GST Returns

What are the Demerits of GST?

Demerits of GST

GST is expected to be a great tax reforms in the Indian taxation system however, for a country like India where computer literacy is about 7% to 9%, it’s difficult for small and micro enterprises to come online and start a business by use of GST software.

GST is good for public business but as we know India’s economy drives from villages. Though GST is considered to be a historical tax reform in India, it also has some demerits as we are all living in a dynamic environment. In this article we shall look at the demerits of GST. However, we believe that over the period of time technology and other trouble related to GST implementation would not be a big challenge.

What is GST?

GST known as Goods and Services Tax was implemented in the year 2017.  It aimed to create a uniform tax regime for smooth transaction of goods and services. It also seeks to eliminate the cascading effect of multiple taxes and bring transparency in the taxation system.

Types of GST

There are four types of GST in India:

  • SGST (State Goods and Services Tax);
  • IGST (Integrated Goods and Services Tax);
  • CGST (Central Goods and Services Tax);
  • UTGST (Union Territory Goods and Services Tax).

Demerits of GST

Due to the introduction of GST, the business and consumers are facing challenges which are explained below in detail:

Demerits of GST
  • Change in Technology

In India, where most of small business are using manual billing system during the indirect tax regime and few of them (. i.e. ERP or Tally software[1] for filing excise return, service tax return and vat returns) will now have to transit to GST by upgrading their software as per the GST compliance requirement which will increase the burden of buying the new software or upgrade the software as per the GST compliance requirement.

  • GST Compliance

The introduction of GST has created lots of concerns in the minds of the persons. Changing over from the traditional system of working to a completely digitally driven compliance is very difficult for people to adjust to the change. Most of them are worried about the preparation of invoices as per GST Invoice Rules, number of GST Returns filing, record keeping and such other compliances.

  • Operating Cost

Most of the businesses in India prefer not to hire tax professional for their compliances. However, due to GST they have to take assistance of the Tax professionals to understand the GST and transit to a completely new system. Due to this they will now incur additional cost of hiring the tax professionals.

  • Online Procedure

GST regime has completely adopted fully digitalized environment. GST compliance in the form of filing of returns, payment of GST is to be done online. Many small businesses carried on in India are not technology driven and have to promote themselves to adapt and learn the complete digitalized environment.

  • Multiple Registration

In GST registration of a person carrying on the businesses in the different state, are required to take the registrations separately for each of the premises. This will increase his cost of administration.

  • Mid-year Launch

Due to the introduction of GST in the middle of the year, businesses would face the problem in taxation and report at the end of the financial year.

  • Many goods not covered under GST

In industries such as coal and petroleum, items like petrol and diesel are not covered under GST which makes it less beneficial for companies in oil and petroleum sector. They won’t be able to claim input tax credit.


Along with some of the advantages of GST, there are certain demerits that cannot be overlooked. The government must try to solve the challenges associated with GST.

Read our article: GST on work contracts and implication in the Oil & Gas Sector

Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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