Goods and Services Tax (GST) and Corporate Tax Planning · Overview of Goods and Services Tax

Evolution and Concept of GST in India

Updated 11 October 2026 · Fact-checked

GST is a destination-based, multi-stage tax on supply of goods and services, with credit for tax paid on inputs. It was introduced by the Constitution (101st Amendment) Act, 2016. India follows a dual model: the Centre levies CGST and IGST, the States levy SGST, and Union territories levy UTGST. The GST Council recommends the rules.

Understand Evolution and Concept of GST in India

Before GST, indirect taxes were split between the Centre and the States. The Centre levied central excise duty, service tax and customs-related duties. States levied VAT or sales tax, entry tax, octroi, luxury tax and entertainment tax. Each levy had its own base, rates and procedures.

This caused cascading of taxes. Tax was charged on tax, because credit was not allowed across the chain. Excise credit could not be set off against VAT, and VAT credit could not be set off against service tax. Central Sales Tax on inter-State sales was a cost with no credit. The result was higher prices, many compliances and barriers at State borders.

GST fixes this by taxing one thing: the supply of goods or services. It is a multi-stage tax, but each dealer pays tax only on the value they add, because they get input tax credit for tax paid on purchases. It is destination-based: tax goes to the State where goods or services are consumed, not where they are made.

The Centre and States could not both tax goods and services under the old Constitution. The Constitution (101st Amendment) Act, 2016 removed this limit. It inserted article 246A, which gives Parliament and State Legislatures concurrent power to make laws on GST. Parliament has exclusive power on GST for inter-State supply. The Amendment also inserted article 279A, which provides for the GST Council, and article 269A on inter-State supply levy and apportionment.

India has a dual GST. On an intra-State supply, CGST goes to the Centre and SGST (or UTGST in a Union territory) goes to the State. On an inter-State supply, the Centre levies IGST, and it is shared with the destination State. The GST Council, chaired by the Union Finance Minister, recommends rates, exemptions, thresholds, model laws and other matters. The Union Government and the States act on those recommendations.

Key rules to remember

Intra-State supply: GST = CGST + SGST (or UTGST); CGST and SGST/UTGST are usually charged at equal rates on the same value.
Inter-State supply: GST = IGST; Levied by the Centre. The share belonging to the destination State is passed to it.
Constitutional articles: Art. 246A: power to levy GST; Art. 269A: inter-State supply; Art. 279A: GST Council; Inserted by the Constitution (101st Amendment) Act, 2016.
Value added approach: Net GST payable = Output tax − Input tax credit; This is how the multi-stage tax avoids cascading.
Appellate body under the CGST Act: National Appellate Authority for Advance Ruling: President + Technical Member (Centre) + Technical Member (State); Constituted under section 101A, inserted w.e.f. 1-1-2020. President holds office for 3 years or until age 70; Technical Members for 5 years or until age 65, whichever is earlier.

How to solve Evolution and Concept of GST in India questions

Use this method for any descriptive question on the evolution or concept of GST.

1Read the verb. 'Explain' needs concept and reasons. 'Discuss' needs points for and against. 'Distinguish' needs a point-by-point comparison.
2Start with the pre-GST position: multiple Central and State levies, cascading, no cross-credit.
3State the constitutional basis: the 101st Amendment, article 246A, article 279A, and the power over inter-State supply.
4Describe the dual model: CGST, SGST, UTGST, IGST, and who collects each.
5Add the GST Council: chair, role, and that it makes recommendations.
6For a fact-based question, decide whether the supply is intra-State or inter-State, and name the taxes.
7Close with a one-line conclusion tied to the question, such as removal of cascading or a common market.

Quickest way: Four-line GST concept answer

When to use it: Use it when you have about five minutes for a short note.

Line 1: define GST as a destination-based tax on supply with credit for input tax.
Line 2: say what it replaced and why (cascading, multiple taxes).
Line 3: give the 101st Amendment, articles 246A and 279A, and the GST Council.
Line 4: list CGST, SGST, UTGST and IGST with who levies each.

