What is GST in India – Complete Guide 2026

GST (Goods and Services Tax) is India's unified indirect tax, effective 1 July 2017, replacing VAT, Service Tax, Excise Duty and 14 other levies. It follows a destination-based, dual-levy model where both Centre and State tax the same transaction.

Why GST Was Introduced

Pre-GST India had cascading taxes (tax-on-tax) causing inflated prices. GST created one national market with seamless Input Tax Credit (ITC) across the supply chain.

GST Rate Slabs

Rate	Category
0%	Milk, eggs, fresh vegetables, books
5%	Packaged food, medicines, household LPG
12%	Processed food, business-class air travel
18%	Electronics, most services, hotel (₹1,001–7,500/night)
28%	Cars, tobacco, cement, luxury hotels

Who Must Register?

Goods turnover > ₹40 lakh (₹20 lakh for special states)
Services turnover > ₹20 lakh
All inter-state suppliers and e-commerce sellers regardless of turnover

How GST Works – Example

Manufacturer sells to distributor at ₹1,000 + 18% GST = ₹1,180. Distributor pays ₹180 GST but claims ₹180 ITC. If distributor sells to retailer at ₹1,500, GST = ₹270; net payable = ₹90. This eliminates cascading at every stage.

Frequently Asked Questions (FAQs)

What does GST stand for?↓

Goods and Services Tax – a single indirect tax in India since July 2017.

Who collects GST?↓

CGST by the Centre, SGST by the State on intra-state sales; IGST by the Centre on inter-state sales.

Is agriculture exempt from GST?↓

Most fresh/unprocessed agricultural produce is exempt. Branded packaged items may attract 5%.

Can businesses claim a GST refund?↓

Yes – exporters, those with inverted duty structure, and others can claim refunds via the GSTN portal within 60 days.

What taxes did GST replace?↓

VAT, Service Tax, Central Excise, CST, Octroi, Entry Tax, and 12 other levies were subsumed into GST.

Frequently Asked Questions (FAQ)

What does GST stand for?