CGST (Central Goods & Services Tax) - Meaning, Features & Benefits

CGST - Central Goods and Services Tax in India

Deepshikha Nainani Posted on October 14, 2025

History of CGST

Brought into form under the Central Goods and Services Tax Act 2016, the CGST Act replaced a host of indirect taxes, including central sales tax, central excise duty, service tax, additional customs duties, and further excise duties.

The CGST charges levied on the movement of standard goods and products can be enhanced by a separate body. While the revenue of CGST is collected by the central government, the input tax credit for CGST is for states. The input tax credit can, however, only be appropriated against the CGST payment.

Objectives of the CGST Act, 2017

There were several objectives of the CGST Act when it was implemented in 2017. Read on below to learn the objectives of the central GST taxation system.

The central and state governments were both levying different amounts and forms of taxation on the same products and services, resulting in double taxation for the manufacturers and others involved in the supply chain.
Owing to double taxation, the country saw high rates of tax evasion and cascading effects.
The free flow of trade throughout the country was also hampered by octroi, entry tax, check posts, etc., which saw an additional level of taxation for the transport of goods and services across states.
Taxpayers were also faced with a higher burden of compliance owing to a large number of taxes levied.

To overcome these obstacles to free trade and to do away with double taxation, which increased the taxation burden on taxpayers, the GST was implemented on July 1, 2017, which saw the central government levy taxes in the form of CGST while states began levying SGST.

The detailed difference between the three sections of the GST (CGST, IGST and SGST) can be read in our article Key Difference Between CGST, IGST and SGST

Features of the CGST Act, 2017

The Central Goods and Services Tax (CGST) has several salient features. Read below to learn more about these.

CGST is levied on all the intra-state goods and services supply.
It expands the input tax credit base by ensuring their availability as taxes paid on supply of goods and services.
CGST enables self-assessment by taxpayers on taxes payable by them.
CGST conducts audits so taxpayers can ensure compliance with the Act’s provisions.
The CGST can recover tax arrears through provisions for detaining and restricting sale of goods and property by defaulting taxpayers.
The CGST has provisions for levying GST penalties or fines in case of contravention by taxpayers.
For consumers, the Central Goods and Services Tax enables a reduction of the tax burden on various goods and services.

CGST Law Taxonomy

The CGST Act includes 174 sections stated across 21 chapters and three schedules pertaining to supplies without consideration, and the treatment of activities as goods or services. The 21 chapters and three schedules are listed below.

Chapter I Preliminary
Chapter II Administration
Chapter III Levy and Collection of Tax
Chapter IV Time and Value of Supply
Chapter V Input Tax Credit
Chapter VI Registration
Chapter VII The Tax Invoice, Credit, and Debit Notes
Chapter VIII Accounts and Records
Chapter IX Returns
Chapter X Payment of Taxes
Chapter XI Refunds
Chapter XII Assessment
Chapter XIII Audit
Chapter XIV Inspection, Search, Seizure, and Arrest
Chapter XV Demands and Recovery
Chapter XVI Liability to Pay in Certain Cases
Chapter XVII Advance Ruling
Chapter XVIII Appeals and Revision
Chapter XIX Offenses and Penalties
Chapter XX Transitional Provisions
Chapter XXI Miscellaneous

The Schedules include:

Schedule I: Activities to be carried even if they are made without consideration
Schedule II: Activities to be considered as supply of goods or services
Schedule III: Activities or transactions mentioned as neither the supply of goods or services.

CGST Rules

Read on below to learn the common rules levied under the CGST Act.

A tax invoice must be issued to all taxable goods and services if you are already registered for GST.
A bill of supply must be issued if registration is under the GST composition scheme.
Ensure that all these invoices have a unique serial number and are noted in sequential order.
Ensure that the GST invoice includes your name, address, supply place, and GSTIN.
CGST and SGST are equally filed. So in case, the GST rate is 18%, the CGST is 9% and SGST is also 9%.
For sales pertaining to out of state businesses, IGST must be levied.
It is preferable to not buy goods or services from unregistered dealers.
Ensure that you are filing GST correctly for the same and different states.
All sales of chargeable goods and services must be issued with a tax invoice.
Ensure to collect the tax invoice for all the purchases you make.
Ensure that your documents include your and the client’s GSTIN.
Furthermore, ensure that all documentation is submitted well within time in order to avoid penalties.

Recent Amendments to CGST Rules, 2023

The Central Goods and Services Tax (Second Amendment) Bill, 2023 was introduced in December 2023 in the Lok Sabha. This amended the Central Goods and Services Tax (CGST) Act of 2017. Below is a detailed explanation of the key amendments affecting the CGST Rules:

Rule 37A – ITC Reversal for Non-Filing Suppliers

Rule 37A requires a recipient to reverse Input Tax Credit (ITC) if the supplier has filed invoice details in GSTR-1/IFF but the supplier did not file the matching GSTR-3B by a certain deadline. For FY 2022-23, the system has already computed these reversal amounts and emailed them to the affected recipients; recipients must reverse such ITC in their GSTR-3B (Table 4(B)(2)) by 30th November 2023.

