GST Explained: CGST, SGST, IGST and Article 279A GST Council Made Simple

Quick Answer: GST in India is a dual-system indirect tax introduced by the 101st Constitutional Amendment Act, 2016 and rolled out on 1 July 2017. It operates through three components: CGST (collected by the Centre), SGST/UTGST (collected by states and union territories) on intra-state supplies, and IGST (collected by the Centre) on inter-state supplies. Article 279A creates the GST Council, which recommends rates and rules, with the Centre holding 1/3 of voting weight and states 2/3.

Direct Answer: What is the GST Structure in India?

Goods and Services Tax (GST) is a comprehensive, destination-based indirect tax levied on the supply of goods and services across India. It was inserted into the Constitution by the 101st Constitutional Amendment Act, 2016, which added Article 246A (concurrent power to legislate on GST), Article 269A (IGST on inter-state trade), and amended Article 279B and introduced Article 279A (the GST Council).

The GST structure has three functional components:

• CGST — Central Goods and Services Tax on intra-state supplies, collected by the Union Government under the CGST Act, 2017.
• SGST / UTGST — State GST (or Union Territory GST) on the same intra-state supply, collected by the state or UT government under the SGST Act, 2017 / UTGST Act, 2017.
• IGST — Integrated GST on inter-state supplies and imports, collected by the Centre under the IGST Act, 2017 and apportioned to the destination state.

GST Meaning and the One Nation One Tax Idea

GST is called a “One Nation, One Tax” reform because it subsumed a maze of central and state indirect taxes into a single, seamless national tax. Before 1 July 2017, a product could attract excise duty at the factory gate, additional duties of customs, central sales tax, VAT or sales tax at the state level, entry tax or octroi at municipal check-posts, service tax on services, and cesses on top — each levied at different points without full input credit linkage.

The taxes replaced by GST include:

• Central taxes: Central Excise Duty, Service Tax, Additional Duties of Excise (goods of special importance and textile), Additional Duties of Customs (CVD and SAD), Special Additional Duty of Customs, surcharges and cesses on supply of goods and services.
• State taxes: VAT/Sales Tax, Central Sales Tax, Entry Tax, Octroi, Purchase Tax, Luxury Tax, Entertainment Tax (except local body levies), Taxes on lottery, betting and gambling, and State cesses and surcharges.

Because GST allows seamless input tax credit across the entire supply chain — from manufacturer to final consumer — it eliminated the “tax on tax” cascade effect of the earlier regime. Alcohol for human consumption, petroleum crude, high-speed diesel, petrol, natural gas and aviation turbine fuel remain outside GST, though Parliament can bring petroleum products under GST on the recommendation of the GST Council.

CGST Explained: Central GST

When a supply of goods or services happens within a state (intra-state supply), the tax is split into two parallel halves. The Central Government’s share is CGST, levied under the Central Goods and Services Tax Act, 2017.

Key points about CGST for exams:

• CGST is charged on the taxable value of an intra-state supply at the rate applicable to that good or service.
• The revenue from CGST accrues entirely to the Union Government.
• Input tax credit of CGST can first be used to set off CGST liability, then IGST — but CGST credit cannot be used to pay SGST.
• Example: A trader in Lucknow sells goods worth ₹1,00,000 to a buyer in Lucknow at 18% GST — CGST @9% (₹9,000) and SGST @9% (₹9,000) are charged.

SGST and UTGST: State and Union Territory GST

SGST is the state-level counterpart of CGST, levied under the State Goods and Services Tax Act, 2017 (each state enacted its own SGST Act, broadly identical in structure). The revenue from SGST accrues to the state where the supply occurs.

For union territories without a legislature — Andaman and Nicobar Islands, Lakshadweep, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, and Ladakh — the equivalent tax is UTGST, levied under the Union Territory Goods and Services Tax Act, 2017. Delhi and Puducherry, which have their own legislatures, have their own SGST Acts. In practice, exam questions treat UTGST at par with SGST.

Example: The same Lucknow trader’s 18% sale splits as CGST 9% + SGST 9%. If the same sale happened in Chandigarh, it would split as CGST 9% + UTGST 9%.

IGST Explained: Integrated GST

IGST is levied under the Integrated Goods and Services Tax Act, 2017 on:

• Inter-state supply of goods and services (Maharashtra to Gujarat, for example).
• Import of goods and services into India.
• Supply to or from a Special Economic Zone (SEZ) — treated as inter-state supply.
• Stock transfers between a company’s branches in different states.

IGST is collected by the Centre, but it is fundamentally a destination-based tax: the revenue ultimately accrues to the state where the goods or services are consumed. Example: A Mumbai manufacturer sells goods worth ₹1,00,000 at 18% GST to a Delhi buyer — IGST of ₹18,000 is charged (no CGST/SGST split). The Centre collects it and settles the appropriate share to Delhi, the destination state.

