Indian Economy
Goods and Services Tax (GST)
Definition
GST is a comprehensive indirect tax system implemented in India on July 1, 2017, replacing multiple central and state taxes. It is a destination-based tax levied on the supply of goods and services, designed to create a unified national market.
Overview
## Goods and Services Tax (GST)
GST represents India's most significant tax reform since independence, creating a unified indirect tax structure. Implemented on July 1, 2017, it transformed India's fragmented tax landscape into a seamless national market.
### Structure and Components
GST operates on a dual model with three components:
• CGST: Collected by Central Government on intra-state supplies
• SGST: Collected by State Governments on intra-state supplies
• IGST: Collected by Central Government on inter-state supplies
### Key Features
Four-tier tax structure (5%, 12%, 18%, 28%) covers most goods and services, with essential items exempted. The input tax credit mechanism eliminates cascading effects, reducing overall tax burden. The system operates entirely online through GSTN platform, ensuring transparency and reducing compliance costs.
### Governance
The GST Council, a constitutional body under Article 279A, makes all policy decisions. Comprising the Union Finance Minister and all state finance ministers, it follows a weighted voting system ensuring cooperative federalism.
### Economic Impact
GST has increased tax compliance, expanded the tax base, and simplified interstate trade. It eliminated multiple checkpoints, reduced logistics costs, and created a common national market. The system has generated higher revenue collection compared to the previous regime while providing better taxpayer services through digital infrastructure.
GST represents India's most significant tax reform since independence, creating a unified indirect tax structure. Implemented on July 1, 2017, it transformed India's fragmented tax landscape into a seamless national market.
### Structure and Components
GST operates on a dual model with three components:
• CGST: Collected by Central Government on intra-state supplies
• SGST: Collected by State Governments on intra-state supplies
• IGST: Collected by Central Government on inter-state supplies
### Key Features
Four-tier tax structure (5%, 12%, 18%, 28%) covers most goods and services, with essential items exempted. The input tax credit mechanism eliminates cascading effects, reducing overall tax burden. The system operates entirely online through GSTN platform, ensuring transparency and reducing compliance costs.
### Governance
The GST Council, a constitutional body under Article 279A, makes all policy decisions. Comprising the Union Finance Minister and all state finance ministers, it follows a weighted voting system ensuring cooperative federalism.
### Economic Impact
GST has increased tax compliance, expanded the tax base, and simplified interstate trade. It eliminated multiple checkpoints, reduced logistics costs, and created a common national market. The system has generated higher revenue collection compared to the previous regime while providing better taxpayer services through digital infrastructure.