89  Goods and Services Tax (GST): Objectives and main provisions; Benefits of GST; Implementation mechanism; Working of dual GST

89.1 Background and Concept

The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based, value-added indirect tax levied on every value addition. Implemented in India from 1 July 2017 through the 101st Constitutional Amendment Act 2016 (Articles 246A, 269A, 279A). India follows a Dual GST model — both the Centre and the States levy GST concurrently on the same base. The reform replaced a maze of central and state indirect taxes — Excise, Service Tax, VAT, CST, Octroi, Entry Tax, Luxury Tax, Entertainment Tax, etc.

89.2 Objectives

TipObjectives of GST
  • One Nation – One Tax – One Market.
  • Eliminate cascading of taxes (tax on tax) via seamless Input Tax Credit (ITC).
  • Subsume multiple taxes into a single levy.
  • Widen the tax base by formalising the economy.
  • Improve ease of doing business.
  • Boost competitiveness of Indian goods and services.
  • Encourage transparency through technology (GSTN).
  • Strengthen cooperative federalism through the GST Council.

89.3 Constitutional Framework

TipConstitutional Articles
  • Article 246A — concurrent power of Centre and States to levy GST.
  • Article 269A — IGST levied and collected by Centre on inter-state supply; apportioned between Centre and States.
  • Article 279A — establishes GST Council.
  • Article 366(12A) — defines GST.
  • Article 366(26A) — defines services.
  • 101st Amendment Act 2016.

89.4 Dual GST Model

TipComponents of GST
Component Levied by Applies to
CGST Central Govt Intra-state supply
SGST State Govt Intra-state supply
UTGST UT Govt Intra-UT supply
IGST Central Govt Inter-state supply; imports
GST Compensation Cess Centre Specified luxury / demerit goods (initially 5 yrs; extended to 2026 for loan repayment)

Intra-state ₹100 sale → CGST + SGST (e.g. 9 % + 9 % = 18 %). Inter-state ₹100 sale → IGST 18 %.

89.5 GST Council (§ 279A)

TipComposition of GST Council
  • Chairperson — Union Finance Minister.
  • Members — Union MoS Finance + Finance Minister of each State/UT with legislature.
  • Decision — by 3/4 majority: Centre 1/3 vote weight; States together 2/3.
  • Quorum: 50 % of total members.
  • Mandate (Art 279A(4)): tax rates, exemptions, threshold, principles of levy, model laws, special rates, supply of goods/services or both.

89.6 Rate Structure

TipGST Slabs
  • 0 % — essentials (fresh fruits, vegetables, milk, books, healthcare, education).
  • 0.25 % — rough diamonds.
  • 3 % — gold, silver, precious metals.
  • 5 % — household necessities; many transport services.
  • 12 % — processed food, computers.
  • 18 % — most goods and services, including telecom, financial services.
  • 28 % — luxury, sin, demerit goods (cars, ACs, aerated drinks, tobacco) + compensation cess.
  • Exempt — alcoholic liquor for human consumption (outside GST); petroleum products (currently outside GST until Council decides).

89.7 Registration

TipGST Registration Thresholds
  • Goods (regular states): turnover > ₹40 lakh (₹20 L for special-category states).
  • Services: > ₹20 lakh (₹10 L for special-category states).
  • Compulsory registration: inter-state suppliers, e-commerce operators, casual taxable persons, NRIs, agents, reverse-charge payers.
  • Composition scheme (§ 10): turnover up to ₹1.5 cr (goods) / ₹50 lakh (services); flat rate, no ITC.
  • 15-digit GSTIN — State + PAN + Entity + Check digit.

89.8 Returns & Compliance

TipMajor GST Returns
  • GSTR-1 — outward supplies (monthly/quarterly).
  • GSTR-2A / 2B — auto-populated inward supply.
  • GSTR-3B — summary monthly return + payment.
  • GSTR-4 — composition annual.
  • GSTR-5 — non-resident taxable person.
  • GSTR-6 — Input Service Distributor.
  • GSTR-7 — TDS.
  • GSTR-8 — TCS by e-commerce.
  • GSTR-9 / 9C — annual return + reconciliation (for entities > ₹2 cr / ₹5 cr).
  • e-invoicing — mandatory for B2B above ₹5 cr turnover (since Aug 2023).
  • E-way bill — for movement > ₹50,000 / interstate / specified categories.

