What is the GST Act?
Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. GST is a destination-based tax, where the tax burden is ultimately borne by the final consumer, while eligible businesses may claim Input Tax Credit (ITC) on qualifying purchases.
To implement the GST system, separate laws have been enacted at the Central and State/Union Territory levels, including the CGST Act, 2017, IGST Act, 2017, SGST Acts, and UTGST Act.
What is the GST Act?
1 July 2017
The GST laws were enacted in 2017, and the major operational framework of GST came into effect on 1 July 2017. The Central Goods and Services Tax Act, 2017 was enacted on 12 April 2017.
The main objective of implementing GST was to simplify the indirect tax system, integrate multiple taxes, and establish a more uniform tax structure across India.
Main Components of GST
CGST
Central Goods and Services Tax
- Applicable to intra-State supplies.
- The tax share goes to the Central Government.
- Section 9 of the CGST Act, 2017 relates to the levy of Central GST on intra-State supplies.
SGST
State Goods and Services Tax
- Applicable along with CGST on intra-State supplies.
- The tax share goes to the State Government.
- Example: If a registered seller in Uttar Pradesh supplies goods to a customer in Uttar Pradesh, CGST + SGST will be charged.
IGST
Integrated Goods and Services Tax
- Applicable to inter-State supplies.
- Applicable to inter-State supplies and imports.
- The Central Government collects IGST, and the destination State receives its share according to the applicable mechanism.
What Does “Supply” Mean Under GST?
The basic concept of taxation under GST law is Supply. Supply can cover transactions such as the sale, transfer, barter, exchange, licence, rental, lease, or disposal of goods or services, subject to certain conditions. Before determining GST liability, it is important to identify whether a transaction qualifies as a taxable supply under GST. The CGST Act specifically provides provisions relating to the scope of supply and composite/mixed supplies.