Goods and Services Tax (GST) is a significant reform in India's tax system aimed at unifying various indirect taxes into a single framework. Introduced on July 1, 2017, GST replaced multiple taxes such as service tax, excise duty, and VAT, simplifying the taxation process for both businesses and consumers. Its introduction was driven by the need to eliminate the complexities of the previous tax regime, streamline compliance, and enhance transparency. By establishing 'One Nation, One Tax', GST aims to create a uniform tax structure across the country, making it easier for businesses to operate and for consumers to understand the tax implications of their purchases.

GST operates on a multi-stage taxation principle, which means tax is levied at various points in the supply chain. This includes the acquisition of raw materials, the manufacturing process, storage, wholesale distribution, and retail sales. For example, when a manufacturer produces biscuits, GST is charged at each stage: when raw materials are purchased, during production, and when sold to wholesalers and retailers. This ensures that value is added at each step while also maintaining transparency and accountability in the tax system. Ultimately, the end consumer pays GST at the point of sale, which reflects the cumulative value added throughout the supply chain.

The main objectives of implementing GST in India include creating a unified tax structure, reducing compliance burdens, eliminating cascading taxes, and mitigating tax evasion. By consolidating various indirect taxes into a single framework, GST aims to simplify tax administration, making it easier for businesses and consumers to comply. Additionally, GST allows businesses to set off tax credits at different stages, which helps lower the overall tax burden. The structured approach fosters transparency and accountability, as stringent provisions require taxpayers to validate invoices for input tax credits. Ultimately, these objectives aim to enhance economic growth and streamline the taxation process.

Destination-based taxation is a core feature of GST, meaning that tax revenue is allocated to the state where the goods or services are consumed rather than where they are produced. This approach ensures that states benefit from the consumption of goods within their jurisdiction. For instance, if a product is manufactured in Maharashtra but sold to a buyer in Karnataka, the tax collected from that sale goes to Karnataka's treasury. This system promotes fairness among states, incentivizes local consumption, and helps in balancing the economic disparities between regions. It also ensures that states are rewarded for the economic activities occurring within their borders.

GST incorporates stringent provisions that significantly curb tax evasion. One of the key mechanisms is the requirement for taxpayers to claim input tax credits only for invoices that have been validated by their suppliers. This means that businesses must maintain proper documentation and ensure compliance with GST regulations to benefit from tax credits. This level of scrutiny fosters a culture of transparency, as both buyers and sellers are accountable for their transactions. Additionally, the technological infrastructure supporting GST, such as the GST Network (GSTN), enables real-time tracking of transactions, making it harder for businesses to evade taxes. Overall, these measures create a more trustworthy tax system.

The implementation of GST in India was fraught with challenges, primarily due to the complexity of transitioning from a fragmented tax system to a unified one. Businesses had to adjust to new compliance requirements, which necessitated changes in accounting practices and software systems. Additionally, there was significant public debate and concern regarding the impact of GST rates on various goods and services. Training and educating both tax officials and businesses about the new system also proved to be a lengthy process. Despite these challenges, the government worked to address concerns and improve the system, ultimately making GST a pivotal reform in India's taxation landscape.