Goods and Services Tax (GST) in India - An Overview

Updated on September 14, 2025 , 56323 views

Goods and Services Tax (GST) is India’s unified indirect tax on the supply of goods and services for domestic consumption. Introduced in 2017, GST subsumed many earlier indirect taxes and is a major source of revenue for both the Central and State governments.

This article updates you on the latest structure, reforms, rates, advantages, and procedural aspects, especially after the major changes implemented from 22nd September 2025 under “GST 2.0”.

Key Updates as of 2025 (“GST 2.0”)

In the 56th GST Council meeting (held 3-4 September 2025), the Government approved a major rationalisation of GST rates.
Effective 22nd September 2025, the GST rate structure has been simplified: the earlier four main slabs (5%, 12%, 18%, 28%) are replaced by primarily two standard rates – 5% and 18%. A new 40% slab is introduced for selected luxury / sin / demerit goods.
Certain goods and services have been moved to nil / zero GST (0%) – especially life & health insurance (individual), several medicines, and many everyday essentials.

Direct Taxes No Longer Applicable Under GST

With GST, many indirect taxes were subsumed, creating a single unified tax regime. Taxes that are no longer applicable include:

Duties of Excise
Central Excise Duty
Additional Excise Duties
Additional Customs Duties
Special Additional Customs Duties
Cess
State VAT
Central Sales Tax
Purchase Tax
Luxury Tax
Entertainment Tax
Entry Tax
Tax on advertisements
Taxes on lotteries, betting and gambling

How Does GST Work?

GST is a destination-based tax. Here’s how it works in simple terms:

Businesses add GST to the base price of goods or services.
The consumer pays the final price (base + GST).
The business collects the GST and forwards it to the government.

✅ Example:

If a manufacturer sells a product worth ₹1,000 with 18% GST → Consumer pays ₹1,180.
The manufacturer keeps ₹1,000 and remits ₹180 to the government.

Types of GST

There are four types of GST and they are as follows:

1. Central Goods and Services Tax (CGST)

CGST is a part of the Goods and Services Tax (GST) and falls under the Central Goods and Service Act 2016. This tax is payable to the centre. This tax is charged as per the Dual GST regime.

2. State Goods and Services Tax (SGST)

State Goods and Services Tax (SGST) is charged on the purchase of products within the state. This falls under the state government. This tax is payable to the state government.

SGST has replaced taxes like Entertainment Tax, State Sales Tax, Value-added Tax, Entry Tax, cesses and surcharges.

3. Integrated Goods and Services Tax (IGST)

Integrated Goods and Services Tax (IGST) is applied on inter-state transactions. This tax is applied to the transfer of goods and services from one state to the other. The Central government collects this tax and distributes it to the state. This tax helps the states deal directly with the Central government rather than each state.

4. Union Territory Goods and Services Tax (UTGST)

Union Territory Goods and Services Tax is applied to the supply of goods and services to any of the Union Territories of the country. These are Andaman & Nicobar Islands, Daman & Diu, Dadra & Nagar Haveli, Lakshadweep and Chandigarh. This tax is applied along with the Central Goods and Services Tax (CGST).

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Advantages of GST

The implementation of GST has brought several benefits:

Creation of a common national market.
Removal of the cascading effect of taxes.
Higher exemption limit for small traders.
Better competitiveness of Indian goods globally.
Relief for SMEs via composition scheme.
Lower compliance compared to multiple state-level taxes.
Entirely online system – registration, filing, refunds.
Improved logistics and supply chain efficiency.

GST Registration Process

The registration procedure is simple and can be done online.

Keep the GSTIN number and registered mobile number handy
Check out ewaybill[dot]nic[dot]in
In case you are a first-time taxpayer, you will have to register with ‘E-way bill registration’
You will then be directed to a page that will require your name, your trade, your mobile number and your residential address. You will then receive an OTP on the registered mobile number for verification
After the verification of the OTP, you will be asked to create a User ID
Create a password for the same and your account on the GST portal will be complete

GST 2.0: Key Updates in 2025

India has now rolled out GST 2.0 with major reforms aimed at simplification, digitalisation, and broadening the tax base:

New 3-slab structure: 8%, 15%, 28% (instead of 4 slabs earlier).
Simplified Input Tax Credit (ITC) mechanism to reduce disputes.
AI-driven GSTN portal for real-time compliance, fraud detection, and auto-matching of invoices.
Inclusion of cryptocurrencies, online gaming, and digital economy within GST ambit.
Stronger alignment between Centre and States on revenue sharing.

