Incorporating GST, a combination of multiple indirect taxes on goods and services, was a much-needed step forward. But since its implementation on July 1, 2017, the debate still continues on the advantages and disadvantages of GST in India and how it is affecting the Indian economy.

Goods and services tax in India contains 4 slabs for all types of products and services: 5%, 12%, 18%, and 28%. Jewelry, cut gems, precious metals, and certain cars fall within the 1.5% and 3% slabs, respectively. So there are a total of 6 slabs under the GST tax regime in India.

As of 2025, GST has undergone several modifications, including AI-driven compliance checks, automated tax audits, and digital tracking of transactions. These advancements aim to simplify tax filing and reduce tax evasion but have also introduced complexities for small businesses. Despite being a landmark tax reform, GST remains a topic of strong debate due to its evolving nature, multiple tax slabs, and compliance requirements.

The article identifies the latest advantages and disadvantages of GST in 2025 and the adaptations by businesses and taxpayers to the prevailing tax regime.

Top 10 Advantages of GST

Here in this list, you will find some of the major advantages of GST that have embarked on the Indian economical ecosystem.

Increase in Foreign Investment 

With the implementation of GST, India has become a single market, and foreign investment has surged in the country. Because of their lower costs, commodities created in India have become more competitive in the worldwide market, resulting in increased exports. In 2024, India witnessed record-high FDI inflows, particularly in the manufacturing and digital services sectors, as companies like Tesla and Apple expanded their presence in the country. The implementation of the Goods and Services Tax brings India in line with worldwide tax regulations, making it easier for Indian enterprises to sell on a global scale.

One Tax System

One of the primary goals of implementing GST was to eliminate various forms of taxes from the Indian tax structure. Prior to the establishment of GST, there were several taxes such as VAT, service tax, and so on. With the implementation of GST, all such levies have been eliminated. There is now only one tax. Although there are several slabs, GST charges for different commodities vary, which often leads to confusion. In 2025, the government has further simplified the GST structure by reducing slabs for essential goods, making taxation more efficient. The merger of 12% and 18% slabs into a single 15% slab is under discussion to streamline tax rates.

Less Compliance to be Followed

Before the GST act was implemented in 2017, we had several different indirect taxes. Naturally, there were various compliance rules associated with each of these taxes which made things complicated. Since the implementation of the new tax regime, there has been only a single unified return to be filed by the taxpayers. The GST has around 11 returns, only 4 of which are basic taxes that apply to all registered taxpayers regardless of their business type. For ease of filing these returns, only the main GSTR-1 is manually populated while GSTR-2 and GSTR-3 are automatically populated.

Simple Access

Anyone sitting anywhere at any time can access the GST portal. This simplifies the filing of returns. The recent launch of the GST mobile app has made tax filing even more accessible to small businesses and freelancers. This is extremely beneficial to all types of organizations.

Efficiency in Logistics

GST has replaced various earlier tax systems, such as VAT. As a result, because the business already pays to the center and state before the transportation of goods, there is no need to pay state-level taxes during interstate movement, which improves logistics and operations. The National Logistics Policy 2024 has further boosted supply chain efficiency, reducing logistics costs from 14% of GDP to around 10%. Companies like Amazon and Flipkart have benefited from smoother interstate transportation, ensuring faster delivery times.

Lift for the Lesser Developed States

The 2% interstate levy remains in place, with the majority of production remaining within the state. However, under the new laws, the tax amount can be distributed across the country, providing a greater boost to the less developed. In 2024, states like Bihar and Odisha saw a significant rise in tax collection, leading to increased development projects. The central government’s decision to extend GST compensation till 2026 ensures financial stability for these states.

The Make In India Initiative

One of the primary objectives for instituting the Goods and Services Tax was to promote ‘Make in India’ products. The GST facilitates competitive product manufacture. However, the government has yet to explain how GST contributes to this campaign.

The recent decision to offer GST rebates on electric vehicle (EV) manufacturing has attracted global companies like Tesla and Tata Motors to expand EV production.  In 2025, India has emerged as a leading global hub for electronics and automobile manufacturing.

Removal of cascading

A system of seamless tax credits across the value chain and across state lines would ensure that there is minimum tax cascading. This would lower the unintentional costs of conducting business.

Boosting of Revenue

Consider this: with the new GST in place, there will be no more evasion than there is now with the current tax regulations. A simplified taxation term will encourage more suppliers to pay the tax amount, resulting in an increase in revenue levels. The GST revenue crossed ₹2 lakh crore per month in early 2025, marking an all-time high. Increased digital transactions and reduced tax evasion have contributed to this growth.

