The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based indirect tax concept implemented in India through The Constitution (One Hundred and First Amendment) Act, 2016. It was introduced on July 1, 2017, to solve the problem of a fragmented national market and the cascading effect of multiple Central and State indirect taxes. The GST subsumed taxes like Central Excise Duty, Service Tax, Value Added Tax (VAT), and Central Sales Tax (CST) into a single levy.
The mechanism operates on a dual model: the Centre levies Central GST (CGST) and the States levy State GST (SGST) on intra-state supplies. For inter-state supplies, the Centre levies Integrated GST (IGST), which is later apportioned to the state of consumption, reflecting its destination-based nature. The core provision is the Input Tax Credit (ITC), which allows businesses to claim credit for the tax paid on inputs, ensuring the tax is levied only on the value addition at each stage.
The key related institution is the GST Council, a constitutional body established under Article 279A. The Council, chaired by the Union Finance Minister, is a joint forum of the Centre and States that recommends the GST rates, laws, and exemptions. While the dual GST structure and ITC mechanism remain constant, the tax slabs have been subject to change. For instance, the initial four-rate structure (5%, 12%, 18%, 28%) was recently simplified to primarily two slabs (5% and 18%) with a 40% rate for sin goods, effective from September 22, 2025, replacing the 12% and 28% slabs.