The Goods and Services Tax (GST) is an indirect tax concept, implemented through the Central Goods and Services Tax Act, 2017 (CGST) and other corresponding Acts. It was introduced in India on July 1, 2017, following the enactment of the Constitution (One Hundred and First Amendment) Act, 2016. The primary problem it solved was the complex, multi-layered system of central and state indirect taxes, such as Central Excise Duty, Service Tax, and Value Added Tax (VAT), which led to the economically inefficient effect of cascading taxation (tax on tax). The reform aimed to create a unified national market under the ideology of 'One Nation, One Tax'.
The mechanism is a dual GST model, levied on the 'supply' of goods and services. For intra-state supply, the tax is split into CGST (Central GST) and SGST (State GST). For inter-state supply, the Centre levies IGST (Integrated GST), which is a destination-based tax apportioned to the state where the goods or services are consumed. A core provision is the Input Tax Credit (ITC), which allows businesses to claim credit for taxes paid on inputs, thereby mitigating the cascading effect.
The constitutional framework is established by the 101st Amendment, 2016, which inserted Article 246A to grant concurrent power to the Parliament and State Legislatures to make GST laws. It also inserted Article 279A, which mandates the formation of the GST Council. The Council, chaired by the Union Finance Minister, recommends the tax rates, laws, and exemptions. While the GST replaced most indirect taxes, alcohol for human consumption and five petroleum products, including Petroleum Crude and Aviation Turbine Fuel, remain outside its purview. Recently, the rate structure was simplified, with four standard rates of 0%, 5%, 18%, and 40% as of September 22, 2025, eliminating the 12% and 28% slabs.