GST

Notes

The Goods and Services Tax (GST) is a destination-based, multi-stage, value-added consumption tax on the supply of goods and services. It came into effect on 1 July 2017 through the 101st Constitution Amendment Act, 2016 ("One Nation, One Tax, One Market"). Art. 246A gives Parliament and States concurrent power; Art. 279A creates the GST Council.

Structure (dual GST)

CGST (Centre) and SGST/UTGST (State/Union Territory) on intra-State supplies.
IGST on inter-State supplies and imports, levied by the Centre and apportioned between the Centre and the destination State.
A compensation cess on sin and luxury goods funded the compensation to States (which was guaranteed for five years, till June 2022).

Taxes subsumed

Central: central excise duty, service tax, countervailing and special additional duties, surcharges and cesses.
State: VAT/sales tax, entertainment and luxury taxes, octroi and entry tax, purchase tax, taxes on lotteries.
Outside GST: alcohol for human consumption (State excise and VAT), and petroleum crude, petrol, diesel, natural gas and ATF (until the Council decides), plus electricity and stamp duties; tobacco also bears central excise.

Key features

Input Tax Credit (ITC): tax paid on inputs is set off against output tax, removing the cascading effect of taxes.
Registration threshold: ₹40 lakh for goods and ₹20 lakh for services (lower for special category States); composition scheme for small businesses.
GSTN (Goods and Services Tax Network) is the IT backbone; returns (GSTR-1, GSTR-3B), e-way bill and e-invoicing. The GST Appellate Tribunal (GSTAT) hears appeals.
Rates: the original slabs were 0, 5, 12, 18 and 28% plus a cess. Reforms from 22 September 2025 simplified the structure mainly to 5% and 18%, with a 40% rate on sin and luxury goods (check the latest notifications).

Benefits: a single national market, fewer check posts, reduced tax on tax, higher compliance and formalisation, and boosted logistics efficiency.

Challenges: compliance burden on small businesses, multiple rates in the early years, inverted duty structure, the exclusion of petroleum, litigation, and the loss of States' fiscal autonomy.

Key Points

GST: 101st Amendment (2016); launched 1 July 2017; destination-based.
Dual GST: CGST, SGST/UTGST, IGST.
Petroleum and alcohol for human consumption are outside GST.
Input tax credit removes cascading; GSTN is the IT backbone.
Rates simplified in 2025 to mainly 5% and 18%, plus 40% for sin goods.

MCQs

Q1. GST was introduced through the: (a) 99th Amendment (b) 101st Amendment (c) 103rd Amendment (d) 97th Amendment Ans: (b).

Q2. The GST on inter-State supply of goods and services is: (a) CGST (b) SGST (c) IGST (d) UTGST Ans: (c).

Q3. Which of the following is outside the GST? (a) Alcohol for human consumption (b) Textiles (c) Software services (d) Electronics Ans: (a).