Key problems with the Goods and Services Tax (GST) include high compliance burdens, technical glitches with the GST portal, a complex multi-slab rate structure, and increased operational costs for small businesses. Other issues involve Input Tax Credit (ITC) hurdles, frequent policy changes, and cash flow bottlenecks for exporters.
Key Problems of Implementing GST in India
The CGST notification 12/2025 was issued on 20th August 2025 this regard. PM Narendra Modi called out the next gen GST reforms in his Independance Day speech. The highlights include the removal of 12% and 28% tax slabs, while merging items into the 5% or 18% tax slabs. Introduction of 40% tax slab for sin goods.
Common reasons for GST litigation include disputes over classification and valuation of goods/services, eligibility and denial of input tax credit, refund claims, tax assessments, and penalties.
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.
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.
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.
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.
Complex Nature of GST
Because somehow Indian policymaking believes in the progressivity of taxes—even for consumption goods. A lesser-known reality of the GST is that it has a total of eight tax slabs, excluding the exemptions. These start at 0.25 and go all the way up to 28 per cent.
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)
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.
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%.
Disadvantages of Voluntary GST Registration
GST is not levied on certain goods and services: Exempt items: the sale and lease of residential properties, provision of financial services, import and local supply of investment precious metals, and supply of digital payment tokens (e.g. cryptocurrencies) from 1 January 2020.
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.
GST has introduced complexity with various tax rates and rules, making it difficult for small businesses to navigate without professional assistance. Some products and services have become more expensive due to higher GST rates compared to previous tax regimes, affecting consumer spending.
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.
As per FY 2021 reports, Jeff Bezos was the highest individual taxpayer in the world by, paying over USD 2.4 billion in taxes.
The key categories of goods and services included under the special 40% GST slab are, Tobacco and related intoxicants as sin goods (e.g., cigarettes, bidis, pan masala, caffeinated drinks) Drinks with high sugar content and caffeinated. Super-luxury and luxury 4-wheelers, 2-wheelers and personal use yacht, aircraft, ...
India has four types of GST: Integrated Goods and Services Tax (IGST), State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax (UTGST). This simple division makes it easy to tell the difference between interstate and intrastate goods.
It is expected to lower the cost of goods and services, boost the economy and make our products and services globally competitive. GST will make India a common national market with uniform tax rates and procedures and removes the economic barriers, thereby paving the way for an integrated economy at the national level.
Starting September 22, 2025, GST in India will be simplified to primarily two rates: 5% and 18%, with a special 40% rate on luxury and sin goods like tobacco and high-end vehicles. Many essentials, including certain medicines and foods, are now zero-rated, while several items see reduced rates.