Archive · 18 Jan 2026
GST Reforms 2.0 Impact Government Finances
India has been cutting taxes to help businesses and people, which makes things cheaper to buy.
This includes changes to the GST, corporate taxes, and income taxes.
While this is good for the economy and helps people save money, it has made it harder for the government to spend on important things like schemes for farmers and jobs.
The government now has less money to spend, which might affect how they can help people in the future.
Some people think these tax cuts are good for the economy, while others worry that the government won't have enough money to do important things.
GST Reforms 2.0, along with corporate and income tax cuts, have significantly reduced government revenues.
The revenue foregone due to corporate tax cuts is estimated at Rs 1.45 lakh crore, and income tax cuts at Rs 1 lakh crore.
Government spending on schemes like PM-Kisan has decreased in relative terms, with the Centre's expenditure to GDP ratio budgeted at 14.2% in 2025-26.
States are also affected, with reduced tax collections due to GST rate cuts and changes in funding structures for schemes like MGNREGA.
The constrained finances limit the government's ability to adopt populist schemes and may have long-term implications for future governments.
- Who
- Indian Government, Economic Analysts, Taxpayers
- What
- Impact of GST Reforms 2.0 and other tax cuts on government finances and spending
- When
- GST Reforms 2.0 in September 2025, Corporate tax cuts in 2019, Income tax cuts in Union Budget 2025-26
- Where
- India
- Why
- To boost private consumption and investment, reduce middle-class disenchantment, and foster economic growth, but resulting in constrained government finances
Government Perspective
Economic Analysts
Tax Cuts and Government Spending
Government Perspective
Tax cuts are necessary to boost private consumption and investment, reduce middle-class disenchantment, and foster economic growth.
Economic Analysts
Tax cuts have significantly reduced government revenues, constrained fiscal capacity, and limited the ability to spend on essential services and schemes.
- Corporate Tax Cuts Revenue Forgone
- Rs 1.45 lakh crore
- Income Tax Cuts Revenue Forgone
- Rs 1 lakh crore
- Centre's Tax Collections (2014-15)
- 7.2% of GDP
- Centre's Tax Collections (2025-26 Budgeted)
- 7.9% of GDP
- PM-Kisan Spending (2020-21)
- Rs 60,989 crore (0.30% of GDP)
- PM-Kisan Spending (2025-26 Budgeted)
- Rs 63,500 crore (0.18% of GDP)
- Centre's Expenditure to GDP (2014-15)
- 13.3%
- Centre's Expenditure to GDP (2025-26 Budgeted)
- 14.2%