How Revenue is Split Between Centre and States

The revenue-sharing logic is the heart of the GST structure:

• Intra-state supply: The total GST rate is split roughly equally between CGST and SGST. At the 18% slab, CGST is 9% and SGST is 9%.
• Inter-state supply: The full rate is charged as IGST, collected by the Centre, and then apportioned to the destination state under the IGST settlement mechanism.
• Destination principle: GST is consumed where goods/services are consumed, not where they are produced. Producing states therefore lose the production-linked revenue they earned under VAT, which is why the Compensation Cess was introduced.

Article 279A: The GST Council

Article 279A, inserted by the 101st Constitutional Amendment Act, 2016, establishes the GST Council as a constitutional body. The Council is a joint forum of the Centre and the states.

Composition of the GST Council:

• Chairperson: The Union Finance Minister.
• Members from the Centre: The Union Minister of State (MoS) in charge of Revenue/Finance, and any other Union Minister nominated by the Centre.
• Members from the states: The Finance/Taxation Minister of each state government (states may nominate any minister as their representative).

The Council is supported by a Secretariat, and the Union Revenue Secretary acts as its Secretary. Half of the state members retire every two years. For authoritative text, refer to the Constitution of India on the Government of India portal and GST Council details on gstcouncil.gov.in.

Voting Pattern in the GST Council

The voting formula in Article 279A(9) is a favourite of exam-setters:

• The Centre holds 1/3 (33.33%) of the total voting weight.
• All states and UTs with legislatures together hold 2/3 (66.67%), divided equally among them.
• Decisions require a three-fourths (75%) majority of weighted votes of members present and voting.
• Practically, no decision can pass without a majority of states and the Centre — the Centre’s 1/3 weight gives it an effective veto, and states collectively need Centre concurrence too.
• The quorum is one-tenth of the total members.

Functions and Recommendations of the GST Council

Under Article 279A(4), the GST Council recommends to the Centre and states on:

• The taxes, cesses and surcharges to be subsumed under GST.
• Goods and services that may be subjected to or exempted from GST.
• Model GST Laws, principles of levy and apportionment of IGST.
• The threshold limit of turnover below which goods and services may be exempted from GST.
• GST rates, including floor rates, special rates, and rate bands.
• Special provisions for certain states — the North-Eastern states, Jammu & Kashmir (then a state), and hill states like Himachal Pradesh.
• Compensation to states for loss of revenue arising on account of GST implementation.

GST Slabs and Compensation Cess Basics

The main GST slabs in India are 5%, 12%, 18% and 28%. A small set of essential items is taxed at nil rate, and gold and jewellery attract 3%. Services are taxed mainly at 18%, with 12% and 5% applying to specified categories.

The GST Compensation Cess was levied (under the GST (Compensation to States) Act, 2017) on luxury and sin goods — pan masala, tobacco, aerated drinks, cars — to compensate states for revenue loss during the first five years of GST (2017–2022). These are fixed, exam-ready facts; note that slab rates and cess timelines have been periodically revised by the GST Council, so always verify current rates from gst.gov.in or PIB notices before the exam.

GST Milestones and Important Dates

• 2000: PM Atal Bihari Vajpayee sets up a committee to draft GST law.
• 2006: GST announced in Union Budget for introduction from 1 April 2010 (deferred repeatedly).
• August 2016: The 122nd Constitution Amendment Bill (enacted as the 101st Amendment) passed by Parliament; ratified by the required number of states.
• 8 September 2016: President’s assent to the 101st Constitutional Amendment Act.
• 12 September 2016: First GST Council meeting held in New Delhi.
• 1 July 2017: GST rolled out pan-India at midnight — the “Good and Services Tax” launch at Parliament’s Central Hall.
• 2019: GST rate restructuring, and Jammu & Kashmir’s integration into the GST framework after Article 370’s abrogation.
• 2023: Special sessions mark GST’s sixth anniversary; ongoing Council rationalisation of slabs and compliances.

Exam-Focused Summary: Key Facts and Quick Revision Table

Frequently Asked Questions

Q: When was GST implemented in India?

GST was implemented on 1 July 2017, following the passage of the 101st Constitutional Amendment Act, 2016, which created the constitutional framework (Articles 246A, 269A and 279A) for the new tax regime.

Q: Who is the chairperson of the GST Council?

The Union Finance Minister is the chairperson of the GST Council. The Union Minister of State for Finance and the Finance Ministers of all states and UTs with legislatures are its other members.

Q: Which tax applies on inter-state supply of goods?

IGST (Integrated GST) applies on inter-state supply of goods and services, and on imports. It is collected by the Centre and apportioned to the destination state under the IGST settlement mechanism.

Q: What majority is needed for GST Council decisions?

Decisions of the GST Council require a three-fourths (75%) majority of the weighted votes of members present and voting, with the Centre holding 1/3 of the vote weight and states combined 2/3.

Q: Is the GST Council’s recommendation binding?

No. The GST Council’s recommendations are not legally binding on either the Centre or the states — both retain their legislative sovereignty on GST matters. The Supreme Court reaffirmed this position in its 2022 judgment in Union of India v. Mohit Minerals. This is a frequently asked exam point.

For exam preparation, keep checking current affairs updates on PIB and official notifications on gst.gov.in for any slab or Council changes.

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