Tax Laws and Practice · Concept of Indirect Taxes at a Glance

Overview of GST: Structure, Types and Taxable Event

Updated 11 October 2026 · Fact-checked

GST is a destination-based, multi-stage tax on the supply of goods or services, levied under a dual model. The Centre levies CGST and the State levies SGST (UTGST in Union territories) on intra-State supplies. The Centre levies IGST on inter-State supplies. To answer, identify the supply, its location, then the tax applicable.

Understand Overview of GST: Structure, Types and Taxable Event

Before GST, many separate taxes applied to one transaction: excise, service tax, VAT and others. Tax was charged on tax, and credit often broke between goods and services. GST replaced most of these with one tax on supply, with credit flowing along the chain.

India follows a dual GST model. Both the Centre and the States levy GST on the same transaction. For a supply inside one State, two taxes apply: CGST (Central tax) and SGST (State tax). In a Union territory without a legislature, UTGST applies in place of SGST. For a supply between two States, or an import or export, the Centre levies IGST, and it is shared with the destination State through the settlement mechanism.

GST is a destination-based consumption tax. The tax belongs to the State where goods or services are finally consumed, not where they are produced. This is why inter-State rules and place of supply matter. Each seller in the chain charges tax but claims credit of tax paid on inputs, so only the value added is taxed and the final consumer bears the burden.

The taxable event is supply. Earlier laws taxed manufacture, sale or provision of service as separate events. Under GST one event, supply, covers goods, services or both. Whether a transaction is intra-State or inter-State is decided by the location of the supplier and the place of supply. Related documents such as credit and debit notes adjust the tax if the original invoice was wrong. Section 34 says a registered supplier may issue a credit note where the taxable value or tax charged exceeds what is payable, where goods are returned, or where supplies are deficient. A debit note must be issued where the tax invoice shows less than what is payable.

Key rules to remember

Intra-State supply: Tax = CGST + SGST (or UTGST in a Union territory); Supplier location and place of supply are in the same State or Union territory. Rates of CGST and SGST are normally equal halves of the total rate.
Inter-State supply, import, export: Tax = IGST; Supplier location and place of supply are in different States or Union territories. IGST equals the combined CGST plus SGST rate.
Net GST payable: Net tax = Output tax − Input tax credit; Shows why GST taxes only value addition at each stage.
Taxable event: Event = Supply (goods, services or both); Replaces separate events of manufacture, sale and service provision.
Credit note (Section 34(1)): Credit note when value or tax charged exceeds payable, goods returned, or supply deficient; Issued by the registered supplier to the recipient. Details are declared in the return of the month of issue, within the time limit in Section 34(2).
Debit note (Section 34(3)): Debit note when value or tax charged is less than payable; Debit note includes a supplementary invoice. Details are declared in the return for the month of issue.

How to solve Overview of GST: Structure, Types and Taxable Event questions

Use this order for any overview or structure question on GST.

1Identify the transaction and state whether it is a supply of goods, services or both.
2Find the location of the supplier and the place of supply.
3If both are in the same State, apply CGST plus SGST. If in a Union territory, apply CGST plus UTGST.
4If they are in different States or Union territories, or the transaction is import or export, apply IGST.
5Explain the destination principle: tax goes to the State of consumption.
6Show the credit flow if numbers are given: output tax less input tax credit.
7Close with a clear conclusion naming the tax and who receives it.

Quickest way: Same place or different place

When to use it: Use for short questions asking which GST applies or who gets the tax.

Write supplier location and place of supply side by side.
Same State: CGST + SGST. Same Union territory: CGST + UTGST.
Different: IGST.
Add one line on destination-based consumption.

Common mistakes in Overview of GST: Structure, Types and Taxable Event

Saying GST is an origin-based tax.
Students link tax with the State where goods are made.
Fix: Write that GST is destination-based: revenue goes to the State of consumption.
Applying SGST in a Union territory.
SGST and UTGST look alike.
Fix: In a Union territory use UTGST. SGST belongs to States.
Calling manufacture or sale the taxable event.
Old laws like excise and VAT taxed those events.
Fix: State that supply is the single taxable event under GST.
Charging CGST and SGST on an inter-State sale.
Students look at the buyer's registration, not the location of supplier and place of supply.
Fix: Compare supplier location with place of supply. Different States means IGST.
Saying GST is a single tax levied only by the Centre.
The name sounds unified.
Fix: Explain the dual model: Centre and States both levy on the same supply, with IGST for inter-State.
Mixing up credit note and debit note.
Both adjust the invoice.
Fix: Credit note reduces value or tax (excess, return, deficiency). Debit note increases it (value or tax too low).

Worked examples

Example 1

A registered dealer in Pune (Maharashtra) sells goods worth ₹1,00,000 to a buyer in Nagpur (Maharashtra) at a GST rate of 18%. Which taxes apply and what is the amount of each?

Show the solution

Supplier location is Maharashtra and place of supply is Maharashtra, so the supply is intra-State.
Intra-State supply attracts CGST and SGST.
Total rate 18% splits equally: CGST 9% and SGST 9%.
CGST = 9% of ₹1,00,000 = ₹9,000.
SGST = 9% of ₹1,00,000 = ₹9,000.

Answer: CGST of ₹9,000 goes to the Centre and SGST of ₹9,000 goes to Maharashtra. Total tax is ₹18,000.

Example 2

Explain why GST is called a destination-based consumption tax and name the tax on a supply from Gujarat to a buyer in Kerala.

Show the solution

GST is levied on supply and the revenue accrues to the State where goods or services are consumed, not where they are produced.
Each seller claims credit of input tax, so only value addition is taxed and the final consumer bears the tax.
Supplier location is Gujarat and place of supply is Kerala, so the supply is inter-State.
Inter-State supply attracts IGST, levied by the Centre.
IGST is then apportioned so that the consuming State, Kerala, receives its share.

Answer: GST is destination-based because tax belongs to the State of consumption. The Gujarat to Kerala supply attracts IGST, with the State share going to Kerala.

Exam tips

Start answers with the dual model: Centre and States both levy GST on the same supply.
Always name the Union territory variant: UTGST replaces SGST there.
Write the one-line test for the tax: same State means CGST plus SGST, different means IGST.
For credit and debit notes, quote the three credit-note triggers and the single debit-note trigger from Section 34.
Use the structure provision, application and conclusion even in a short answer.

Practice questions from Concept of Indirect Taxes at a Glance

Overview of GST: Structure, Types and Taxable Event in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Overview of GST: Structure, Types and Taxable Event: frequently asked questions

What is the difference between CGST, SGST, UTGST and IGST?

CGST is the Central tax and SGST is the State tax, both on intra-State supplies. UTGST replaces SGST in Union territories. IGST is levied by the Centre on inter-State supplies, imports and exports.

What does destination-based consumption tax mean?

It means the tax accrues to the place where goods or services are consumed. The producing State does not keep the tax on supplies consumed elsewhere.

What is the taxable event under GST?

The taxable event is supply of goods, services or both. It replaces the separate events of manufacture, sale and provision of service used in earlier laws.

When can a credit note be issued under Section 34?

A registered supplier may issue a credit note when the taxable value or tax charged is more than payable, goods are returned, or goods or services are found deficient.