The Goods and Services Tax (GST) was introduced in 2017 as one of the biggest tax reforms in India via the 101st Constitutional Amendment Act. It replaced many indirect taxes (like excise duty, service tax, etc) with a single tax under the idea of “One Nation, One Tax”.

Key Features of GST

1. Consumption Based Tax: Taxes are paid to the state where the goods or services are consumed not the state in which they were produced.
2. GST Council: GST is governed by the GST council established under Article 279A of the Constitution whose chairman is the Finance Minister of India.
3. It comprises of 3 types of taxes:
   1. Integrated GST: Levied for inter-state trade of goods and services.
   2. State GST: Levied on intra-state supply of goods and services, collected by the respective State Governments.
   3. Central GST: Levied on intra-state supply of goods and services, collected by the Central Government.
4. Tax Slabs:Four main rates: 5%, 12%, 18%, and 28%. Special rate of 0.25% on  rough precious and semi-precious stones and 3% on gold.
5. Input Tax Credit (ITC) – Businesses can use tax already paid on inputs to reduce their tax liability, avoiding “tax on tax”.
6. Digital System: GST works online through the GST Network (GSTN) for registration, filing returns, and payments.

Advantages of GST

• For Businesses: 

1. 1. 1. Easy compliance through online portals.
      2. Removal of cascading effect of earlier indirect taxes.
      3. Removal of complexities in handling various indirect taxes at one go.
      4. Seamless Movement of trucks through the introduction of E-way Bill.

• For Central and State Governments:

1. 1. 1. Widening of tax base
      2. Easy handling of a single tax regime instead of a variety of indirect taxes.
      3. Better control on tax leakages leading to a higher revenue efficiency.

• For consumers:

1. 1. More transparency as consumers now have to pay only one tax instead of multiple taxes.
   2. Overall tax burden is expected to reduce as there will be efficiency gains to the government and the government will be able to keep better check on leakages.

Challenges of GST

1. State Revenue Concerns: Uncertainty over revenue collections after the end of the compensation period; lack of clarity on coping mechanisms to sustain pre-GST revenue levels.
2. Multiple Tax Slabs: Presence of several slabs reduces simplicity and dilutes the idea of “One Nation, One Tax.”
3. Compliance Burden: Increased administrative and filing requirements, especially for small taxpayers.
4. Working Capital Issues: Slow refund processing locks up working capital of businesses.
5. Centre-State Frictions: Lack of clarity for states on discontinuation of certain local taxes, along with frequent disputes in the GST Council.

GST has been a landmark reform that unified India’s indirect tax structure, widened the tax base, and enhanced transparency. At the same time, concerns over compliance burden, state revenues, and structural complexities highlight the need for further reforms. With continuous efforts by the GST Council, GST is gradually evolving into a more robust, efficient, and business-friendly tax regime, aligning with the vision of “One Nation, One Tax.”