Goods and Services Tax (GST) is India’s most significant indirect tax reform. It replaced multiple central and state levies such as excise duty, service tax, VAT, entry tax, octroi, luxury tax and purchase tax with one unified, destination-based consumption tax. GST is levied on the supply of goods or services or both. It came into force on 1 July 2017 after the Constitution (One Hundred and First Amendment) Act, 2016 inserted Article 246A, Article 269A and Article 279A into the Constitution of India.
Legal Framework of GST
GST operates under a dual model. The legal framework consists of:
- Central Goods and Services Tax Act, 2017 (CGST Act) – levies tax on intra-state supplies by the Centre.
- State Goods and Services Tax Act, 2017 (SGST Act) – each State levies tax on intra-state supplies.
- Integrated Goods and Services Tax Act, 2017 (IGST Act) – levies tax on inter-state supplies, imports and exports.
- Union Territory Goods and Services Tax Act, 2017 (UTGST Act) – applies in Union Territories without a legislature.
- GST (Compensation to States) Act, 2017 – provides compensation cess for loss of revenue to States.
GST is administered by the GST Council, a constitutional body under Article 279A, chaired by the Union Finance Minister and comprising State Finance Ministers.
Key Features of GST
- Destination-based consumption tax: Tax accrues to the State where goods or services are ultimately consumed.
- Dual GST model: Both Centre and State simultaneously levy tax on a single transaction.
- Value-added tax mechanism: Tax is levied at each stage of supply, with credit for taxes paid on inputs.
- Seamless input tax credit: ITC chain reduces cascading of taxes.
- Single registration and returns: PAN-based registration and common electronic portals.
- Technology-driven compliance: GSTN, e-invoicing, e-way bills and electronic ledgers.
Taxable Event: Supply
Under GST, the taxable event is supply. Section 7 of the CGST Act defines supply to include all forms of supply of goods or services such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for consideration in the course or furtherance of business. Schedule I lists certain supplies made without consideration that are deemed taxable, such as permanent transfer of business assets and supplies between related persons.
How Input Tax Credit Works
A registered person can avail input tax credit of GST paid on inward supplies used in the course or furtherance of business. The credit chain ensures that tax paid at an earlier stage is available as set-off against output tax liability. For example, a manufacturer pays GST on raw materials and claims ITC; when the finished goods are sold, GST is charged on the sale value, and the tax payable is reduced by the input credit.
GST Rate Structure
GST rates are prescribed by the GST Council through notifications. The broad rate slabs are:
- 0% for essential goods and services
- 5% for mass consumption items
- 12% for standard goods and services
- 18% for most services and goods
- 28% for luxury and demerit goods
- Compensation cess on specified sin and luxury goods
Administration and Compliance
Every registered person must file monthly or quarterly returns such as GSTR-1, GSTR-3B and annual return GSTR-9. E-invoicing is mandatory above prescribed turnover. E-way bills are required for movement of goods above the threshold. Tax payments are made through electronic ledgers maintained on the GST portal.
How Anuj Desai & Associates Can Help
We advise businesses on GST registration, classification of supplies, rate determination, ITC optimisation, return filing, departmental audits, assessments, appeals and refunds. Our team helps you build a compliant GST framework and manage litigation risk.
Contact Anuj Desai & Associates
Email: office@anujdesaiassociates.com
Phone: 9619456656
Website: https://anujdesaiassociates.com
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