Who Benefited from GST—and Who Lost Out?

When the Goods and Services Tax (GST) was introduced in India in July 2017, it was hailed as the biggest tax reform since independence. By replacing a complex web of indirect taxes with a unified tax structure, GST promised to simplify compliance, reduce cascading taxes, and bring transparency. However, as with any major policy reform, the reality has been mixed. Some sections of society and industry have clearly benefited, while others have struggled to adapt. To understand the complete picture, we must look at the advantages and disadvantages of GST and analyze who the real winners and losers are.

A Quick Refresher: What is GST?

GST is a destination-based indirect tax levied on the supply of goods and services. It replaced multiple taxes such as excise duty, service tax, VAT, octroi, and entry tax, thereby creating a single national market. GST is structured into three types:

• CGST (Central GST): Collected by the central government.

• SGST (State GST): Collected by the state governments.

• IGST (Integrated GST): Levied on interstate transactions.

The goal was to create a tax system that was fair, transparent, and efficient. But while the idea was strong, the implementation revealed both strengths and weaknesses.

The Advantages of GST

One cannot ignore the many positive aspects of GST. Let’s look at some of the major benefits.

1. Elimination of Cascading Taxes

Before GST, businesses had to deal with “tax on tax.” For example, excise duty was charged on goods, and then VAT was levied on the excise-included price. GST eliminated this cascading effect, allowing businesses to claim input tax credit seamlessly. This is one of the core advantages and disadvantages of GST, as it simplifies tax liability for some but creates compliance complexity for others.

2. Uniform Tax Structure

GST replaced multiple indirect taxes with one uniform system across the country. This reduced confusion among traders who previously had to navigate different state VAT laws. The “One Nation, One Tax” approach has been beneficial for large corporations that operate in multiple states.

3. Boost to Transparency

GST is technology-driven. Every invoice is reported digitally, which minimizes the chances of tax evasion. Digital compliance has also created a transparent audit trail, which helps the government track revenue leakages.

4. Encouragement to Organized Businesses

Earlier, many small players operated in the informal sector to avoid complex taxation. GST incentivized formalization, as businesses needed to register to claim input tax credits. This gave an edge to organized companies, especially in manufacturing and retail.

The Disadvantages of GST

While GST has brought several benefits, it has also created significant challenges. To get a balanced view, we need to highlight the advantages and disadvantages of GST side by side.

1. Compliance Burden

Small and medium businesses often complain that GST has increased paperwork. Monthly, quarterly, and annual return filings, along with reconciliation requirements, have created compliance headaches. For small traders, who earlier dealt with simple VAT filings, GST feels like a burden.

2. Higher Costs for Some Sectors

While manufacturing companies benefited from input tax credits, sectors like real estate, petroleum, and alcohol remain outside the GST net. Businesses in these industries face higher costs due to partial applicability of GST. Consumers in services such as restaurants also faced price hikes, as tax rates shifted from 15% service tax to 18% GST in many cases.

3. Technology Challenges

While digital compliance ensures transparency, not every business—especially small traders in rural areas—has the infrastructure or expertise to manage e-invoicing and online returns. This digital divide has hurt micro and small enterprises.

4. Rate Complexity

Though GST was supposed to simplify the tax structure, multiple slabs (0%, 5%, 12%, 18%, 28%) have created confusion. Businesses and consumers often struggle to understand why essential items fall into higher brackets while luxury goods sometimes benefit from lower rates.

Who Benefited from GST?

1. Large Corporates

Multinational corporations and large Indian companies have been clear winners. With operations spread across states, they now face a unified tax regime instead of dealing with multiple VAT laws. Their compliance departments can handle the digital filing system easily, and they gain from better input tax credits.

2. Organized Retail and E-Commerce

GST has been a blessing for e-commerce companies. Earlier, states imposed entry taxes and checkpoints that delayed deliveries. With GST, these barriers were removed, allowing smoother logistics. Organized retail chains also benefited as consumers shifted away from the unorganized sector, which struggled with compliance.

3. Government Revenues

The government has benefited from increased tax compliance and a wider tax net. Though initial teething issues caused fluctuations, GST has significantly improved revenue collection and reduced leakages.

Who Lost Out Under GST?

1. Small Traders and SMEs

The biggest losers have been small businesses. They face high compliance costs, lack of technology access, and difficulty in maintaining digital records. For many, the shift to GST was overwhelming and costly.

2. Informal Sector Workers

As GST pushed businesses toward formalization, many small, informal units either shut down or scaled back operations. This disproportionately affected workers in the unorganized sector, leading to job losses.

3. Certain Industries

Sectors excluded from GST, like petroleum and alcohol, face inefficiencies as they continue under the old tax system. Real estate developers, too, have struggled due to increased taxation on construction services, leading to higher property prices.

Balancing the Equation: Winners vs. Losers

When we weigh the advantages and disadvantages of GST, it’s clear that the reform has worked better for large, organized players while creating hardships for smaller businesses. Consumers saw mixed outcomes—cheaper goods in some categories but higher prices in others.

The policy succeeded in creating a transparent, technology-driven tax system, but the cost of compliance and slab complexities dampened its benefits. The uneven impact shows that GST has been more of a reform in progress rather than a finished success story.

The Road Ahead

For GST to achieve its true potential, reforms are needed. Some suggestions include:

• Simplifying rate slabs: Moving toward a two- or three-slab system to reduce confusion.

• Supporting small businesses: Offering compliance assistance, reduced filing requirements, and digital literacy programs.

• Expanding the tax net: Bringing petroleum, electricity, and alcohol under GST to eliminate inefficiencies.

• Reducing compliance frequency: Allowing quarterly filings for small traders instead of monthly obligations.

By addressing these issues, the government can ensure that the advantages and disadvantages of GST tilt more favorably toward inclusivity and growth.

Conclusion

The introduction of GST was a landmark moment in India’s economic history. While it succeeded in simplifying the tax landscape for large businesses and improving government revenues, it also placed significant burdens on small traders and informal sector workers. The advantages and disadvantages of GST reveal that it is both a progressive reform and a continuing challenge.

Ultimately, GST is not a failure but a work in progress. Its benefits are undeniable, but so are its shortcomings. With further refinements, GST can truly become the transformative tax system it was envisioned to be—one that benefits not just corporates, but also small businesses, workers, and everyday consumers.