The Goods and Services Tax (GST) is superior to the previous Indian tax system by replacing multiple indirect taxes with a single, unified tax, which eliminates the "cascading effect" (tax on tax). It simplifies compliance, enables seamless input tax credits, promotes a common national market, and reduces logistics costs by removing interstate checkpoints.
GST has replaced multiple indirect taxes, which were existing under the previous tax regime. The advantage of having one single tax means every state follows the same rate for a particular product or service. Tax administration is easier with the Central Government deciding the rates and policies.
The Old vs New Tax Regime debate centers on tax slabs and deductions. Income up to ₹12 lakh is tax-free under the new regime, due to rebate. Beyond ₹25 lakh, the old regime is better if deductions exceed ₹8 lakh. Between ₹12 - 25 lakh, the choice depends on your deduction level.
It has replaced a multitude of indirect taxes levied by the state and central governments. GST has several advantages, starting from simplifying the tax system, reducing its cascading effect on taxes, and making compliance easier for businesses.
GST prevents cascading of taxes by providing a comprehensive input tax credit mechanism across the entire supply chain. Such a seamless availability of Input Tax Credit across goods or services at every stage of supply will enable streamlining of business operations.
Maximum marginal rate is the highest rate of tax at any income level. This means for those with incomes between Rs 2 crore and Rs 5 crore, 39% will be the highest applicable tax rate, and for those with incomes above Rs 5 crore, it will be 42.74% — the highest tax rate since 1992.
Sales tax is primarily used in the United States, while GST is the standard in countries like India, Canada, Australia, and others. The primary difference between sales tax and GST lies in how and when the taxes are applied throughout the supply chain. Imagine you're selling a pair of sneakers in the US.
The Government: A Boost in Revenue
From a government standpoint, GST has been a resounding success in terms of revenue generation and increase in tax base. The number of Taxpayers is increasing from year to year and the same thing can be said about the collection of GST.
Electronics such as ACs, washing machines, TVs, and dishwashers are set to become more affordable, while GST on several medicines and medical devices has been cut to 5 per cent.
The new tax regime is better if you have total deductions of ₹1.75 lakh or lower. If your total deductions exceed ₹4.5 lakh the old tax regime will save you more tax. If your deductions fall between ₹1.75 lakh and ₹4.5 lakh the choice depends on your income level.
One of the biggest disadvantage of the old tax regime is its complex tax structure that includes multiple exemptions and deductions. This can be challenging for taxpayers to understand and comply with.
Although VAT made the taxation of goods at the state level easier, it created loopholes in the form of fragmented rates, cascading taxes, and interstate trade barriers. GST addresses these shortcomings by establishing a single, national tax system that is applicable to goods and services.
Types of GST in India
CGST (Central Goods and Services Tax) SGST (State Goods and Services. IGST (Integrated Goods and Services Tax) UTGST (Union Territory Goods and Services Tax)
Income tax is paid directly by individuals and businesses based on their earnings. Therefore, while GST is based on consumption and collected by businesses from consumers, income tax is based on income and paid by the earners themselves.
GST in India has four components – CGST, SGST, IGST, and UTGST. The charge depends upon whether the transaction is intra-state or inter-state. The Central Government charges CGST, while the State Governments and Union Territories levy SGST and UTGST respectively, on intra-state supplies.
For any standard-rated supplies of goods or services that you make on or after 1 Jan 2024, you must charge GST at 9%. For instance, if you issue an invoice and receive payments for your supply on or after 1 Jan 2024, you must account for GST at 9%.
Major highlight was simplification of tax rates into two main slabs (5% & 18%) by removing 12% and 28%. Sin goods will be taxed at a new 40% GST. These changes are now live with notifications by the CBIC passed on 17th September 2025.
Significance of GST
Consumers have benefited from lower average tax rates and reduced costs on essential items, while the logistics sector has seen enhanced efficiency, reduced transport times, and significant investments.
Duty Drawback is a trusted and time-tested scheme administered by CBIC to promote exports. It rebates the incidence of Customs and Central Excise duties, chargeable on imported and excisable material respectively when used as inputs for goods to be exported.
Advantages: GST simplifies the tax structure, reduces tax evasion, and eliminates cascading taxes, promoting a unified market. It enhances transparency and compliance while boosting the economy. Disadvantages: Implementation challenges, initial compliance costs, and potential inflation in some sectors.
With GST, there is only one CGST rate and a uniform rate of SGST across all states. Credit of CST and various other indirect taxes isn't allowed in the previous tax structure, whereas under GST the entire concept of CST has been eliminated with introduction of IGST.
By providing a credit for taxes paid, the VAT prevents cascading. Last, when retailers evade sales taxes, revenues are lost entirely. With a VAT, revenue would only be lost at the “value-added” retail stage. All these differences help explain why numerous countries replaced their sales and turnover taxes with VATs.