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

Structure of GST Laws and Levy of Tax in India

Updated 11 October 2026 · Fact-checked

GST is a destination-based consumption tax levied on supply of goods or services or both. It runs on a set of laws: the CGST Act, IGST Act, UTGST Act, State GST Acts and the GST (Compensation to States) Act. Supply is the taxable event. To solve questions, identify the supply, its location, and which Act applies.

Understand Structure of GST Laws and Levy of Tax

GST is one tax on supply of goods or services or both, replacing many earlier central and State indirect taxes. The CGST Act, 2017 is the main law. It holds the definitions, levy, input tax credit, procedures, offences and appeals.

The structure has several laws working together. The CGST Act levies central tax on intra-State supplies. Each State has its own SGST Act that levies State tax on the same intra-State supplies. The UTGST Act does this for Union territories without a legislature. The IGST Act levies integrated tax on inter-State supplies, imports and exports, and it also holds the place of supply rules. The GST (Compensation to States) Act, 2017 provides for compensation to States and for the levy of cess. The CGST Act says that words defined in these Acts but not in the CGST Act carry the same meaning (section 2(120)).

The taxable event is supply, not manufacture, sale or provision of service as in the old laws. Section 2 defines key terms around it. "Goods" means every kind of movable property other than money and securities, and includes actionable claim, growing crops, grass and things attached to land that are agreed to be severed before supply. "Services" means anything other than goods, money and securities, and includes activities relating to the use of money or its conversion from one form, currency or denomination to another for which a separate consideration is charged. "Business" is widely defined and includes activities whether or not done for pecuniary benefit.

GST is a destination-based consumption tax. Tax belongs to the State or territory where goods or services are finally consumed, not where they are produced. That is why the IGST Act has place of supply rules, and why in an inter-State supply the tax revenue goes to the destination State. Because the tax is on consumption, the chain of suppliers recovers tax through input tax credit and the final consumer bears it.

In a dual model, the Centre and States both levy tax on the same supply. An intra-State supply bears CGST plus SGST (or UTGST). An inter-State supply bears IGST. Rates are not fixed in the Act itself. They are notified by the Government on the recommendation of the GST Council, subject to the ceiling in the Act. Learn the structure first, then the rates by notification.

Key rules to remember

Intra-State supply: Tax = CGST + SGST (or UTGST); Both levied on the same value. Rates are notified on the Council's recommendation.
Inter-State supply, import, export: Tax = IGST; Levied under the IGST Act. Place of supply decides the destination.
Taxable event: Supply of goods or services or both; Section 7 of the CGST Act gives its scope. Section 9 is the charging section.
Destination principle: Tax accrues where consumption takes place; Governed by place of supply rules in Chapter V of the IGST Act.
Taxable supply: Taxable supply = supply leviable to tax under the Act; Section 2(108). Exempt and non-taxable supplies are outside this.
Input tax: Input tax = CGST, SGST, UTGST or IGST charged on supply to a registered person; Section 2(62). It does not include tax paid under composition levy.

How to solve Structure of GST Laws and Levy of Tax questions

For a structure-and-levy question, move from the law to the facts, then to a conclusion. Do not jump to the tax amount.

1Identify whether there is a supply, and whether it is of goods, services or both, with the relevant definition in section 2.
2Check that it is made in the course or furtherance of business, using the wide definition of business.
3Decide whether it is taxable, exempt or non-taxable, as the definitions in section 2 separate them.
4Find the place of supply and the location of the supplier, to decide whether it is intra-State or inter-State.
5Name the Acts and taxes that apply: CGST with SGST or UTGST, or IGST.
6Apply the destination principle to say which State or territory gets the revenue.
7Conclude clearly. Add any compliance point, such as registration or invoicing, if the facts call for it.

Quickest way: Four-question checklist

When to use it: For short answers and MCQ-style written questions with limited time.

Is there a supply? If no, there is no GST.
Is it taxable under the Act? If exempt or non-taxable, stop.
Do supplier location and place of supply fall in the same State or territory?
If yes, write CGST plus SGST or UTGST. If no, write IGST.

