Key Differences: GST vs Previous Tax System in India 1. Structure of Taxes: Previous Tax Regime: Multiple taxes were levied at different stages, including Central Excise Duty, Service Tax, Value Added Tax (VAT), Central Sales Tax (CST), Octroi, Entry Tax, and more. Taxes were administered by both the Central and State governments, leading to a complex and multi-layered tax structure. GST Regime: GST is a single, comprehensive tax that replaces most of the indirect taxes previously levied by the Central and State governments. It is divided into CGST, SGST/UTGST, and IGST, simplifying the tax structure and unifying it across the country. 2. Tax on Tax (Cascading Effect): Previous Tax Regime: There was a cascading effect of taxes, meaning tax was levied on tax at every stage of the production and distribution chain. This resulted in higher costs for goods and services. Input tax credit (ITC) was not uniformly available across different taxes, leading to inefficiencies. GST Regime: GST eliminates the cascading effect by providing a seamless flow of input tax credits across the supply chain. Tax is levied only on the value addition at each stage, reducing the overall tax burden. 3. Compliance and Filing: Previous Tax Regime: Businesses had to comply with multiple tax laws, maintain various records, and file numerous returns for different taxes. Different forms and deadlines for each tax made compliance cumbersome and costly. GST Regime: GST introduces a unified and streamlined compliance system with fewer returns and standardized forms. A robust IT infrastructure (GSTN) facilitates online registration, filing, payment, and refund processes, reducing the compliance burden. 4. Tax Rates and Uniformity: Previous Tax Regime: Different states had different VAT rates, leading to price disparities and market distortions across the country. Central and state taxes varied widely, creating complexity in tax administration. GST Regime: GST provides uniform tax rates across the country for similar goods and services. This uniformity promotes a common national market and reduces tax rate disparities. 5. Impact on Prices: Previous Tax Regime: The cumulative tax burden due to the cascading effect often resulted in higher prices for goods and services. Different tax rates and rules across states could lead to price variations. GST Regime: By eliminating the cascading effect and ensuring the seamless flow of ITC, GST generally leads to a reduction in the overall tax burden, potentially lowering prices. Uniform tax rates across the country help stabilize prices. 6. Tax on Services: Previous Tax Regime: Service tax was levied separately and was not integrated with the tax on goods, leading to complexities in taxing composite supplies (goods + services). GST Regime: GST is a single tax on both goods and services, simplifying the tax treatment of composite supplies and promoting ease of doing business. 7. Inter-state Transactions: Previous Tax Regime: Interstate sales were subject to CST, and input tax credit was not available for CST, leading to higher costs. Different entry taxes and octroi were levied by states, creating trade barriers. GST Regime: IGST is levied on inter-state supplies, and the input tax credit is available, facilitating seamless inter-state trade. Removal of entry taxes and octroi under GST reduces trade barriers and logistics costs.