Goods and Services Tax (GST) (Indian Economy)
Goods and Services Tax (GST) (Indian Economy)
Why In News:
India marked nine years of the Goods and Services Tax (GST), launched on 1 July 2017 under the principle of 'One Nation, One Tax'.
GST has been strengthened over the years through digital systems, continuous reform, and Centre-State coordination, culminating in the Next-Generation GST reforms of 2025, aimed at lower rates, fewer exemptions, and easier compliance.
The GST Model and Constitutional Basis:
GST subsumed 17 central and state taxes and 13 cesses, including VAT, service tax, excise duty, octroi and entry tax.
It operates on a three-part structure: CGST (levied by the Centre on intra-state supply), SGST (levied by States on intra-state supply), and IGST (levied on inter-state supply of goods and services, apportioned between the Centre and the destination State).
The 101st Constitutional Amendment Act, 2016 inserted Article 246A (concurrent legislative power on GST), Article 269A (IGST apportionment) and Article 279A (constituting the GST Council).
Institutional Architecture:
GST Council: A constitutional body under Article 279A, chaired by the Union Finance Minister which decides rates, exemptions and thresholds.
Its Vice-Chairperson is elected by the Council members from among themselves.
Its members include the Union Minister of State for Finance/Revenue and the State Ministers in charge of Finance, Taxation, or any nominated Minister from each State, ensuring representation of both Centre and States.
Additionally, the Chairperson of the Central Board of Indirect Taxes and Customs (CBIC) serves as a permanent invitee without voting rights, and the Union Revenue Secretary acts as the ex-officio Secretary.
GSTN (GST Network): A not-for-profit, non-government entity that acts as the IT backbone of the GST system in India.
Next-Generation GST Reforms (2025):
Approved at the 56th GST Council meeting, the reforms rationalise the rate structure into two main slabs of 5% and 18%, with a special 40% slab for luxury and sin goods such as lottery and online gaming, tobacco, aerated drinks, high-end cars, yachts and private aircraft.
The reforms took effect from 22 September 2025 and are aimed at easing compliance through faster registration, simplified return filing and quicker refunds.
Key Facts for Prelims:
GST is a destination-based tax: revenue accrues to the State where goods or services are finally consumed, not where they are produced.
GST applies to almost all goods and services; alcoholic liquor for human consumption is kept outside GST, and five petroleum goods remain outside for now pending a GST Council decision.
Benefits include transparency, uniformity, reduced cascading of taxes through input tax credit, a broader tax base and improved tax discipline.
The reform push is officially termed 'GST 2.0', described as delivering lower taxes, simpler processes and stronger growth.
Compensation Cess, originally levied to compensate States for revenue loss during the initial five years of GST implementation, has been a recurring point of Centre-State negotiation and features in ongoing GST Council deliberations on funding the new rate structure.