The Goods and Services Tax (GST) is one of the biggest tax reforms in India after independence. It was introduced on 1st July 2017 with the aim of creating “One Nation, One Tax, One Market.” Before GST, India had a very complicated tax system where multiple indirect taxes were levied by the central and state governments such as VAT, excise duty, service tax, octroi, entry tax and many more. This created confusion, double taxation and extra compliance burden for businesses. With the introduction of GST, all these taxes were merged into a single tax system, which has been seen as both a boon and a bane depending on the perspective of businesses, government and consumers.
What is GST?
GST is an indirect tax levied on the supply of goods and services. It is collected at every stage of the value chain but is designed in such a way that the final burden falls on the consumer. Businesses can claim input tax credit (ITC) on the taxes they have already paid, which reduces the cascading effect of “tax on tax.” GST is structured into four main components:
CGST – Central Goods and Services Tax (collected by the central government)
SGST – State Goods and Services Tax (collected by the state government)
IGST– Integrated Goods and Services Tax (for inter-state transactions)
UTGST – Union Territory Goods and Services Tax
GST as a Boon for Businesses
1. Simplification of Tax Structure
Before GST, businesses had to deal with multiple indirect taxes. For example, a manufacturer had to pay excise duty, then VAT and also service tax if they used services. Under GST, all these have been merged into one system, which makes it much simpler and easier to understand. This saves time and reduces the burden of handling too many compliances.
2. Removal of Cascading Effect
The biggest benefit of GST is that it removes the problem of double taxation. Earlier, businesses were paying tax on tax at different stages. For example, excise duty was charged on production and VAT was charged on the sale price (which already included excise). Now, under GST, businesses can claim input tax credit for the tax already paid at earlier stages. This reduces cost and increases profit margins.
3. Transparency and Accountability
GST has brought more transparency into the system. Every transaction is recorded online through GST returns, invoices and filings. This makes it difficult for businesses to hide sales or avoid taxes. For honest businesses, this is a boon because the competition becomes fairer and black money circulation is reduced.
4. Encouragement to “One Nation, One Market”
Earlier, businesses had to pay different entry taxes, octroi and state-wise taxes while moving goods from one state to another. Now, under GST, the whole country is treated as a single market. This reduces logistics costs, saves time at state borders and encourages free movement of goods and services across India.
5. Growth of Start-ups and Small Businesses
GST has provided benefits to start-ups and small businesses by offering a composition scheme where small businesses with limited turnover can pay a fixed percentage of their turnover as tax instead of maintaining detailed records. This helps them grow without facing heavy compliance burdens.
6. Digitalization and Modernization
GST has shifted the tax system to an online platform where businesses file returns, pay taxes and claim refunds digitally. This reduces corruption, paperwork and human interference. It also pushes businesses to become more technology-driven and modern.
GST as a Bane for Businesses
1. Complex Filing Process
Although GST was meant to simplify taxes, many small businesses still find the filing process complicated. Monthly returns, multiple forms and online procedures can be challenging, especially for businesses in rural areas or those without digital knowledge.
2. High Compliance Costs
To file GST returns properly, businesses often need to hire accountants or tax professionals. This increases compliance costs, especially for small traders who cannot afford expensive consultants.
3. Burden on Small Businesses
While big companies can easily adapt to GST, many small businesses feel the burden. The requirement to maintain digital records, issue GST-compliant invoices and pay taxes on time becomes difficult for small shopkeepers and unorganized sector players.
4. Issues with Input Tax Credit
Although input tax credit is a major benefit, in practice many businesses face delays in receiving refunds or credits. This creates a cash flow problem, especially for exporters who often wait months for GST refunds.
5. Multiple Tax Slabs
One major criticism of GST in India is that it has multiple tax rates like 5%, 12%, 18%, and 28%. This makes the system slightly complicated compared to other countries where there is usually a single or double GST rate. For businesses, this means confusion in classifying products correctly, which sometimes leads to disputes and penalties.
6. Initial Implementation Challenges
When GST was first launched in 2017, many businesses faced difficulties in understanding the system, filing online returns, and managing working capital due to delay in refunds. This created frustration and financial pressure.
Impact of GST on Different Sectors
Manufacturing Sector: Benefited from removal of multiple taxes and easier interstate trade.
Service Sector: Initially faced challenges due to higher tax rates compared to earlier service tax but later adjusted.
E-commerce: GST brought clarity in rules, but compliance requirements like TCS (Tax Collected at Source) added complexity.
Exporters: Zero-rated supply under GST benefits exporters, but refund delays create liquidity issues.
Consumers: In many cases, consumers benefitted from reduced prices due to removal of cascading effect, but in luxury and sin goods, GST rates are high, making them more expensive.
Long-Term Benefits of GST
Even though there are challenges, GST has long-term benefits:
It increases tax compliance and government revenue.
It creates a more formal economy by reducing cash transactions.
It integrates the Indian economy into a single market, making it easier for global investors.
It promotes economic growth by reducing logistics and transaction costs.
Conclusion: Boon or Bane?
GST is both a boon and a bane for businesses, depending on how we look at it. In the short term, it created many challenges for small businesses in terms of compliance and digital adaptation. The multiple tax slabs and refund delays are still a concern. However, in the long run, GST has proved to be a boon by simplifying the tax system, removing double taxation, encouraging transparency and building a unified national market. Like any major reform, GST has faced teething problems, but with time and continuous improvement, it will provide huge benefits to the Indian economy and businesses. Therefore, GST can be seen as a transformational reform which is more of a boon than a bane, especially when we think about the future growth and development of India.
