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GST is known as the Goods and Services Tax. It is an indirect tax which has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017.

In other words, Goods and Service Tax (GST) is levied on the supply of goods and services. Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country.

Before the Goods and Services Tax could be introduced, the structure of indirect tax levy in India was as follows:

Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST.

Now, let us understand the definition of Goods and Service Tax, as mentioned above, in detail.

Objectives Of GST

To achieve the ideology of ‘One Nation, One Tax’
To subsume a majority of the indirect taxes in India
To eliminate the cascading effect of taxes
To curb tax evasion
To increase the taxpayer base
Online procedures for ease of doing business
An improved logistics and distribution system
To promote competitive pricing and increase consumption

Components of GST

There are three taxes applicable under this system: CGST, SGST & IGST.

CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)
SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)
IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)