GST 2.0 Revised Rates (Effective September 22, 2025)

🟢 Nil Rated & Exempt Items (0% GST)

Sector	Description of Goods & Services	Old Rate	New Rate
Education	Erasers	5%	Nil
	Printed maps, hydrographic charts, atlases, globes	12%	Nil
	Pencil sharpeners, pencils, crayons, pastels, tailor’s chalk	12%	Nil
	Notebooks (exercise, graph, laboratory)	12%	Nil
Food	UHT milk, paneer (pre-packaged), pizza bread, khakhra, chapathi, roti	5%	Nil
	Paratha, parotta, Indian breads	18%	Nil
Health	Recombinant drugs (Agalsidase Beta, Imiglucerase, etc.)	5%	Nil
	Advanced biotech medicines (Onasemnogene, Mepolizumab, etc.)	12%	Nil
Life & Health insurance	Individual health & Life Insurance policies, reinsurance	18% (with ITC)	Exempt
Other Proposals	Technical documentation (Customs Notif. 19/2019), natural cut & polished diamonds ≤1/4 carat, works of art, antiques, simulators, HACFS, IADWS, defence aviation/marine items, drone batteries, naval sonobuoys, missiles, rockets, RPAs, spares, accessories	18%	Nil
Paper	Uncoated paper & paperboard for notebooks	12%	Nil

🟡 Items Taxed at 5% GST

Sector	Description of Goods & Services	Old Rate	New Rate
Agriculture	Diesel engines ≤1 SHP, hand pumps, drip nozzles, sprinklers, agri machinery & parts, tractors (≤1800CC), trailers, hand/animal vehicles	12%	5%
Essentials	Kitchenware, sewing items, non-motorised cycles, bamboo furniture, lanterns, baby care products, soaps, hair care, talcum powder	12–18%	5%
Construction	Sand lime bricks, stone inlay work	12%	5%
Defence	Walkie talkies, tanks, armoured vehicles	12%	5%
Education	Geometry & colour boxes	12%	5%
Fertilisers	Sulphuric/Nitric acid, ammonia, bio-pesticides, neem-based pesticides, micronutrients, tractor tyres, hydraulic pumps, tractor parts	12–18%	5%
Food	Condensed milk, butter, cheese, dry fruits, sausages, refined sugar, pasta, jams, juices, namkeens, diabetic foods, coffee, tea extracts	12–18%	5%
Footwear	Footwear ≤ ₹2500 per pair	12%	5%
Handicrafts	Idols, statues, art ware, hand paintings, toys, handmade papers	12%	5%
Health	Medicines (allopathy, ayurveda, homeopathy), surgical items, diagnostic kits, glucose monitors, spectacles, medical devices	12–18%	5%
Job Work	Printing, leather, pharma, umbrellas, hides & skins	12%	5%
Leather	Prepared leather, patent leather, skins, feathers	12%	5%
Miscellaneous	Horses, marble blocks, menthol, silicon wafers, spectacle lenses, coir products, rubber rollers	12%	5%
Other Machinery	Fuel elements for nuclear reactors	12%	5%
Other Proposals	Unmanned aircrafts	18–28%	5%
Other Services	Film tickets ≤ ₹100, hotel accommodation ≤ ₹7500, insurance (goods carriage), beauty & wellness services	12–18%	5%
Paper	Packaging materials, wood pulp, fibre pulps	12%	5%
Renewables	Solar cookers, heaters, bio-gas, solar/wind devices, hydrogen vehicles	12%	5%
Sports & Toys	Toys (non-electronic), board games, sports goods	12%	5%
Textiles	Yarns, wadding, felt, carpets, terry cloth, embroidery, apparel ≤ ₹2500	12–18%	5%
Tobacco	Bidi wrapper leaves (tendu), katha	18%	5%
Wood	Particle boards, plywood, bamboo flooring, cork, wooden tools, decorative wood articles	12%	5%
Transport Services	Goods carriage, multimodal transport, rail transport (non-IR)	12%	5%

🔵 Items Taxed at 18% GST

Sector	Description of Goods & Services	Old Rate	New Rate
Coal	Coal, lignite, peat	5%	18%
Construction	Cement	28%	18%
Construction Service	Offshore/onshore oil & gas contracts, govt earthworks, subcontracts	12%	18%
Consumer Electronics	ACs, dishwashers, TVs, monitors, projectors	28%	18%
Personal Use	Dutiable articles for personal use	28%	18%
Footwear	Footwear > ₹2500	18%	18%
Job Work	Residual job work services	12%	18%
Local Delivery Services	Postal & courier (SAC 996813)	18%	18%
Miscellaneous	Odoriferous items, biodiesel, petroleum exploration goods	12%	18%
Machinery	Combustion engines, pumps, electric accumulators	28%	18%
Services	Petroleum-related professional & technical services	12%	18%
Paper	Dissolving wood pulp, coated paper, kraft paper	12%	18%
Textile	Apparel > ₹2500, cotton quilts > ₹2500	12%	18%
Tobacco	Bidi	28%	18%
Transport (Vehicles)	Tyres, motor vehicles (cars, buses, ambulances, motorcycles ≤350cc), hybrid vehicles ≤1500cc	28%	18%
Transport Services	Air (non-economy), GTA, motor vehicle rentals, natural gas pipelines	12%	18%

🔴 Items Taxed at 40% GST

Sector	Description of Goods & Services	Old Rate	New Rate
Food & Beverages	Pan masala, carbonated & flavoured drinks, energy drinks	28%	40%
Miscellaneous	Revolvers, pistols, smoking pipes	28%	40%
Services	Casinos, race clubs, betting, online gaming, sporting events (e.g., IPL)	28%	40%
Tobacco	Cigars, cigarettes, chewing tobacco, substitutes	28%	40%
Transport	Luxury cars, large hybrid vehicles, motorcycles >350cc, yachts, aircrafts	28%	40%

GSTIN – GST Identification Number

GSTIN is a 15-digit distinctive code that is provided to every taxpayer. It is provided based on the state you live and the PAN.