89.9 Input Tax Credit (§ 16)

ITC allowed if: - Possession of tax invoice / debit note. - Goods/services received. - Tax paid by supplier (GSTR-3B). - Return furnished. - Not blocked under § 17(5) (cars, food/beverage, club membership, employee insurance, etc.).

ITC cross-utilisation order (post 2019 amendment): IGST → CGST → SGST → UTGST (no cross between CGST and SGST/UTGST).

89.10 Benefits of GST

TipBenefits
  • Removal of cascading via ITC.
  • Common national market; uniform rates across States.
  • Tax buoyancy — wider base, plugged leakages.
  • Logistics efficiency — no check-posts.
  • Simpler compliance — single portal (GSTN).
  • Lower cost for end consumer (anti-profiteering).
  • Push to digital economy.
  • Composition scheme for small businesses.

89.11 Challenges

Multiple rate slabs (vs ideal one or two), classification disputes, ITC frauds (fake invoices), GSTN technology hiccups, compensation cess politics, petroleum/alcohol still outside GST, compliance burden for MSMEs.

89.12 Institutions and Mechanism

TipGST Implementation Bodies
  • GST Council (Art 279A).
  • GSTN — Goods and Services Tax Network — IT backbone (Section 25-NPCS; now wholly govt-owned).
  • Central Board of Indirect Taxes & Customs (CBIC) — administers central GST.
  • State Tax Departments — administer SGST.
  • GST Appellate Tribunal (GSTAT) — Principal Bench at Delhi (2024 operational).
  • National Anti-Profiteering Authority (NAA) — sunset 30 Nov 2022; functions now transferred to CCI.

flowchart TB
  G[GST 2017] --> C[Constitutional Basis<br/>Art 246A · 269A · 279A · 101st Amdt]
  G --> D[Dual GST<br/>CGST · SGST · UTGST · IGST · Cess]
  G --> Co[GST Council<br/>3/4 majority]
  G --> R[Rates<br/>0/5/12/18/28 % + 0.25/3 %]
  G --> Re[Returns<br/>GSTR 1/2A/3B/9 · e-invoice · e-way]
    classDef default fill:#003366,color:#ffffff,stroke:#ffcc00,stroke-width:3px,rx:10px,ry:10px;

NoteDistractor warning

PYQ trap: GST in force 1 July 2017 via 101st CAA; Art 246A concurrent power; Art 279A GST Council; Council decision 3/4; 5 slabs (0, 5, 12, 18, 28 %) + 0.25 / 3 % special; petroleum & alcohol outside GST.

89.13 Practice Questions

Q 01DateEasy

GST was implemented in India on:

  • A1 April 2017
  • B1 July 2017
  • C1 April 2018
  • D15 August 2017
View solution
Correct Option: B
**1 July 2017**.
Q 02CAAEasy

GST was enabled by which Constitutional Amendment?

  • A95th
  • B101st
  • C122nd
  • D103rd
View solution
Correct Option: B
**101st CAA 2016**.
Q 03CouncilMedium

GST Council is established under:

  • AArt 246
  • BArt 246A
  • CArt 269A
  • DArt 279A
View solution
Correct Option: D
**Art 279A**.
Q 04DecisionMedium

GST Council decides by:

  • A50 % majority
  • B2/3 majority
  • C3/4 majority
  • DUnanimity
View solution
Correct Option: C
**3/4 of weighted votes**.
Q 05ChairEasy

GST Council is chaired by:

  • APM
  • BUnion Finance Minister
  • CPresident
  • DSpeaker
View solution
Correct Option: B
**Union FM**.
Q 06Threshold goodsMedium

Threshold for GST registration (goods, regular states):

  • A₹10 lakh
  • B₹20 lakh
  • C₹40 lakh
  • D₹50 lakh
View solution
Correct Option: C
**₹40 lakh** (goods regular states); ₹20 L for services.
Q 07SlabsEasy

GST rate slabs (main) are:

  • A0, 5, 12, 18, 28
  • B5, 10, 15
  • C8, 12, 18
  • D1, 5, 10, 18
View solution
Correct Option: A
**0, 5, 12, 18, 28** (+ 0.25 % rough diamonds, 3 % gold).
Q 08CompositionMedium

Composition scheme for goods is available up to turnover of:

  • A₹50 lakh
  • B₹1 cr
  • C₹1.5 cr
  • D₹2 cr
View solution
Correct Option: C
**₹1.5 cr** for goods; ₹50 L for services (§10).
Q 09IGSTMedium

IGST is levied on:

  • AIntra-state supply
  • BInter-state supply and imports
  • CPetroleum products
  • DExempt supply
View solution
Correct Option: B
**Inter-state + imports**; collected by Centre under Art 269A.
Q 10ExemptMedium

Which is currently outside GST?

