GST & Indirect Tax — Fundamentals
CGST, SGST, and IGST — the three-way split
GST applies differently depending on whether a transaction is intra-state or inter-state: an intra-state transaction (buyer and seller in the same state) splits GST into CGST (Central GST, collected by the central government) and SGST (State GST, collected by the state government) — each typically at half the total applicable GST rate, so a transaction subject to 18% total GST would involve 9% CGST and 9% SGST. An inter-state transaction (buyer and seller in different states) instead charges IGST (Integrated GST) at the full combined rate, collected by the central government and subsequently apportioned to the destination state — this structure is specifically designed so the state where goods/services are actually consumed receives its due share of tax revenue, consistent with GST's design as a destination-based consumption tax. (needs verification — recheck against current source: current GST rate slabs are periodically revised by the GST Council.)
Input Tax Credit — the mechanism preventing cascading tax
Input Tax Credit (ITC) allows a GST-registered business to claim credit for the GST it paid on its own purchases (inputs), offsetting that credit against the GST it owes on its own sales (output) — meaning the business effectively pays GST only on the value it actually added, not on the full sale value including tax already paid earlier in the supply chain. For example, a manufacturer purchasing raw materials pays GST on that purchase; when the manufacturer sells the finished product, GST is charged on the sale price, but the manufacturer can subtract (credit) the GST already paid on raw materials from the GST owed on the sale — only the net difference is actually remitted to the government. This mechanism is what makes GST fundamentally different from the pre-2017 cascading-tax system (Overview).
Conditions for claiming ITC
ITC isn't automatically available on every purchase — several conditions must be met: the business must possess a valid tax invoice, the goods/services must actually have been received, the supplier must have actually paid the GST charged to the government (and filed the corresponding return), and the business itself must have filed its own GST returns. This last set of conditions — that ITC availability depends partly on the supplier's compliance, not just the buyer's own records — is a frequently tested and practically significant point, since it means a business can lose ITC eligibility due to a supplier's non-compliance, even if the business's own paperwork is entirely correct. (needs verification — recheck against current source: specific ITC eligibility conditions and matching mechanisms are periodically revised.)
GST registration — who must register
Businesses exceeding a specified annual turnover threshold (which differs by state category and by whether the business deals in goods or services) are required to register for GST; below this threshold, registration is generally optional (though some categories of business must register regardless of turnover). Once registered, a business receives a GSTIN (GST Identification Number) and takes on the associated compliance obligations (return filing, invoice requirements) covered in Intermediate. (needs verification — recheck against current source: current turnover thresholds for mandatory GST registration are periodically revised and differ by state category and business type.)