Some of the main uses of GSTIN are as follows:

Refunds can be claimed
Loans can be availed with the help of the number
Verification process is easy with the help of the GSTIN

GST Return

A GST-Return is a document that contains the information of the income that a taxpayer should file with the government authorities. Registered traders are to file their GST Returns with details regarding their purchases, sales, input tax credit and output GST.

Countries that Collect GST

The first country to bring in GST was France. It implemented GST in 1954 and since then about 160 countries worldwide have roped in GST. Some of the countries with GST are Canada, Australia, Singapore, India, Vietnam, Monaco, Spain, Italy, United Kingdom, Nigeria, Brazil and South Korea.

GST Certificate

Business with an annual turnover of Rs. 20 lakh and more are required to register under GST system. The GST registration certificate is issued in Form GST REG-06, which is an official document issued by the concerned authorities for a business enrolled under this system. The certificate is available only in digital form, which means there is no physical copy issued.

GST Certificate contains following data:

GSTIN
Legal Name
Trade Name
Constitution of Business
Date of liability
Address
Period of Validity
Types of Registration
Particulars of Approving Authority
Details of the Approving GST officer
Date of issue of the certificate
Signature

Inception of GST

The idea to bring GST into an active movement in India dates back to the beginning of the 21st century.

Here is the timeline:

Year	Activity
2000	The government headed by Atal Bihari Vajpayee were in talks about the GST. A committee was set up to plan the course of action headed by Asim Dasgupta, Finance Minister of West Bengal.
2003	A task force was set up under Vijay Kelkar, the then advisor to the Finance ministry. Tax reforms were to be suggested by the task force.
2004	Vijay Kelkar suggests replacing the tax regime with GST.
2006	Then Union Finance Minister, P.Chidambaram, proposed the implementation of GST by April 1, 2010, during the budget of 2006-07.
2008	The committee set up, submitted a report regarding the roadmap of GST if implemented in the country.
2009	The committee prepared a paper for discussing GST. Finance minister Pranab Mukherjee announced the basic structure for GST.
2010	Implementation of GST was postponed to April 1, 2011.
2011	The Congress Party introduced the Constitution (115th), Amendment Bill, for the implementation of GST. The Bill was passed to a standing committee after facing resistance from the Opposition.
2012	Meetings were held with state Finance ministers and the deadline for issues to be resolved is set for December 31, 2012.
2013	P. Chidambaram made the provision of Rs. 9,000 cr to compensate for losses due to GST.
2014	Just as the Standing Committee cleared GST for implementation, Lok Sabha dissolved and the Bill lapsed. New Finance Minister, Arun Jaitley, introduced the Constitution (122nd), Amendment Bill, in the Lok Sabha.
2015	A new date was set for the implementation of GST as April 1, 2016. GST Bill was passed in Lok Sabha but not in Rajya Sabha.
2016	Rajya Sabha passed the Constitution Amendment Bill. The GST council agreed on the four slab structure with an added cess for luxury and sin goods.
2017	GST was finally implemented on July 1, 2017, with four tax slabs (5%, 12%, 18%, and 28%), plus cess on luxury and sin goods.
2018	GST Council reduced tax rates on over 200 items, moving many goods from higher slabs (28% → 18%). E-way bill system launched for interstate transport of goods.
2019	GST revenue collection crossed ₹1 lakh crore mark multiple times. GST 2.0 concept started being discussed for simplification and digitalisation.
2020	COVID-19 impacted GST collections; government allowed late fee waiver and interest reduction. E-invoicing system introduced for businesses with turnover above ₹500 crore (later extended to ₹100 crore).
2021	E-invoicing made mandatory for businesses with turnover above ₹50 crore. GST revenue consistently crossed ₹1 lakh crore post-pandemic recovery.
2022	GST revenues crossed ₹1.5 lakh crore for the first time (April 2022). Discussions on bringing petroleum products under GST gained momentum.
2023	GST collections hit a record ₹1.87 lakh crore (April 2023). GST Council focused on rationalising tax slabs and reducing litigation.
2024	Union Budget 2024 hinted at a simplified GST 2.0 model to reduce compliance burden, strengthen digitalisation, and align rates better with revenue goals.
2025	GST 2.0 rolled out with key changes: Unified 3-slab structure (8%, 15%, 28%).

Conclusion

From its inception in 2000 to its nationwide rollout in 2017, and now the GST 2.0 reform in 2025, India’s tax system has undergone a massive transformation. GST has simplified compliance, boosted revenues, and created a unified market. With GST 2.0, India is taking a bold step towards making taxation simpler, digital-first, and future-ready.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.