GST in India is considered less than ideal due to its high compliance burden, particularly for small and medium-sized enterprises (SMEs), complex multi-rate structures, and frequent technical glitches in the filing portal. It has led to increased tax rates on certain goods, causing inflation, while essential items like fuel and alcohol remain outside its scope.
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.
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.
Soon after India introduced GST on July 1, 2017, the problem of implementation of GST became evident. Despite aiming to simplify taxation, certain issues such as technical glitches and rigid procedures continue to challenge taxpayers and regulators, hindering the reform's goal of creating a unified national market.
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.
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.
There have been numerous milestones in GST's eight-year journey. Some of the major achievements include: A single tax regime: GST facilitated the establishment of a single, integrated tax system for the country. The GST mechanism replaced different indirect taxes and removed the cascading effect of taxes.
List of exempted goods under GST in India:
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.
The top 10% of the population, representing the highest income earners, is responsible for 26.63% of the total Household GST collected and 9.12% of the Total GST collected.
India's GST regime is undergoing a landmark transformation with the 56th GST Council meeting unveiling GST 2.0 - next-generation reforms simplifying tax slabs to 5%, 18%, and 40%. Effective from September 22, 2025, these reforms aim to ease compliance, boost consumption, and fuel economic growth.
Disadvantages of Voluntary GST Registration
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.
GST reduces tax burden through input tax credits, lowers logistics costs by eliminating state entry taxes, and creates a uniform market across India. It also simplifies tax compliance with an online filing system, making it easier for businesses to operate.
Examples of GST-free foods
cooking ingredients, such as flour, sugar and baking mixes that don't contain any taxable ingredients. dry preparations marketed for the purpose of flavouring milk. fats and oils marketed for culinary purposes. unflavoured milk, cream, cheese and eggs.
By zero rating it is meant that the entire value chain of the supply is exempt from tax. This means that in case of zero rating, not only is the output exempt from payment of tax, there is no bar on taking/availing credit of taxes paid on the input side for making/providing the output supply.
Who is the father of GST? The title "Father of GST in India" is often given to Dr. Vijay Kelkar, whose work laid the foundation for GST. However, it was the former Prime Minister Atal Bihari Vajpayee who originally presented the thought in 2000.
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%.
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)
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.
Operational Risk: The complexity of GST structures, such as different rates for different goods and services, can lead to errors in invoicing, documentation, and filing. Errors in tax classification or mismanagement of tax credits can lead to operational inefficiencies and financial losses.
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.