Module 1: Introduction to GST
Goods and Services Tax (GST) is one of the most significant tax reforms in India’s history. Introduced on 1st July 2017, GST replaced a complex web of indirect taxes with a unified tax system. This beginner-friendly module will help you understand the basics of GST—what it is, how it works, and why it’s important.
What is GST?
GST (Goods and Services Tax) is a destination-based, multi-stage, value-added indirect tax levied on the supply of goods and services. It is collected at every point of sale or provision, but the final burden falls on the consumer.
Pre-GST Tax Structure:
Before GST, India had various indirect taxes like:
- Excise Duty
- Service Tax
- VAT (Value Added Tax)
- CST (Central Sales Tax)
- Octroi, Entry Tax, etc.
Each of these had its own rules, rates, and compliances. GST replaced most of these to bring uniformity and transparency in the tax system.
Why Was GST Introduced?
The primary reasons behind the introduction of GST were:
- Simplify the tax structure
- Avoid cascading effect (tax on tax)
- Improve ease of doing business
- Boost tax compliance and transparency
- Unify the Indian market across all states
Types of GST in India
GST is divided into four major components:
| Type of GST | Levied By | Applies On |
|---|---|---|
| CGST (Central GST) | Central Government | Intra-state supply |
| SGST (State GST) | State Governments | Intra-state supply |
| IGST (Integrated GST) | Central Government | Inter-state supply & imports/exports |
| UTGST (Union Territory GST) | UT Governments | Supply in union territories |
How Does GST Work?
Let’s simplify this with an example:
A manufacturer sells a product for ₹100 + GST (18%)
- Manufacturer pays ₹18 as GST (₹9 CGST + ₹9 SGST)
- Wholesaler sells at ₹150 + GST
- Wholesaler claims credit of ₹18 and pays only the GST on the value added (₹50)
This is called Input Tax Credit (ITC), a key benefit of GST.
GST Registration – Who Should Register?
GST registration is mandatory for:
- Businesses with turnover above the threshold limit (₹40 lakh/₹20 lakh/₹10 lakh depending on state and type of business)
- E-commerce sellers
- Inter-state suppliers
- Casual taxable persons
- Input Service Distributors (ISDs)
- Businesses liable under Reverse Charge Mechanism (RCM)
You can also opt for voluntary registration if you want to avail Input Tax Credit and gain business credibility.
Benefits of GST
✅ Simplified tax structure
✅ Uniform tax rates across states
✅ Transparent and digitized compliance
✅ Reduction in overall tax burden
✅ Boosts competitiveness for businesses
✅ Encourages voluntary tax compliance
GST Compliance Requirements
As a registered taxpayer, you must comply with:
- Filing monthly/quarterly GST returns (GSTR-1, GSTR-3B, etc.)
- Maintaining records & invoices
- Payment of taxes on time
- Issuing GST-compliant invoices
- Responding to departmental notices, if any
Conclusion
GST has revolutionized India’s indirect tax system by bringing uniformity, transparency, and accountability. Whether you're a small business owner, freelancer, or aspiring tax professional, understanding the basics of GST is essential in today’s economic landscape.
This module is the foundation of your GST journey. In the next module, we will dive deeper into GST Registration Process, eligibility, and step-by-step procedure.
✅ Quick Recap:
- GST is a unified indirect tax introduced in July 2017
- It replaced multiple taxes like VAT, excise, and service tax
- Divided into CGST, SGST, IGST, UTGST
- ITC is a major advantage
- Registration is mandatory for many businesses
- Compliance is key for avoiding penalties
