Advantages and Disadvantages of GST: Key Benefits & Drawbacks

When the late Honourable President of India, Shri Pranab Mukherjee, officially introduced GST in 2017, there was strong resistance from the audience. Most businesses thought that GST may severely erode their recurring profits. But the reality turned out to be different. The advantages of GST offset most of the disadvantages of indirect tax, which made it a great success in the long run. A statistical survey reports that in 2023, there were almost 14 million registered GST taxpayers. This alone implies that GST has brought most of the population under a tax regime, making tax paying a crucial part of business. There are thus numerous advantages and disadvantages of GST, which can be discussed one by one in this blog. Let’s first understand the concept of GST before we skip to the main part.

What is GST?

Main definition of GST

GST stands for Goods and Services Tax, a tax levied on the final sales of goods and services. It is a form of indirect tax and is usually imposed on the final selling price, eliminating the need to collect tax at every intermediate step. There are different types of GST too, which will be discussed later before understanding the advantages and disadvantages of GST.

Major objectives of GST

GST was introduced to achieve certain milestones the government had set in the 12th Five-Year Plan in 2017. The GST Council mentions that the major objectives include substituting the complex structure of VAT and other indirect taxes. Here is an outline of all those objectives:

• Achieving maximum compliance - GST tries to engage the maximum number of people under a common tax regime. Before GST was applied, tax evasion was quite high. According to a report by BBC, tax evasion was as high as $9.5 billion in India in 2017. After the application of GST, a large proportion of the tax-evading section had been converted to a tax-paying mass.
• Lower tax cascading - Tax cascading means additional imposition of tax on goods and services, which tends to inflate the prices of goods. A great importance of GST is that it has lowered this effect to a good extent as it is levied only on the final price.
• Enhance economic welfare - Economic welfare is certainly enhanced by GST imposition, as GST has contributed significantly to boosting the GDP growth of India. As per media reports, in 2024 the tax-to-GDP ratio was 11.7%, which implies an impressive growth range.

Types of GST

To understand the advantages and disadvantages of GST, one first needs to have a concise idea of the various types of GST existing. GST follows a dual taxation structure. It is levied on those transactions occurring either within the state or outside the state. GST is also imposed on transactions that occur in the Union Territories, so here is a concise list explaining all of these different types namely CGST, SGST, IGST and UTGST:

CGST: This stands for Central Goods and Services Tax, imposed by the central government on all intra-state transactions. The Central Government collects the tax revenue divided into an equal proportion with the State government.

SGST: SGST stands for State imposed tax on all transactions, and the revenue is directly collected by the State government. SGST is imposed on all intra-state transactions, with revenue sharing with the State government.

IGST: IGST refers to Integrated GST, where the tax is levied only on those transactions that happen interstate or across two different states. IGST is different from all the various types of GST, as in IGST, tax is charged only on those transactions that occur in states.

UTGST: Union Territories Goods and Services Tax (UTGST) is a specific form of tax charged on the transactions in the Union Territories. These Union Territories usually include Andaman and Nicobar Islands, Dadra & Nagar Haveli, Daman & Diu.

Advantages of GST

These are some advantages of GST to call out for. Here are they:

• Better threshold - GST has a threshold that protects small-scale traders and micro businesses. Businesses earning under 40 lakhs INR are exempted from the GST imposition, which encourages more enterprises to start businesses, developing a strong economic structure for the nation.
• Offers input tax credit benefit - One of the benefits of GST is to offer input tax credit for small businesses. Most businesses can directly claim an input tax credit, which has benefited them to a good extent.
• Tax on E-commerce goods - GST is levied on all e-commerce transactions under the CGST Act 2017 and for any inter-state e-commerce transactions under the IGST Act 2017. Before GST, e-commerce transactions underwent a complex system of tax levies, with low clarity.
• Reduced cascading effect - A strong importance of GST is that it has strongly lowered the cascading effect of taxation. The cascading effect refers to double taxation, where a business ends up paying tax twice or more than that on the same transaction. Before GST, a business used to pay VAT, CST, State Excise Tax, Grant Tax and more, which was eliminated by GST.
• Easier tax filing - Tax filing was the biggest challenge before GST, as it involved daunting tasks of paperwork. In the case of GST, all these hustles have been removed and replaced with an easier online filing system. All businesses can file for GST online with the generation of an e-receipt of GST, with better tax compliance.

Disadvantages of GST

Here are some major disadvantages of GST:

• Complex for small-scale businesses - Small-scale businesses have faced the problem of increased complexity, in terms of tax compliance. With a varied tax slab for various goods, small businesses face complexity in terms of filing taxes for each transaction.
• Overall economic slowdown - Indian businesses resisted the imposition of GST at first, with low aid on filing for GST. This caused a nationwide slowdown of the economy, and many small businesses paused their operations owing to the sudden imposition of the GST regime.
• Technical interruption - It has been found that frequently there are technical interruptions in the GST portal, especially while filing it online. For example, in the first week of 2025, the portal went down when there was a crucial need to file it online.
• Massive tax on a few goods - Among other disadvantages of GST, the high tax rate imposed on certain goods is a strong demerit. Consider the high GST on goods such as tobacco and automobiles, which strongly discourages businesses of these goods.

Conclusion

GST is an integral part of any business now. It has been 8 long years since the GST has been introduced. Since then, numerous taxpayers have been enrolled, and the annual revenue of the nation has been enormous since GST was rolled out. This blog mostly lists all the advantages and disadvantages of GST, continuing from the timeline of its imposition to the present. To concise everything, GST has made tax filing highly convenient and has reduced double taxation. On the other hand, it has also complicated tax enrollment and has inflated the price of multiple items.

How Coverbiz can help in calculating GST?

After knowing the benefits of GST and its demerits, by now you should also know the way to calculate GST. Coverbiz brings you a simple GST calculator, where you get features such as choosing the GST rate, choosing the inclusion and exclusion of GST and viewing the complete breakdown of GST.