations

For GST to evolve from a political slogan into a real reform, the following structural corrections are essential:

Nationwide PAN Bar: Fraudulent PANs must be debarred across all states, subject only to tribunal clearance.

Automated ITC Verification: Real-time AI-driven invoice matching must be operationalized.

Judicial Safeguards for Identity Blocking: PAN/Aadhaar restrictions, if any, must be sanctioned by fast-track courts, not imposed administratively.

Officer Accountability: Wrongful or negligent orders by officers should invite disciplinary action.

Visible Deterrence: Habitual offenders should face permanent blacklisting and expedited trials.

Predictable Tax Calendar: Reforms must align with the financial year to reduce business disruption.

Refund Automation: Eliminate human discretion to curb corruption in refunds.

Conclusion

GST was meant to unify India’s market and simplify taxation. But eight years later, it finds itself entangled in its own contradictions. Rate rationalisation continues to dominate political debate, while the real issues of enforcement, accountability, and constitutional balance remain neglected.

If reforms remain cosmetic, GST will remain a law of ambition rather than a law of integrity.

⚖ True reform is not about cutting rates or tinkering with slabs. It is about building a system that is legally robust, technologically sound, and corruption-resistant.

Only then can GST live up to its promise of “One Nation, One Tax, One Market.”