  • ACement
  • BAlcohol for human consumption & petroleum products
  • CMobile phones
  • DBanking services
View solution
Correct Option: B
**Alcohol & petroleum** — outside GST.
Q 11GSTINMedium

A GSTIN has how many digits?

  • A10
  • B12
  • C15
  • D21
View solution
Correct Option: C
**15 digits** — 2 (State) + 10 (PAN) + 1 entity + 1 default + 1 check.
Q 123BMedium

Monthly summary return is:

  • AGSTR-1
  • BGSTR-3B
  • CGSTR-9
  • DGSTR-4
View solution
Correct Option: B
**GSTR-3B** monthly summary + payment.
Q 13ITCMedium

ITC eligibility is in:

  • A§ 16 CGST Act
  • B§ 17(5) CGST Act
  • C§ 10 CGST Act
  • D§ 49 CGST Act
View solution
Correct Option: A
**§ 16** ITC; §17(5) blocked credits.
Q 14E-wayMedium

E-way bill is required for movement of goods above:

  • A₹10,000
  • B₹50,000
  • C₹1 lakh
  • D₹5 lakh
View solution
Correct Option: B
**₹50,000** consignment value.
Q 15e-invoiceHard

E-invoicing mandatory for B2B turnover above (current):

  • A₹500 cr
  • B₹100 cr
  • C₹50 cr
  • D₹5 cr
View solution
Correct Option: D
**₹5 crore** — since 1 Aug 2023.
Q 16AnnualHard

Annual return form is:

  • AGSTR-3B
  • BGSTR-9
  • CGSTR-1
  • DGSTR-4
View solution
Correct Option: B
**GSTR-9 annual** (+ GSTR-9C reconciliation for entities > ₹5 cr).
Q 17NAAHard

National Anti-Profiteering Authority's functions are now with:

  • ACBDT
  • BCCI
  • CCBIC
  • DSEBI
View solution
Correct Option: B
**CCI** since 1 Dec 2022 (NAA sunset).
Q 18UTGSTMedium

UTGST applies to:

  • AUTs without legislature on intra-UT supply
  • BAll States
  • CInter-state supply
  • DImports
View solution
Correct Option: A
**UTGST** — intra-UT for UTs without legislature.
Q 19Council voteHard

In GST Council voting, Centre's weight is:

  • A1/4
  • B1/3
  • C1/2
  • D2/3
View solution
Correct Option: B
**Centre 1/3; all States 2/3**; decisions require 3/4 of total.
Q 20MatchMedium

Match Article with provision:

Article Provision
(i) 246A (a) GST Council
(ii) 269A (b) Concurrent levy
(iii) 279A (c) IGST on inter-state
(iv) 366(12A) (d) Definition of GST
  • A(i)-(b), (ii)-(c), (iii)-(a), (iv)-(d)
  • B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
  • C(i)-(c), (ii)-(d), (iii)-(b), (iv)-(a)
  • D(i)-(d), (ii)-(a), (iii)-(b), (iv)-(c)
View solution
Correct Option: A
246A-concurrent, 269A-IGST, 279A-Council, 366(12A)-definition.

89.14 Quick Recall

ImportantQuick recall
  • Date: 1 July 2017 via 101st CAA 2016.
  • Articles: 246A (concurrent), 269A (IGST), 279A (Council), 366(12A) (definition).
  • Dual GST: CGST + SGST/UTGST intra-state; IGST inter-state + imports; compensation cess.
  • Council — FM chair; 3/4 vote (Centre 1/3, States 2/3).
  • Slabs: 0, 5, 12, 18, 28 % + 0.25 / 3 %; alcohol & petroleum outside GST.
  • Registration: goods ₹40 L / services ₹20 L; composition ₹1.5 cr goods / ₹50 L services.
  • Returns: GSTR-1, 3B, 9/9C; e-invoice ≥ ₹5 cr; e-way bill > ₹50,000.
  • ITC §16; blocked §17(5).
  • Bodies: CBIC, State tax dept, GSTN, GSTAT 2024, NAA → CCI 2022.