Key issues with India’s Goods and Services Tax (GST) include high compliance burdens for Small and Medium Enterprises (SMEs), complex multi-slab rate structures, and frequent technical glitches on the GSTN portal. Input Tax Credit (ITC) mismatches, delayed refunds, and, in some cases, an inverted duty structure have further complicated the system.
Key Problems of Implementing GST in India
The existence of five tax slabs, 0%, 5%, 12%, 18%, and 28%, is one of the major implementation problems of GST in India. Firms often misclassify products, which can result in fines, legal problems, and difficulties with compliance.
The GST reforms in India are have been rolled out since 22nd September 2025 through central tax notifications, as stated by Prime Minister Narendra Modi. The Centre's GST reform now have a simplified two-slab structure of 5% and 18%, and a special 40% slab for sin and luxury goods.
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.
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.
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.
According to government reports, while over 7 crore people file tax returns, only a fraction of them actually pay taxes because many fall below the taxable income threshold or use deductions to reduce liability.
In her 2025 Budget speech, Finance Minister Nirmala Sitharaman shared big news. Under the new regime, if you earn up to Rs 12 lakh, you will not have to pay any income tax. Salaried taxpayers get an extra benefit too. The standard deduction, which was Rs 50,000 before, has now gone up to Rs 75,000 for the new regime.
Amitabh Bachchan tops the list by paying 120 crore in tax. Shah Rukh Khan, Thalapathy Vijay, Salman Khan, Virat Kohli and many others also pay huge amounts every year. These numbers come from public reports and estimates, but they clearly show how big the earnings of Indian superstars really are.
New GST Slab Structure
This new GST tax slab approach aims to reduce compliance burden, improve transparency, and make prices easier for consumers to understand.
Raja Chelliah: Father of India's tax reforms.
Using the wrong tax codes or accounting method
Many GST mistakes are the result of using incorrect tax codes or the wrong accounting method: Tax codes: If a GST-free sale is coded as taxable in your accounting system, you'll pay GST unnecessarily. If a taxable sale is coded GST-free, you'll underpay.
In conclusion, India's tax system imposes a heavy burden on its citizens, similar to the USA, with high indirect taxes, income tax rates, and corporate taxes. However, the public services provided by the government often fail to meet the expectations of the taxpayers, resembling those in underdeveloped countries.
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.
In India, the 30% income tax rate generally applies to individuals earning above ₹24 Lakhs (under the old regime/default for some) or ₹15 Lakhs (under the new optional regime for FY 2025-26) and to firms (as a flat rate), while certain income types like lottery winnings, online gaming, and virtual digital assets (like crypto) are taxed at a flat 30% for everyone, regardless of total income.
The Union Budget 2025 introduced a major income tax relief for the middle class – making annual incomes up to ₹12 lakh completely tax-free* under the new regime. This means if your taxable income is ₹12 lakh or less, you owe zero tax* for the year.
The sates with highest levels of poverty will always pay lower taxes because the income itself is not even close to the amount which would qualify for tax. Poor people also spend less money and buy overall less number of products and lower quality items. Hence the total tax including sales and income tax is less.
TAXATION in India is a complex subject that involves various laws, regulations, and compliance requirements. The Indian tax system is governed by the Income Tax Act, of 1961. Besides this, there are laws on GST, Customs, and a host of other areas, from banking to finance transactions.
As an Indian, you are subject to the same tax rules as other Canadian residents unless your income is eligible for the tax exemption under section 87 of the Indian Act.
It allows a tourist, one who is not normally resident in India and enters the country for a stay of not more than six months on non-immigrant reasons, to claim a refund of GST levied on goods purchased in India and thereafter exported out of the country.
The export items that will now enjoy a higher duty drawback include marine and seafood products, automobile tyres and bicycle tyres/tubes, leather and articles made of leather, yarn and fabric made of wool, glass handicrafts and bicycles.
An offender not paying tax or making short-payments has to pay a penalty of 10% of the tax amount due, subject to a minimum of Rs. 10,000.