GST (Goods and Services Tax) is a comprehensive, multi-stage, destination-based indirect tax levied on every supply of goods and services in India, replacing a fragmented structure of central and state indirect taxes. Under Indian law, GST was introduced through the Constitution (One Hundred and First Amendment) Act, 2016 and is operationalised by the Central Goods and Services Tax Act, 2017, with the taxable event defined as "supply" under Section 7 and the charge levied under Section 9 of the CGST Act.
Legal definition
The constitutional and statutory framework for GST in India is established through multiple provisions:
Article 246A of the Constitution of India (inserted by the 101st Amendment): "Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State."
The Central Goods and Services Tax Act, 2017 defines the tax and key concepts:
Section 9(1) — Levy and collection: "There shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both... on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government."
Section 7(1) — Scope of supply: "The expression 'supply' includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business."
The dual GST model operates through parallel legislation: the CGST Act (Central Government), State GST Acts (each state legislature), and the Integrated Goods and Services Tax Act, 2017 (for inter-state supplies). Article 279A establishes the GST Council, a constitutional body that recommends rates, exemptions, and policies.
How courts have interpreted this term
Union of India v. VKC Footsteps India Pvt. Ltd. [(2022) 2 SCC 603]
The Supreme Court examined the scope of input tax credit (ITC) refunds under the inverted duty structure. The Court upheld Rule 89(5) of the CGST Rules, which restricts refund calculations to ITC on inputs only, excluding input services. The bench applied a "functionality test" to interpret the term "plant" under Section 17(5) of the CGST Act, holding that plant cannot be given a restricted meaning and must be interpreted based on whether the item performs a function in the business.
Bharti Airtel Ltd. v. Union of India [(2022) 1 SCC 51]
The Supreme Court held that the GST portal's (GSTN) auto-populated Form GSTR-2A does not relieve a taxpayer of its legal obligation to file accurate returns. The Court disallowed Bharti Airtel's claim for rectification of GSTR-3B returns to claim a refund of Rs 923 crore, ruling that taxpayers must exercise independent due diligence in filing returns and cannot subsequently seek rectification beyond the statutory time limit. This judgment clarified the binding nature of self-assessed returns in the GST framework.
Mohit Minerals Pvt. Ltd. v. Union of India [(2022) 2 SCC 314]
The Supreme Court ruled that the recommendations of the GST Council are not binding on Parliament or state legislatures. The Court held that Article 246A grants independent legislative power to both Parliament and state legislatures, and the GST Council's recommendations under Article 279A are persuasive but not mandatory. This landmark ruling clarified the federal character of India's GST framework.
Types of GST
India operates a dual GST model with four distinct components:
- CGST (Central Goods and Services Tax): Levied by the Central Government on intra-state supplies under the CGST Act, 2017.
- SGST (State Goods and Services Tax): Levied by the respective state government on intra-state supplies under each state's GST Act.
- IGST (Integrated Goods and Services Tax): Levied by the Central Government on inter-state supplies and imports under the IGST Act, 2017. IGST = CGST + SGST combined.
- UTGST (Union Territory Goods and Services Tax): Levied in union territories without a legislature, such as Chandigarh and Lakshadweep, in place of SGST.
Following the GST 2.0 reforms effective from 22 September 2025, India simplified its rate structure from four main slabs (5%, 12%, 18%, 28%) to two primary slabs — 5% (merit rate for essential goods) and 18% (standard rate) — along with a 40% de-merit rate for luxury and sin goods replacing the earlier 28% plus cess structure.
Why this matters
GST is the most significant tax reform in India since independence. It subsumed 17 central and state indirect taxes — including excise duty, service tax, VAT, CST, entry tax, and octroi — into a single, unified tax. This elimination of the cascading "tax on tax" effect reduced compliance complexity and lowered effective tax rates for most goods and services.
For businesses, GST compliance is a continuous obligation involving monthly or quarterly return filing (GSTR-1, GSTR-3B), maintenance of electronic records, timely payment of tax, and proper claiming of input tax credit. The registration threshold is Rs 20 lakh for service providers (Rs 10 lakh in special category states) and Rs 40 lakh for goods suppliers. Every entity exceeding these thresholds must obtain a GSTIN (GST Identification Number) in each state where it has a place of supply.
For practitioners and tax advisors, GST jurisprudence is rapidly evolving. Key areas of frequent litigation include input tax credit eligibility (particularly the "blocked credits" under Section 17(5)), classification disputes between goods and services, valuation of related-party transactions, and anti-profiteering provisions. The GST Council, which meets periodically to revise rates and resolve implementation issues, effectively functions as the primary policy-making body, though the Mohit Minerals ruling confirmed its recommendations are constitutionally advisory rather than mandatory.
Related terms
Broader concepts:
Components and mechanisms:
Frequently asked questions
What is the current GST rate structure in India?
Following the GST 2.0 reforms effective from 22 September 2025, India operates primarily with two rate slabs: 5% (merit rate) for essential goods and services, and 18% (standard rate) for most other goods and services. A 40% de-merit rate applies to luxury and sin goods such as premium cars, tobacco products, and aerated beverages. Certain essential items like unbranded food grains, fresh milk, and healthcare services remain exempt (0% GST).
Who needs to register for GST in India?
Under Section 22 of the CGST Act, every supplier of goods with an aggregate turnover exceeding Rs 40 lakh (Rs 20 lakh in special category states) and every supplier of services with an aggregate turnover exceeding Rs 20 lakh (Rs 10 lakh in special category states) must register for GST. Certain categories, including persons making inter-state supplies, e-commerce operators, and casual taxable persons, must register regardless of turnover under Section 24.
What taxes did GST replace in India?
GST subsumed 17 central and state indirect taxes, including Central Excise Duty, Service Tax, Central Sales Tax (CST), State Value Added Tax (VAT), Entry Tax, Octroi, Purchase Tax, Luxury Tax, Entertainment Tax (except those levied by local bodies), and various cesses and surcharges on the supply of goods and services. Customs duty on imports was retained separately.
Is GST applicable on the sale of immovable property?
GST applies to the sale of under-construction properties and is payable by the builder. The effective GST rate on under-construction residential properties is 5% (without ITC) or 1% for affordable housing (properties valued up to Rs 45 lakh). However, GST is not applicable on the sale of completed properties that have received a completion certificate or first occupation, as such transactions are treated as a sale of immovable property (not a supply of service) and attract only stamp duty and registration charges.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.