Article
Need and Purpose of GST in India
GST or Goods and Services Tax was rolled out in India on 1st July 2017 and has been the country's principal indirect tax ever since. It replaced a web of central and state levies with one unified system. Here are some of the integral things about why GST was needed and what it changed.
Which taxes did GST replace?
GST brought an end to the following taxes in India (petroleum products and alcohol for human consumption remain outside GST and still attract VAT/state excise): -
- Central Excise Duty (Central Excise Fee)
- Taxes on advertisements
- Excise Duty
- Additional Duties of Excise (on textile and textile products)
- Additional Customs Duty (CVD)
- Special Edition Duty of Customs (SAD)
- Service Tax
- Surcharge and Cess related to the supply of commodities and services
- State VAT
- Central Sales Tax
- Purchase Taxes
- Luxury Taxes
- Entry tax
- Entertainment Tax (except where levied by local bodies)
- Octroi and Local Body Tax
- Taxes on lotteries
- Betting and gambling
- State Cess and Surcharge
How is GST applied?
GST is applied on the supply of goods and services across the nation. GST began with four main slabs of 5%, 12%, 18% and 28%, but under the GST 2.0 reforms effective 22nd September 2025 most goods and services now fall under two main rates — 5% and 18% — with a 40% rate on select sin and luxury goods and special rates of 3% and 0.25% for gold, precious metals and stones.
What is the main purpose of GST in India?
The main purpose of GST in India was to replace all the indirect taxes levied by the Central and State Government and bring all of them under one umbrella.
Why is GST needed?
GST was a much-needed reform. Before 2017, the same goods could suffer excise duty, VAT, CST, entry tax and more — taxes on taxes, with no credit across them. GST unified these indirect taxes into one, taxes only the value added at each stage, and allows credit of tax paid at earlier stages against tax payable at later stages, both at the state and central level. Nearly nine years on, it has created one common national market with a single registration, a single portal and a common rate structure.
What is GST Number?
Goods and Services Tax Identification Number (GSTIN) or GST Number is a unique identifier assigned to a business or person registered under the GST Act. GSTIN is utilized by tax authorities to maintain records of GST dues and payments for those who are registered under the GST Act. GST Number has replaced the earlier taxpayer identification systems such as the Tax Identification Number or TIN which was used by state taxation authorities to track state tax records such as VAT.