Common mistakes in Structure of GST Laws and Levy of Tax

Saying GST is levied on manufacture or sale.
Students carry over the idea of excise duty and sales tax.
Fix: Write that the taxable event is supply, and cite section 7 for its scope.
Treating the producing State as the one that gets the tax.
Origin-based thinking from earlier taxes.
Fix: State that GST is destination-based, and that the place of supply decides the destination.
Ignoring the UTGST Act and the Compensation Act.
Students remember only CGST, SGST and IGST.
Fix: List all the Acts. UTGST covers Union territories without a legislature, and the Compensation Act covers compensation and cess.
Treating money and securities as goods.
Loose reading of the definition.
Fix: Quote the definition: movable property other than money and securities. Note that actionable claim is included.
Treating exempt supply and non-taxable supply as unrelated.
Definitions in section 2 are not read together.
Fix: Remember that exempt supply includes non-taxable supply, while taxable supply is leviable to tax.
Stating rates as fixed in the Act.
Memorised rate slabs without the source.
Fix: Say rates are notified by the Government on the recommendation of the GST Council.

Worked examples

Example 1

Aarav Traders, registered in Pune, Maharashtra, sells machinery to Meera Industries in Nashik, Maharashtra, for a consideration. Which taxes apply, and which Acts levy them?

Show the solution

There is a supply of goods made for consideration in the course of business.
Supplier is in Maharashtra and the goods are delivered in Maharashtra, so the supply is intra-State.
An intra-State supply attracts central tax and State tax.
Central tax is levied under the CGST Act. State tax is levied under the Maharashtra GST Act.
The tax is recovered through the chain and borne by the final consumer.

Answer: CGST under the CGST Act and SGST under the Maharashtra GST Act apply. IGST does not apply.

Example 2

Explain with reasoning why GST is called a destination-based consumption tax, using the case of a supplier in Gujarat selling goods to a customer in Karnataka.

Show the solution

The supply is from Gujarat to Karnataka, so it is inter-State, and IGST is levied under the IGST Act.
Place of supply, decided under Chapter V of the IGST Act, is where the goods are delivered, namely Karnataka.
Tax is meant to belong to the place of consumption, so the revenue is for Karnataka, not Gujarat.
The Gujarat supplier and others in the chain claim input tax credit, so they do not bear the tax.
The final consumer bears the tax, which is why it is a consumption tax.

Answer: GST is destination-based because tax accrues to the State where consumption takes place, here Karnataka, and consumption-based because the final consumer bears it while the chain recovers tax through input tax credit.

Exam tips

Begin every answer with the taxable event: supply, and quote section 7 and the section 2 definitions.
List all five Acts when asked about structure, with one line on each.
Use short case facts with named States, and always state intra-State or inter-State before naming the tax.
In an open book paper, mark the section 2 definitions you need, such as goods, services, business and taxable supply, so you can quote them quickly.
Do not state rates from memory unless the question gives the notification. Say they are notified on the Council's recommendation.

Practice questions from Overview of Goods and Services Tax

Structure of GST Laws and Levy of Tax in other exams

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

CA IntermediateLevy and Charge of GST under Section 9

Structure of GST Laws and Levy of Tax: frequently asked questions

What are the laws that make up the GST structure in India?

They are the CGST Act, the IGST Act, the UTGST Act, the State GST Acts and the GST (Compensation to States) Act, 2017. Each handles a different part of the levy. Together they apply tax across States and territories.

What is the difference between CGST, SGST and IGST?

CGST and SGST (or UTGST) are levied together on intra-State supplies, one to the Centre and one to the State or Union territory. IGST is levied on inter-State supplies, imports and exports under the IGST Act. The place of supply decides which applies.

What is the taxable event under GST?

The taxable event is supply of goods or services or both. It replaces the earlier events of manufacture, sale and provision of service. Section 7 gives its scope.

What does destination-based consumption tax mean?

It means the tax goes to the State or territory where goods or services are consumed, not where they are made. Input tax credit ensures the final consumer bears the tax. Place of supply rules identify the destination.