Transparency

The tax administration has begun working without corruption. Transparency has also resulted from allowing sales invoices to disclose the tax applied. The government’s introduction of blockchain-based GST verification in 2025 ensures that fraudulent claims are minimized. This has encouraged a corruption-free tax environment, benefiting both businesses and consumers.

Top 10 Disadvantages of GST

Let us see some of the major disadvantages of GST and its effects on the citizens of India.

Increased Costs

GST requires firms to upgrade their current accounting software to ERP or GST-compliant software in order to keep their operations running. However, firms should keep in mind that purchasing, installing, and training staff to utilize GST-compliant software can be costly. Furthermore, the expenses of conducting business have risen significantly for both large and small enterprises, since they must now hire tax professionals in order to become GST-compliant.

With new government mandates for e-invoicing and AI-driven compliance checks in 2025, companies are investing more in automation tools and cloud-based tax solutions, further increasing operational expenses.

Increased Software Expenses

Prior to the implementation of the GST regime, most Indian businesses relied on basic ERP or accounting software to manage their day-to-day operations. These software and solutions were developed in compliance with the tax rules and structures in place at the time. Businesses are now compelled to switch to more expensive GST-compliant software or specialized GST software as a result of the implementation of GST. This indicates that operating costs will rise as a result of software acquisitions and employee training.

Increased Tax Burden on SMEs

One of the most significant downsides of GST is that it has increased tax burdens for small and medium-sized firms. This is because, under the previous tax structure, enterprises with annual sales of more than Rs. 1.5 crores were required to pay excise. However, under the new tax structure, any company with a total yearly turnover of more than Rs. 20 lakh is subject to taxation.

This tax system, however, includes a composition scheme for SMEs with a revenue of less than Rs. 1 crore. SMEs are simply required to pay 1% of their annual revenue under this system. However, if a company decides to take advantage of this composition benefit, it cannot claim the input tax credit.

Difficult Migration to Online Filing System

Since the implementation of the new tax system, practically every part of the tax has been handled online, from registration to filing tax returns. With the advancement of modern technology, organizations are gradually adopting digital solutions. However, such solutions for tiny enterprises receive little attention. Although the government’s online system is incredibly convenient for business owners, it still has a steep learning curve that can be difficult for small enterprises.

Compliance Burden

Companies must now register with GST in all states where they operate under the new taxing regime. Businesses must issue GST-compliant invoices, keep electronic records, and file returns as part of the registration procedure. The expense of all of these services has significantly raised the strain on the country’s small and medium-sized businesses. Furthermore, numerous firms are finding it difficult to adjust to GST because all Indian states’ infrastructure is not ready to embrace e-governance.

Loss in the real estate sector

The advent of the GST has had a significant impact on the real estate industry. It has resulted in an 8% increase in real estate prices. This has resulted in a 12% drop in property demand. However, it is possible that this is a short-term trend that may not persist forever.

Standard Tax Rates and Multiple Rates of CESS

Instead of a simpler tax system, India’s GST Council implemented GST with five standard rates. Many economists believe that this complicates rather than simplifies the structure.

Given India’s many states, each had its own challenges with GST rates. Each wants lower rates to be implemented for certain items produced. As a result, the GST Council was forced to introduce numerous tax rates under GST. Furthermore, GST was initially implemented with a tax rate as high as 28%. Despite this, the GST Council has been steadily lowering rates, and most items of daily use now fall into the 0% to 5% tax category.

Dual Control 

GST is referred to as a single taxation system, but in reality, it is a dual tax because both the state and the center will collect separate taxes on a single sale and service transaction.

Hurried Implementation of GST

GST was implemented on July 1, 2017, in the midst of the fiscal year. This made it difficult for firms to swiftly transition to a new tax framework. Following the prior regime’s tax laws for the first quarter of 2017 and sticking to the newly implemented GST for the remaining quarters posed compliance challenges.

Income Tax Credit Mismatch

As the tax guard changes, the first few occurrences of application will result in large tax-paying at the outset. However, when the loop is activated, they will only be allowed to use the tax input in the latter phases. With such in place, there would be an ITC mismatch during the initial application of GST Tax.

Conclusion 

While GST has modernized India’s taxation system, it continues to pose challenges, especially for small businesses, real estate, and compliance-heavy industries. 

