Tax term

GST

A plain-English definition of GST— what it means, how it works, and a simple example.

Quick answer

GST (Goods and Services Tax) is a single indirect tax on most goods and services in India, collected along the supply chain but paid by the consumer.

GST replaced a tangle of older taxes like VAT, service tax and excise with one unified system. It applies at rates such as 5%, 12%, 18% and 28% depending on the product or service.

Although businesses collect and remit GST, the cost is passed along until the final customer bears it. Businesses claim credit for GST they paid on inputs, so tax is effectively charged only on the value they add.

For example, on a ₹1,000 service taxed at 18%, you pay ₹1,180 — ₹180 of which is GST. Registered businesses charge, collect and file this with the government, offsetting the GST on their own purchases.

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A note on accuracy:this definition is for general education, not personalised financial or tax advice. Figures are illustrative and rules can change — confirm anything that affects a real decision.