In a major move toward formalizing India’s vast informal economy, the Government of India has launched a nationwide campaign to bring street food vendors, local shops, and other small-scale businesses under the Goods and Services Tax (GST) regime.
Government Pushes for Wider GST Inclusion
The Ministry of Finance has directed the Central Board of Indirect Taxes and Customs (CBIC) to activate its field offices and conduct targeted outreach programs. The objective is to expand the GST taxpayer base, curb tax evasion, and promote transparency in cash-dominated sectors.
A government official stated, “Our twin goals are to integrate unregistered businesses into the GST network and minimize cash-based, unaccounted transactions.”
Focus on Trust-Based Engagement
This campaign will focus on sectors with high cash usage, particularly in densely populated commercial zones. It targets unregistered food vendors, small service providers, and other micro-enterprises. However, officials have emphasized a trust-based approach rather than coercive enforcement.
“More registrations translate into improved compliance, streamlined trade, and the potential for lower GST rates in the future,” said a senior finance official.
GST Base Expansion and Revenue Milestones
The strategy hinges on expanding the GST base, which could ease the per-person tax burden and pave the way for rate rationalization. In April 2025, India achieved its highest-ever monthly GST collection of ₹2.36 lakh crore, marking a 12.6% year-on-year growth.
This record was largely driven by a surge in new GST registrations—over 2.5 million in FY25—bringing the total number of registered GST taxpayers to 15 million.
Domestic GST revenues grew by over 9%, reflecting robust consumption and production trends in both urban and rural areas.
Top GST Contributors by State
Uttar Pradesh leads the country in total GST registrations, surpassing the 1 million mark. Maharashtra remains the highest contributor to GST collections, supported by its diversified industrial and service economy. Other states with over 1 million GST-registered entities include Karnataka, Gujarat, and Tamil Nadu.
Formalization to Boost Economic Growth and FDI
India’s informal sector still accounts for nearly 45–50% of employment and a substantial portion of the GDP. Experts believe this formalization initiative could significantly improve productivity, offer easier access to credit, and enhance worker protections.
Officials also pointed out that the digital nature of the GST framework creates valuable data trails for future policy-making. “The record GST collections are a result of both economic growth and improved taxpayer compliance,” one official said.
The broader formalization push is expected to enhance India’s global appeal by improving ease of doing business, attracting foreign direct investment (FDI), and boosting investor confidence.
While the Ministry of Finance has not issued an official statement, it is evident that GST registration will be a key pillar in India’s journey toward a more structured and transparent economy.