However, GST has also streamlined taxation, reducing tax evasion and making business operations more transparent. The key to successfully navigating GST in 2025 lies in staying informed about frequent updates, leveraging digital tools, and seeking expert guidance to optimize tax planning and compliance. As the system evolves, it is expected that further reforms will address current challenges, making GST more efficient and business-friendly in the long run.

​​On the fifth anniversary of the GST, we are at a critical point in the GST journey since the advantages of GST look strong as the economy recovers and foreign enterprises look for a new base. If the government responds positively to industry demands, India may emerge as a favored place for businesses, and the economy may continue its post-pandemic growth story with strong collections.

Frequently asked questions about GST 

1. How does GST work?

• Manufacturer: The manufacturer is responsible for paying GST on both the raw materials used to make the product and the value added during production.
• Service Provider: In this case, the service provider is responsible for paying GST on both the product’s purchase price and the value that has been added. However, the manufacturer’s tax payment may be deducted from the total GST that must be paid.
• Retailer: The retailer is responsible for paying GST on both the merchandise they received from the distributor and the margin they added. However, the retailer’s tax payment may be deducted from the total amount of GST that must be paid.
• Consumer: GST must be paid on the purchased item.

2. What are the types of GST in India?

The following list includes each of the four categories of GST:

• The Central Goods and Services Tax (CGST) is levied on intra-state supplies of goods and services.
• State Goods and Services Tax (SGST): Similar to CGST, SGST is levied on purchases made inside a state.
• Interstate sales of goods and services are subject to the Integrated Goods and Services Tax (IGST).
• Union Territory Goods and Services Tax (UTGST): In any of the nation’s union territories, including the Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and Chandigarh, UTGST is imposed on the supply of goods and services. UTGST is assessed in addition to CGST.

3. Who Can Levy GST?

Because GST is a destination-based tax, the Centre and States can impose it on a single tax basis. As a result, it has several parts:

• GST (Central Goods and Services Tax): is the tax levied by the federal government.
• GST (State GST)/UTGST (Union Territory GST): SGST is the state tax, while UTGST is the union territory tax.
• Interstate GST (IGST): This tax is levied on goods supplied between states. The importation of goods is treated as an interstate supply. In addition to IGST, imports may also be subject to customs duties.

4. How many GST slabs are there?

As of February 2025, India follows a GST structure with six effective slabs: 5%, 12%, 18%, 28%, 3%, and 1.5%. The primary slabs are 5%, 12%, 18%, and 28%, which apply to a wide range of goods and services, including essentials, processed food, mobile phones, telecommunications, luxury items, and more. There are also special rates of 3% for gold, silver, platinum, and jewelry, and 1.5% for cut and polished diamonds. Additionally, a 0% GST rate applies to exempt goods and services like fresh vegetables, milk, and educational services, though it isn’t officially considered a tax slab.

5. What is the fine for non-filing of GST returns?

Non-filing of GST returns incurs a punishment of Rs 20 per day for Nil returns and Rs 50 for all other filings. This becomes pretty costly.

6. Does one need to pay quarterly or monthly returns?

Returns can be paid quarterly or monthly, as desired. The options for return period filing can be changed via the GST portal’s Dashboard.

7. What is the GST Number?

A Goods and Services Tax Identification Number (GSTIN) or GST Number is a unique identifier provided to a registered firm or individual under the GST Act. Tax authorities use GSTIN to keep track of GST dues and payments for people who are registered under the GST Act. The GST Number has superseded previous taxpayer identifying systems such as the Tax Identification Number (TIN), which was used by state taxing authorities to track state tax data such as VAT.

8. Can one file a Nil return?

There is no problem with filing a Nil return.

9. How can one file a return using EVC?

To file a return, go to your dashboard, click file returns, select the month’s return to file, and then select the return to file. Then, enter the information and press the file return button. The GST will ask you for the signatory’s name, which you must select from a drop-down menu before clicking on file return with EVC. The GST portal will send you an OTP to your registered mobile number and email address. Fill in the OTP and press the submit button.

10. What is the due date for GST returns for GSTR 3B?

GST returns are due either on the 20th or 24th of each month.

11. What is the composition scheme?

The composition plan is available to businesses with an annual revenue of less than or equal to INR 1.5 crore. Using this approach, they can easily lower their compliance. Businesses that participate in this scheme pay GST at lower rates of 1%, 5%, and 6%.

12. Is opening a GST account free?

Yes, you can open a GST account for free.

13. Can I skip filing a return in case I have no transactions in a month?

No, a NIL return is required; otherwise, you will be taxed Rs 20 per day.