A Study on the Relationship between Goods and Services Tax (GST) and Foreign Direct Investment (FDI) Inflows in India
Year: 2026
Type: article
Abstract: This study investigates the correlation between Goods and Services Tax (GST) revenues and Foreign Direct Investment (FDI) inflows in India following the implementation of GST, while also assessing the reforms associated with GST and their effects on the nation's investment environment and economic development. Initiated on 1 July 2017, GSTconsolidated India's previously fragmented indirect tax framework by integrating various central and state taxes, which led to a reduction in cascading taxation, enhanced transparency, and simplified compliance processes. The analysis utilizes data on CGST, SGST, IGST, and GST CESS collections, revealing a steady increase from ?7,40,648 crore in 2017–18 to ?22,08,861 crore in 2024–25, notwithstanding a brief downturn during the pandemic year of 2020–21. Simultaneously, FDI inflows exhibit a variable yet generally robust trend, experiencing significant growth in the initial years post-GST, followed by declines attributed to global uncertainties, and a resurgence in recent years. The results indicate that enhanced tax governance, digital advancements, and improved business conditions under GST have bolstered investor confidence in India. Furthermore, the study emphasizes the significance of the Next-Generation GST Reforms 2025, which introduced a streamlined two-slab tax structure of 5% and 18%, thereby promoting transparency, affordability, and consumption-driven growth. In conclusion, the study asserts that GST has profoundly reformed India's indirect tax system and has been instrumental in fostering economic stability and enhancing India's appeal as a global investment destination.
Source: SJCC Management Research Review
Author: Govindan, P.
Language: English
Topic: Economic and Fiscal Studies
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7220884982