Central GST (CGST)

Central GST (CGST) is the tax levied and collected by the Government of India on the intra-state supply of goods and services, forming one limb of the dual Goods and Services Tax architecture that took effect across India on 1 July 2017. Its legal foundation rests on the Constitution (One Hundred and First Amendment) Act, 2016, which inserted Article 246A conferring concurrent power on Parliament and state legislatures to legislate on GST, and Article 279A creating the Goods and Services Tax Council. The operative statute is the Central Goods and Services Tax Act, 2017, supplemented by the Integrated GST Act and the Union Territory GST Act. Section 9 of the CGST Act is the charging provision, authorising a levy on all intra-state supplies except alcoholic liquor for human consumption, with petroleum products notified for inclusion at a future date by Council recommendation.

In procedural terms, CGST operates only where the supplier and the place of supply lie within the same state or union territory. On such a transaction the supplier charges two parallel taxes—CGST to the Centre and State GST (SGST) to the state—each at half the notified composite rate. A supply taxed at 18 per cent, for instance, bears 9 per cent CGST and 9 per cent SGST. The supplier collects both, files a single return through the GST Network (GSTN) portal, and remits the CGST portion to the Consolidated Fund of India. Registration is mandatory once aggregate turnover crosses the threshold—₹40 lakh for goods and ₹20 lakh for services in most states, with ₹10 lakh limits for special-category states. The same registration and return cycle (GSTR-1 for outward supplies, GSTR-3B for summary payment) covers both the central and state components simultaneously.

The mechanism turns on input tax credit (ITC), which prevents tax cascading. A registered person sets off CGST paid on inputs against CGST payable on outputs; cross-utilisation between CGST and SGST is prohibited, preserving the fiscal autonomy of each government. Section 49 of the CGST Act, as amended, governs the order of credit utilisation: IGST credit must be exhausted first, after which CGST credit may offset CGST and IGST liabilities but never SGST. For inter-state transactions a separate Integrated GST (IGST) applies, collected by the Centre and later apportioned, so CGST and IGST are mutually exclusive on any single supply. A composition scheme under Section 10 offers small taxpayers a flat-rate alternative without ITC, with the levy still bifurcated between Centre and state.

Administration is exercised through the Central Board of Indirect Taxes and Customs (CBIC) within the Department of Revenue, Ministry of Finance, in New Delhi. Rate changes flow from the GST Council, chaired by the Union Finance Minister, where the Centre commands one-third of the voting weight and the states collectively two-thirds, decisions requiring a three-fourths majority. Recent Council sessions illustrate the system's dynamism: the 53rd meeting in June 2024 in New Delhi recommended waivers of interest and penalty for certain demand notices, and through 2024–25 the Council debated rationalising the four-slab structure (5, 12, 18 and 28 per cent), culminating in the major rate-restructuring announced for implementation in 2025 that compressed slabs and recalibrated the CGST share accordingly.

CGST must be distinguished from its adjacent components. SGST is its mirror image, identical in base and rate but accruing to the state treasury; IGST applies to inter-state and import transactions and is apportioned between Centre and destination state; and Union Territory GST (UTGST) replaces SGST in union territories without a legislature, such as Chandigarh and Lakshadweep. Compensation cess, levied under a separate 2017 Act on demerit and luxury goods, is a further distinct charge that funded the guaranteed compensation to states for revenue shortfalls during the transition. CGST should not be conflated with the erstwhile central excise duty or service tax it subsumed; those were origin-based single-point levies, whereas CGST is a destination-based, multi-stage value-added tax with seamless credit.

The most consequential controversy concerned the five-year compensation guarantee under the GST (Compensation to States) Act, 2017, which assured states 14 per cent annual revenue growth and lapsed in June 2022 amid pandemic-era shortfalls financed by Centre-arranged borrowing. The episode strained Centre-state fiscal federalism and triggered demands for extension. Litigation has also tested the system: in Union of India v. Mohit Minerals (2022) the Supreme Court held that GST Council recommendations are persuasive, not binding, on legislatures—an affirmation of cooperative federalism with significant implications for how CGST rates and exemptions are contested. Persistent issues of inverted duty structures, ITC fraud through fake invoicing, and classification disputes continue to occupy the CBIC and the appellate tribunals.

For the working practitioner—whether a UPSC aspirant preparing General Studies Paper III, a revenue desk officer, or a policy analyst—CGST is the clearest expression of India's experiment in pooled fiscal sovereignty. It demonstrates how a federal polity reconciled the Union's revenue needs with states' constitutional taxing powers through a deliberately symmetrical dual levy. Mastery of CGST requires holding together the constitutional architecture of Articles 246A and 279A, the charging and credit mechanics of the 2017 Act, and the political economy of the GST Council, where every rate decision is a negotiated settlement between New Delhi and the states.