The Central Goods and Services Tax (CGST) Act, 2017 is the foundational legislation governing the levy and collection of CGST by the Central Government on intra-state supplies of goods and services across India. It unifies multiple central indirect taxes under a single, comprehensive framework.
Core Mechanics
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- Intra-State Supply: CGST applies when the location of the supplier and the place of supply are in the same state.
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- Dual Tax Structure: For intra-state transactions, the tax burden is split equally between the Central Government (CGST) and the respective State or Union Territory Government (SGST/UTGST).
Key Provisions & Objectives
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- Unified Tax Regime: It subsumed previously fragmented central levies such as Service Tax, Central Excise Duty, and Central Sales Tax.
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- Input Tax Credit (ITC): The Act establishes a seamless credit mechanism, allowing businesses to deduct the CGST paid on inputs from their final tax liability, thereby preventing the cascading effect of taxes (tax on tax).
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- Tax Slabs: The CGST rates are typically divided into standard tiers: (5%), (12%), (18%), and (28%), depending on the classification of the goods or services.