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August 8, 2023

Know all about Advantages and Disadvantages of GST

Know all about Advantages and Disadvantages of GST


The implementation of Goods and Services Tax (GST) on July 1st, 2017, marked a significant reform in India’s tax structure. GST consolidated various indirect taxes imposed by both the central and state governments, such as excise, VAT, and service taxes. This comprehensive change aimed to streamline taxation and boost the economy.

Advantages of GST:

1. Diplomacy and Technical Support:

The functioning of the GST Council showcased the diplomatic skills of its members, fostering cooperation between the central and state governments. The increased emphasis on technical support and digitalization of GST services improved efficiency.

2. Simplified Return Filing for MSMEs:

Micro, Small, and Medium Enterprises (MSMEs) benefited from simplified return filing procedures. The option for quarterly filing for taxpayers with a turnover below 1.5 crores eased the compliance burden for smaller businesses.

3. Elimination of Cascading Tax Effect:

GST replaced the cascading effect of tax (tax on tax) by providing a unified taxation system. This elimination of double taxation boosted transparency and reduced tax burden.

4. Higher Threshold for Registration:

The threshold limit for registration under GST was increased to Rs. 20 lakhs, benefiting many small traders and service providers. This change reduced compliance pressure for smaller businesses.

5. Composition Scheme for Small Businesses:

The Composition scheme offered small businesses with a turnover of Rs. 20 to 75 lakhs the option to pay lower taxes. This eased tax liabilities and compliance obligations.

6. Simplified Online Procedure:

The transition to GST streamlined the entire taxation process, including registration and return filing. The online platform simplified operations, especially for startups, negating the need for multiple registrations.

7. Reduced Compliance Burden:

Unlike the multiple returns required under the previous tax regime, GST introduced a unified return filing system, reducing compliance complexity.

8. Defined Treatment for E-Commerce Operators:

GST established clear provisions for e-commerce operators, eliminating variations in VAT laws across different states. This consistency eased interstate movement of goods.

9. Improved Logistics Efficiency:

Interstate movement of goods under GST was made more efficient, reducing the need for multiple warehouses. This streamlined logistics, decreasing operating costs.

10. Regulation of Unrecognized Sectors:

GST brought unregulated industries like construction and textiles under the tax framework, enhancing accountability and regulation.

Disadvantages of GST:

1. Increased Software Costs:

Businesses had to upgrade their accounting software or purchase new GST-compliant software, resulting in higher costs. Additionally, training employees to efficiently use new software incurred additional expenses.

2. Penalties for Non-Compliance:

SMEs struggled with the complexities of the GST regime, including issuing compliant invoices, maintaining digital records, and timely return filing. Non-compliance could attract penalties.

3. Increased Operational Costs:

Adapting to the GST regime required businesses to hire tax professionals for compliance. Training employees and employing experts led to increased operational costs.

4. Transition Challenges:

The mid-year implementation of GST led to a transition period where businesses followed the old tax structure for the initial months. This created confusion and compliance issues.

5. Adoption of Online Taxation:

The shift from traditional invoicing to online return filing posed challenges for smaller businesses. Cloud-based GST billing software offered a solution but required adaptation.

6. Higher Tax Burden for SMEs:

The introduction of GST expanded the tax burden for SMEs, including those with a turnover above Rs. 20 lakhs. The composition scheme offered some relief but also limitations.


Despite challenges, GST is a crucial step towards unifying India’s taxation system. Learning from global economies that implemented GST, addressing teething problems, and embracing its advantages will pave the way for a smoother tax regime. Ensuring GST compliance and leveraging resources like Clear Tax’s All-in-one GST kit for Chartered Accountants will aid in navigating this transformative tax landscape.

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