What Is GST? Understanding India's Tax System
GST (Goods and Services Tax) is an indirect tax that replaced multiple cascading taxes in India on July 1, 2017. It's a single tax on the supply of goods and services.
How GST Works
GST is a destination-based, multi-stage tax collected at every stage of the supply chain. But tax is paid only on the value addition at each stage, thanks to the Input Tax Credit (ITC) mechanism. This eliminated the cascading tax effect.
GST Slab Rates
India has four main GST slabs: 5% (essential items like packaged food, transport), 12% (processed food, business class air tickets), 18% (most goods and services, restaurants), and 28% (luxury items, cars, tobacco). Some items like fresh food, milk, and healthcare are GST-exempt (0%).
Types of GST
CGST + SGST: For intra-state transactions, GST is split equally between Central and State governments. IGST: For inter-state transactions, the full tax goes to the Central government, which then distributes to the destination state.
Impact on Prices
Some items became cheaper under GST (electronics, FMCG goods) while others became more expensive (services that were taxed at 15% now at 18%). Overall, GST simplified the tax structure and reduced the total tax burden on most goods.