What is GST?

What is GST?

The Goods and Services Tax (GST) is a single, destination-based indirect tax levied on the supply of goods and services across India. Introduced on 1 July 2017, it subsumed a host of earlier taxes such as VAT, service tax, excise duty and entry tax under the slogan 'One Nation, One Tax'. The aim was to remove the cascading effect — tax on tax — that plagued the old regime.

The dual structure: CGST, SGST and IGST

India adopted a dual GST model because both the Centre and the States have the constitutional power to tax. For an intra-state supply (buyer and seller in the same state) the tax is split into CGST (collected by the Centre) and SGST (collected by the State). For an inter-state supply, a single IGST is charged and later apportioned between the Centre and the destination state. A Union Territory supply attracts UTGST instead of SGST.

Tax slabs and the GST Council

GST rates in India are tiered — commonly 0%, 5%, 12%, 18% and 28% — with a few items outside GST (petroleum, alcohol for human consumption). Rates and rules are decided by the GST Council, a body chaired by the Union Finance Minister with state finance ministers as members. This cooperative-federalism design means changes are negotiated rather than imposed.

Why it matters for your business

Understanding the CGST/SGST vs IGST split is not academic: it determines which tax you charge on an invoice, how input tax credit flows, and how your returns reconcile. Getting the place of supply wrong is one of the most common — and costly — GST errors made by new businesses.