Goods and Services Tax (GST) is an indirect tax applicable throughout India which replaced multiple cascading taxes levied by the central and state governments. It was introduced as The Constitution (One Hundred and First Amendment) Act 2017 following the passage of Constitution 122nd Amendment Bill. The GST is governed by a GST Council and its Chairman is the Finance Minister of India. Under GST, goods and services are taxed at the following rates, 0%, 5%, 12% and 18%. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 15% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products.
A single GST replaced several existing taxes and levies which include: central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi. Other levies which were applicable on inter-state transportation of goods has also been done away with in GST regime.
A nationwide tax reform cannot function without strict guidelines and provisions. The GST Council has devised a fool proof method of implementing this new tax regime by dividing it into three categories. Wondering how they work? Let our experts explain this to you in detail.
When Goods and Services Tax is implemented, there will be 3 kinds of applicable Goods and Services Taxes:
CGST: where the revenue will be collected by the central government
SGST: where the revenue will be collected by the state governments for intra-state sales
IGST: where the revenue will be collected by the central government for inter-state sales
| Transaction | New Regime | Old Regime | Comments |
| Sale within the state | CGST + SGST | VAT + Central Excise/Service tax | Revenue will now be shared between the Centre and the State |
| Sale to another State | IGST | Central Sales Tax + Excise/Service Tax | There will only be one type of tax (central) now in case of inter-state sales. |
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