What is GST in India?

GST is a destination-based indirect tax on the supply of goods or services or both. It is collected through the supply chain, with eligible input tax credit generally available for tax paid on business inputs and input services.

A registered supplier charges applicable GST on taxable outward supplies and may claim eligible input tax credit subject to the CGST Act and Rules. The net tax liability is generally the output tax liability reduced by admissible input tax credit.

What are the main GST rates in India in 2026?

Following the 2025 rate rationalisation, the broad structure is centred on 5 percent and 18 percent, with a 40 percent special de-merit rate for specified goods and services. Separate notified schedules also continue for certain goods at special rates such as 0.25 percent, 1.5 percent and 3 percent, while Nil or exemption applies where specifically notified.

Updated: 1 September 2026

What Is GST and How Does GST Work in India?

Goods and Services Tax (GST) is India's destination-based indirect tax on the supply of goods or services or both. It replaced a large number of Central and State indirect taxes and created a common framework in which tax is generally collected at successive stages of the supply chain while eligible input tax credit reduces cascading.

In simple terms: a registered supplier charges GST on taxable outward supplies, claims eligible input tax credit on qualifying inward supplies, and pays the net tax liability in accordance with the CGST, SGST/UTGST and IGST laws.

How GST Works

1. Tax on supply GST is generally triggered by a taxable supply of goods, services or both rather than merely by manufacture or sale.

2. Input tax credit Eligible GST paid on business purchases and input services can generally be credited, subject to statutory conditions and restrictions.

3. Tax on value addition The credit mechanism normally limits the effective burden at each stage to the value added, with the final tax cost ultimately borne by the consumer where credit is unavailable.

For an intra-State taxable supply, tax is generally levied as Central GST (CGST) together with State GST (SGST) or Union Territory GST (UTGST). Inter-State taxable supplies are generally subject to Integrated GST (IGST), subject to the place-of-supply and other applicable provisions.

Current GST Rate Structure as on 1 September 2026

The GST rate structure was substantially rationalised following the 56th GST Council meeting. The broad rate framework is now centred on a 5% merit rate and an 18% standard rate, together with a 40% special de-merit rate for specified luxury or sin goods and services. Certain separately notified goods continue to be covered by special rate schedules, including 0.25%, 1.5% and 3%, while Nil-rated or exempt treatment applies where specifically notified.

GST rate / treatment	General position
Nil / Exempt	Applies only where the relevant goods or services are specifically covered by a Nil-rate or exemption notification.
0.25%, 1.5% and 3%	Special notified rates continue for specified goods under separate schedules.
5%	Principal merit rate for many essential, mass-use and specifically notified goods and services.
18%	Principal standard GST rate for a wide range of goods and services.
40%	Special de-merit rate for specified luxury, sin and other notified supplies.

Important: GST rates are classification-specific. The correct rate must be verified from the current HSN or SAC entry and the notification in force on the date of supply. A general rate summary should not be used as a substitute for item-level classification.

Benefits of GST for Business and Industry

1. Online and technology-based compliance

GST introduced a common technology platform for registration, return filing, tax payment and several other compliance functions. Electronic processes have increased standardisation and transparency across jurisdictions.

2. Greater uniformity in indirect taxation

GST replaced numerous Central and State indirect taxes with a harmonised framework. Although State-specific administration and certain procedural differences remain, the basic structure, taxable event and credit mechanism operate within a common national system.

3. Reduction of tax cascading

The input tax credit mechanism permits eligible credit of taxes paid at earlier stages, subject to statutory conditions. This reduces the tax-on-tax effect that existed under several pre-GST indirect tax systems.

4. Improved business competitiveness

A common tax framework, electronic compliance and credit across the supply chain can reduce hidden indirect tax costs and facilitate movement of goods and services across States.

5. Support for manufacturers and exporters

Exports are treated as zero-rated supplies under the IGST Act. Subject to applicable law and procedures, exporters may claim refund of eligible unutilised input tax credit or follow other permitted zero-rating mechanisms. This helps reduce domestic indirect-tax loading on exports.

Benefits of GST for Central and State Governments

Simpler indirect-tax framework

GST consolidated major indirect taxes of the Centre and States into a coordinated system administered through common legal and technology architecture.

Improved compliance controls

Electronic registration, return filing, invoice reporting, e-way bills and system-based matching and analytics provide authorities with stronger tools for compliance monitoring and detection of tax leakage.

Revenue efficiency

A broad tax base, digital administration and the input tax credit chain can improve tax visibility and administrative efficiency, while actual revenue outcomes depend on economic activity, rate policy, compliance and enforcement.

Benefits of GST for Consumers

More transparent indirect taxation

GST is generally shown separately on tax invoices, making the indirect tax component more visible to consumers than under many earlier tax systems where multiple embedded levies could form part of the price.

Reduced cascading where input tax credit is available

Because eligible businesses can claim input tax credit, multiple layers of unrecoverable tax can be reduced. The extent to which this results in lower consumer prices varies by product, service, supply chain, rate and market conditions.

Official GST Resources

Central Goods and Services Tax Act, 2017 - India Code Central Board of Indirect Taxes and Customs - GST CBIC Tax Information Portal - Current Notifications and Circulars Goods and Services Tax Council - Official Portal GST Common Portal