Topic 02 of 6 · Chapter 08 · Indian Economy
GST — Structure, Rates & Implementation
GST Council, CGST/SGST/IGST, GST rates (0%, 5%, 12%, 18%, 28%), GSTN, and impact of GST on Indian economy.
📋 In This Article
1. What is GST?
GST (Goods and Services Tax) is a comprehensive, multi-stage, destination-based tax on the supply of goods and services. It replaced a complex web of central and state indirect taxes.
⭐ GST Implementation: GST was implemented on July 1, 2017 — called “One Nation, One Tax, One Market.” It was enabled by the 101st Constitutional Amendment Act, 2016 which inserted Article 246A (concurrent power to levy GST).
💡 How GST Works — Input Tax Credit
Before GST: A manufacturer paid excise duty. Then the wholesaler paid VAT. Then the retailer paid VAT again. Tax was paid on tax — called “cascading effect.”
After GST: Each stage pays GST but gets credit for GST paid at previous stage (Input Tax Credit). Only the final consumer bears the full GST burden. No cascading effect!
Example: Manufacturer pays 18% GST on ₹100 = ₹18. Wholesaler sells at ₹150, pays 18% GST = ₹27, but gets credit of ₹18 paid by manufacturer. Net GST paid by wholesaler = ₹9.
2. GST Structure — CGST, SGST, IGST
| Type | Full Form | Levied by | When |
|---|---|---|---|
| CGST | Central GST | Central Government | Intra-state supply (within same state) |
| SGST | State GST | State Government | Intra-state supply (within same state) |
| IGST | Integrated GST | Central Government | Inter-state supply (between states) + imports |
| UTGST | Union Territory GST | UT Administration | Supply within Union Territories |
💡 Example: You buy a phone in Delhi (intra-state): Pay CGST (9%) + SGST (9%) = 18% total. You buy a phone from Maharashtra (inter-state): Pay IGST (18%) = 18% total. Same total tax, different split!
3. GST Rates
0%
Essential items: Fresh vegetables, milk, eggs, salt, books, newspapers
5%
Basic necessities: Sugar, tea, coffee, edible oil, medicines, railways
12%
Standard goods: Butter, cheese, frozen meat, mobile phones, computers
18%
Most goods & services: Restaurants, IT services, financial services, AC
28%
Luxury/sin goods: Cars, tobacco, aerated drinks, casinos, betting
✅ Petroleum products (petrol, diesel, ATF, natural gas, crude oil) are currently OUTSIDE GST — they are taxed by states separately. This is a major pending reform.
4. GST Council
- Constitutional body under Article 279A
- Chairperson: Union Finance Minister
- Members: State Finance Ministers
- Decisions by 3/4 majority (Centre has 1/3 vote; States together have 2/3 vote)
- Recommends GST rates, exemptions, and other matters
6. Key Points for Exam
🔑 Must-Remember Facts
- GST implemented: July 1, 2017
- GST enabled by: 101st Constitutional Amendment Act, 2016
- GST Article: Article 246A
- GST Council: Article 279A; Chairperson = Union Finance Minister
- GST Council decisions: 3/4 majority
- CGST + SGST = intra-state; IGST = inter-state
- GST rates: 0%, 5%, 12%, 18%, 28%
- Petroleum products are outside GST
- GSTN = GST Network — IT backbone of GST
- GST replaced: Central Excise, Service Tax, VAT, CST, and many other taxes