Common mistakes in Evolution and Concept of GST in India

Saying GST replaced all indirect taxes.
Students over-generalise 'one nation, one tax'.
Fix: Say it subsumed many Central and State taxes. Customs duty continues, and some goods such as alcohol for human consumption remain outside GST.
Writing that the GST Council makes binding law.
The Council seems powerful.
Fix: Say it makes recommendations. The law comes from Parliament and State Legislatures.
Calling GST an origin-based tax.
Mixing it up with the old excise on manufacture.
Fix: Write that GST is destination-based and revenue goes to the State of consumption.
Confusing IGST with a tax that benefits only the Centre.
IGST is levied by the Centre.
Fix: Explain that the destination State's share is passed to it.
Mixing up articles 246A, 269A and 279A.
Similar numbers.
Fix: Remember: 246A is power to legislate, 269A is inter-State supply, 279A is the Council.

Worked examples

Example 1

Explain how the dual GST model works, using a supply by a dealer in Pune (Maharashtra) to a dealer in Nagpur (Maharashtra) and another to a dealer in Indore (Madhya Pradesh). GST rate is 18% and value is ₹1,00,000 in each case.

Show the solution

Pune to Nagpur is an intra-State supply, so CGST and SGST apply.
Rate is 18%, so each of CGST and SGST is 9%.
CGST = 9% of ₹1,00,000 = ₹9,000. SGST = 9% of ₹1,00,000 = ₹9,000. Total = ₹18,000.
Pune to Indore is an inter-State supply, so IGST applies at 18%.
IGST = 18% of ₹1,00,000 = ₹18,000.
IGST is levied by the Centre, and the destination State's share is passed to Madhya Pradesh.

Answer: Intra-State: CGST ₹9,000 to the Centre and SGST ₹9,000 to Maharashtra. Inter-State: IGST ₹18,000 levied by the Centre, shared with the destination State.

Example 2

Write a note on the role of the 101st Constitutional Amendment and the GST Council in the introduction of GST.

Show the solution

Before the Amendment, the Centre could not tax sale of goods and States could not tax services, which blocked a common tax.
The Constitution (101st Amendment) Act, 2016 inserted article 246A, giving Parliament and State Legislatures concurrent power to make laws on GST.
It gave Parliament exclusive power over GST on inter-State supply, and inserted article 269A for inter-State supply.
It inserted article 279A, which provides for the GST Council.
The Council, chaired by the Union Finance Minister, recommends matters such as rates, exemptions, thresholds and model laws.
The Government acts on these recommendations, so Centre and States share decisions.

Answer: The 101st Amendment gave the constitutional basis for a shared GST, and the GST Council is the joint forum that recommends its design, supporting cooperative federalism.

Exam tips

Expect short notes and 'explain with reasons' questions. Give structure: background, constitutional basis, model, Council.
Quote article numbers 246A, 269A and 279A correctly. Examiners reward precision.
Use a small numerical illustration for CGST, SGST and IGST. It makes the dual model clear.
When the CGST Act is cited, give the section only if sure. Section 101A deals with the National Appellate Authority for Advance Ruling.
Link the topic to later chapters, such as supply, levy and input tax credit, to show depth.

Practice questions from Overview of Goods and Services Tax

Evolution and Concept of GST in India in other exams

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

Evolution and Concept of GST in India: frequently asked questions

What is the dual GST model in India?

Both the Centre and the States levy GST on the same supply. On intra-State supply, CGST and SGST (or UTGST) apply. On inter-State supply, the Centre levies IGST, and the destination State gets its share.

What did the 101st Constitutional Amendment do?

It introduced article 246A giving concurrent power to levy GST, article 269A for inter-State supply, and article 279A for the GST Council. It enabled a common national tax on goods and services.

How is GST different from VAT?

VAT was a State tax on sale of goods only, with no credit against Central taxes. GST covers supply of goods and services, merges many Central and State taxes, and gives seamless input tax credit across the chain.

Does the GST Council make law?

No. It makes recommendations on rates, exemptions, thresholds and similar matters. Parliament and State Legislatures enact the law.