7 Years of GST: What Went Wrong with India’s ‘One Nation, One Tax’?

When the Goods and Services Tax (GST) was introduced in July 2017, it was hailed as India’s most ambitious tax reform. Marketed as a step toward “One Nation, One Tax,” it aimed to simplify indirect taxation, eliminate cascading taxes, and create a unified national market. However, seven years later, the outcomes have been mixed. While GST has achieved certain goals, the disadvantages of GST have also become apparent, leaving many to question whether the promise has been fully realized.

The Big Promise of GST

Before GST, India’s tax landscape was cluttered with a multitude of taxes — VAT, service tax, excise duty, entry tax, and more. Each state had its own system, causing confusion, higher costs, and barriers to trade. GST was envisioned as a remedy to this chaos.

The government promised:

• Simplification of the tax system.

• Greater transparency and digitization.

• Input tax credit to reduce costs.

• A level playing field across states.

• Boost to ease of doing business.

While many of these benefits have materialized in part, the disadvantages of GST have had a lasting impact on businesses, consumers, and even state governments.

Major Disadvantages of GST

1. Compliance Burden

One of the biggest disadvantages of GST is its heavy compliance structure. Businesses are required to file multiple returns every month, including GSTR-1, GSTR-3B, and annual filings. For large companies with dedicated finance teams, this may not be a problem, but for small and medium enterprises (SMEs), the burden is overwhelming. Instead of simplifying taxation, GST often feels like a complicated maze.

2. Multiple Tax Slabs

The original vision of GST was a uniform tax rate across goods and services. In reality, India has five main slabs — 0%, 5%, 12%, 18%, and 28%. This creates confusion and disputes over classification. For example, a restaurant meal might attract a different slab than packaged food. This defeats the purpose of simplicity and highlights one of the major disadvantages of GST.

3. Technical Glitches

The GST portal was designed to make compliance seamless. However, taxpayers continue to face frequent technical glitches, slow processing, and downtime. Filing returns often becomes a frustrating experience, especially close to deadlines. This technical inefficiency is another disadvantage of GST that hampers ease of doing business.

4. Impact on Small Businesses

Small traders and manufacturers have been hit the hardest. Many of them operated informally before GST and are now struggling to comply with digital requirements. Moreover, delayed refunds have created cash flow issues. For SMEs, these are critical disadvantages of GST, as working capital is the lifeblood of their operations.

5. Delayed Refunds

Exporters frequently complain about delayed refunds under GST. Since they pay taxes upfront and claim refunds later, delays lock up their capital and reduce global competitiveness. Despite promises of quick processing, this remains one of the most pressing disadvantages of GST for export-oriented industries.

6. Frequent Changes and Uncertainty

Another disadvantage of GST is its constantly changing rules. Tax rates, filing procedures, and compliance requirements have been revised multiple times. This lack of stability creates confusion and increases compliance costs. Businesses often find it difficult to keep pace with the changes, leading to penalties for unintentional errors.

7. Higher Costs for Consumers

While GST was supposed to lower prices, the reality has been different in many sectors. Essential services like insurance, telecom, and banking are now taxed at 18%, which is higher than pre-GST rates. Consumers end up paying more, adding to the list of disadvantages of GST.

Economic Consequences

The disadvantages of GST extend beyond businesses and consumers. The economy at large has also felt its impact:

• Short-term disruption: The early years saw businesses struggling with compliance, which led to supply chain disruptions and slower growth.

• Inflationary pressure: Many essential goods and services became costlier under GST.

• Unequal impact: Larger businesses adapted better, while smaller firms struggled disproportionately.

Thus, while GST did streamline taxation, it also created hurdles that slowed economic momentum.

Political Challenges

The slogan of “One Nation, One Tax” implied uniformity, but in practice, the system has been far from simple. State governments continue to raise concerns about revenue losses, demanding compensation from the Centre. This highlights another disadvantage of GST: the lack of fiscal autonomy for states.

In addition, the uneven application of GST slabs has led to lobbying and disputes, undermining the credibility of the system.

Global Lessons

A look at other countries reveals that GST or VAT systems usually operate with one or two tax rates. This ensures clarity and reduces compliance costs. India’s multi-slab structure makes it one of the most complex GST regimes in the world, further emphasizing the disadvantages of GST when compared internationally.

The Way Forward

For GST to achieve its full potential, reforms are necessary to address the disadvantages of GST:

1. Reduce the number of tax slabs — moving toward a simpler system.

2. Simplify compliance — fewer returns and user-friendly portals.

3. Ensure timely refunds — especially for exporters.

4. Provide stability — minimize frequent rule changes.

5. Widen the tax base — so the burden is spread more evenly.

Only then can GST become the growth-friendly reform it was meant to be.

Conclusion

Seven years after its launch, GST has undoubtedly transformed India’s tax system. It has improved transparency, encouraged digitization, and created a more unified market. But the disadvantages of GST — such as compliance burden, multiple slabs, technical glitches, refund delays, and higher costs — continue to weigh heavily on businesses and consumers.

The dream of “One Nation, One Tax” remains unfinished. For GST to truly deliver on its promise, the government must focus on simplification, consistency, and fairness. Until then, the disadvantages of GST will overshadow its intended benefits, leaving the reform as a work in progress rather than a complete success.