A tax levied on goods and services rather than on income, where the burden can be passed on from the seller to the end consumer. GST is India's primary indirect tax.
Indirect taxes are collected by an intermediary (like a business) from the consumer and remitted to the government. Before GST (July 2017), India had multiple indirect taxes — excise duty, service tax, VAT, CST, entertainment tax, luxury tax, etc. GST unified most of these into a single tax. Current indirect taxes in India include: GST (central), Customs Duty (imports), and a few state-specific taxes. Indirect taxes are considered regressive because they apply equally regardless of the payer's income, meaning lower-income individuals pay a proportionally higher share.
When you buy a smartphone for ₹20,000, the price includes 18% GST (₹3,051 approximately). You pay ₹20,000 total. The retailer collected the GST on behalf of the government and remits it via their GST return.
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
Pre-GST, goods were taxed multiple times (excise + VAT + CST + octroi), creating cascading taxes (tax on tax). GST replaced 17 different taxes with one unified tax, eliminated cascading effect through ITC mechanism, and created 'One Nation, One Tax' for easier compliance.
Customs Duty (on imports/exports), Stamp Duty (on property transactions), Petroleum products taxes (petrol/diesel are outside GST), Alcohol excise (state-controlled), and Electricity Duty (state-level).
A comprehensive indirect tax levied on the supply of goods and services in India, replacing multiple earlier taxes like VAT, excise duty, and service tax.
A consumption tax levied on the value added at each stage of the supply chain, used in many countries worldwide including Ireland, UK, Australia, and the EU.
A tax paid directly by an individual or organization to the government, where the burden cannot be shifted to another person. Examples include income tax, corporate tax, and capital gains tax.
The GST paid on business purchases that can be claimed as a credit against the GST collected on sales, reducing the net tax payable.
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