Complete Guide to GST in India: History, Benefits, Problems, and Impact

 

Introduction

Goods and Services Tax, also called GST, is one of the biggest tax reforms in India’s history. It was started with the aim to make the tax system simple, transparent, and fair. Before GST, there were many types of indirect taxes like VAT, Service Tax, Excise Duty, Octroi, etc. This made business very complicated because companies had to pay and manage many taxes at different stages.

GST combined all these taxes into one single tax. Today, whether you buy a product or service, GST is included in the bill.

But the story of GST is not so simple. It took years of planning, debates, and adjustments. In this article, we will understand:

• When GST started in India
• Whose idea was GST
• Who needs to apply for GST
• How GST helps businesses and people
• How GST creates problems for companies
• How it helps the Indian government
• How much revenue GST collects compared to income tax before GST
• A full, easy-to-read report

When Did GST Start in India?

GST officially started in India on 1st July 2017. The day is now celebrated as GST Day every year.

The idea of GST was first discussed in the year 2000 during Atal Bihari Vajpayee’s government. A committee was made to design the structure of GST. But due to political debates and challenges, it took 17 years to finally launch GST in India.

Whose Idea Was GST?

GST is not an idea of one person. It is a concept that was already used in many countries like Canada, Australia, and Singapore. India also decided to implement GST to make the tax system easier and more uniform.

• The idea of GST in India was first proposed by Atal Bihari Vajpayee’s government in 2000.
• Later, the Congress government under Manmohan Singh worked on the draft.
• Finally, it was launched by Prime Minister Narendra Modi’s government in 2017.

So, GST is a result of long-term efforts of many governments.

Who Needs to Apply for GST?

Not every person needs to register for GST. It mainly applies to businesses and service providers.

GST Registration is Required If:

• Your business turnover is above ₹40 lakh (₹20 lakh in some states).
• You are an online seller (Amazon, Flipkart, etc.).
• You are a service provider earning above ₹20 lakh per year.
• You are involved in interstate business (selling in other states).
• You are an exporter or importer.

For small businesses below this limit, GST registration is optional, but many still apply because customers and vendors prefer dealing with GST-registered companies.

How GST Helps People and Companies

GST brought several benefits:

1. One Nation, One Tax

Earlier, people had to pay multiple taxes like VAT, excise, and service tax. Now all are combined into one single tax – GST.

2. Transparent Billing

When you buy a product, you clearly see GST on the bill. This increases trust and reduces hidden taxes.

3. Lower Prices in Some Cases

By removing double taxation, GST has reduced the price of some goods and services.

4. Easy for Businesses to Expand

Earlier, businesses faced different tax rules in different states. Now with GST, rules are the same across India. This helps companies grow without confusion.

5. Boost to Digital India

GST is completely online – from registration to filing returns. This pushed businesses to become more digital.

How GST Creates Problems for Companies

Even though GST has benefits, it also creates challenges:

1. Complicated Return Filing

Small businesses often struggle with monthly or quarterly GST returns. They need accountants or software, which increases cost.

2. Higher Compliance Costs

Businesses must keep all invoices, file returns regularly, and follow strict rules.

3. Cash Flow Problems

In some cases, businesses pay GST first and wait months for refunds (like exporters). This creates money blockage.

4. Technical Glitches

In the early years, the GST portal often crashed during deadlines, creating stress for businesses.

5. Multiple Tax Slabs

India’s GST has different slabs – 0%, 5%, 12%, 18%, 28%. Many countries have a single slab, but India’s system is complex.

How GST Helps the Indian Government

GST is very important for the Indian government:

1. Higher Revenue Collection – Earlier, many businesses avoided paying taxes due to loopholes. Now, with GST being digital, the government can track almost all transactions.
2. Reduced Tax Evasion – Since buyers need GST invoices to claim credit, sellers are forced to report sales.
3. Boost to Formal Economy – More businesses register officially, which increases India’s formal economy.
4. Better Transparency – Tax collection data is available online, making it easy to monitor.
5. Stronger Economy – Stable tax system attracts foreign investments and strengthens India’s image globally.

GST Collection vs. Income Tax Collection

Before GST

• India mainly earned from Income Tax + Service Tax + Excise + VAT.
• In 2016-17, indirect tax revenue (before GST) was about ₹8.63 lakh crore.

After GST

• GST has become the largest source of indirect tax.
• In 2022-23, India collected around ₹18 lakh crore from GST.
• Monthly GST collections now often cross ₹1.5 to ₹1.7 lakh crore.

Income Tax Comparison

• Income tax collection is still very important.
• In 2022-23, direct tax collection (income tax + corporate tax) was around ₹16.6 lakh crore.
• This means GST now collects more than income tax in many months.

So, GST is a huge success for the Indian government in terms of revenue.

Is GST Good or Bad?

Like every system, GST has good points and bad points.

• For government → It is very good because it increases tax collection and reduces fraud.
• For big companies → It is helpful because rules are uniform across India.
• For small businesses → It can be difficult because of compliance burden.
• For common people → It made some goods cheaper, but also made some services (like restaurants) more expensive.

Conclusion

GST is one of the most important reforms in India’s economy. It replaced multiple taxes with one system, brought transparency, increased government revenue, and helped businesses grow across states.

But at the same time, small businesses face challenges due to multiple slabs, compliance costs, and refund delays.

Overall, GST is a big step for India’s long-term growth. With time, if the system becomes simpler (maybe with fewer tax slabs), both businesses and people will benefit even more.