Rule 8 – Pilot for Aadhaar Biometric Authentication

Rule 8 of the CGST Rules has been updated to allow GST officials to identify new GST applicants using Aadhaar biometric authentication and on-site document verification (pilot started in Puducherry and rolled out to Gujarat). Applicants may receive a link for OTP-Aadhaar verification or be asked to book an appointment at a GST Suvidha Kendra for biometric verification.

Sub-Rule 2 Inserted in Rule 28 – Valuation of Corporate Guarantees

This is a new sub-rule to rule 28. When one related company (for example, a parent) gives a corporate guarantee to a bank on behalf of another related company (for example, its subsidiary), the GST value of that guarantee will be treated as 1% of the guaranteed amount, unless the actual money charged is higher — in which case the actual amount is used.

Amendment to Rule 159 – Automatic Release of Provisional Attachments

When the tax department temporarily attaches your property (movable or immovable) to secure tax dues, that provisional attachment will automatically stop after one year from the attachment date. This holds true unless the Commissioner issues a written instruction earlier to keep it longer. This is also reflected in FORM GST DRC-22.

Rule 48 – Enforcement Instructions for e-Invoicing Non-compliance

Tax authorities got instructions on how to deal with taxpayers (B2B/export) who do not issue e-invoices though they are required to. Steps include: find the reason, ask them to declare exempt status on the portal if valid, nudge non-compliant taxpayers to comply, and initiate penalties for continuous non-compliance (first focus on turnover > ₹50 Crores).

Section 148 – Amnesty Scheme for Certain Delayed or Rejected Appeals

The Government notified an amnesty (a one-time relaxation) under Section 148 that allows taxable persons who missed filing appeals against orders under sections 73/74 by the deadline (or whose appeals were dismissed only because of time lapse) to avail relief under specific conditions. This is essentially a limited opportunity to regularise past appeal defaults.

Schedule I of CGST Act – New/Clarified Entries (e.g., Imitation Yarn, etc.)

The Council inserted specific entries in Schedule I (via notifications) – notably clarifying that imitation ‘zari’ thread/yarn made from metallised polyester/plastic film falls under a lower specified GST entry (5% in that notification) and added related entries to enable refunds for certain inputs.

Section 9 – Who pays GST & Rate/Charge Mechanics

The Government used powers under section 9 (which governs levy of CGST) to

convert Indian Railways supplies from reverse charge to forward charge so they can claim ITC;
make targeted rate and classification changes in notifications.

These are formal changes to who bears tax and at what rate.

Section 9(5) – E-commerce Operator (ECO) and Bus Operator Carve-out

The Council/notifications clarified and amended the scope of Section 9(5) (where liability to pay tax is placed on the electronic commerce operator for supplies made through them). Crucially, bus transport services supplied through ECOs are excluded from ECO liability if the bus operator is a company — i.e., companies supplying via ECO can pay under forward charge and claim ITC.

Section 54(3) – Refund Wording for Construction Contracts

The Government amended a notification under Section 54(3) to refine refund rules related to construction contracts where the amount charged includes value of land or undivided share of land. The opening paragraph was reworded to clarify when refunds are available for such supplies.

FORM GST REG-01 – New Field for ‘One Person Company (OPC)’

The GST registration application form (REG-01) now specifically includes a new checkbox/entry for One Person Company (OPC) in Part B. This is simply to capture OPCs distinctly during registration.

Documents Required for CGST Registration

Different documents are required for different categories of taxpayers. Read below to understand better.

For Individuals & Sole Proprietors

Owner’s PAN Card
Owner’s Aadhaar Card
Owner’s photograph
Residential Proof
Details of Bank Account

For Partnerships & LLPs

Deed of Partnership
PAN Cards of Partners
Photographs of Partners
Partners’ Residential Proofs
Aadhaar Card of Any Authorised Signatory
Proof of Signatory’s Appointment
Proof of LLP Registration
Bank Details
Business’ Principal Address Proof

For Hindu Undivided Families (HUFs)

HUF’s PAN Card
Karta’s (family patriarch’s) PAN Card
Owner’s photograph
Bank Details
Business’ Principal Address Proof

For Companies

Company PAN Card
Incorporation Certificate from MCA
Memorandum or Articles of Association
Appointment Proof of Signatory
Signatory’s PAN Card
Signatory’s Aadhaar Card
PAN Cards of all Directors
Directors’ Residential Proofs
Bank Details
Business’ Principal Address Proof

For Societies & Clubs

Registration Certificate Copy
PAN Card Copies of Club or Society and of Associated Partners or Promoters
Copy of Bank Account Statement or Crossed Cheque or First Page of Passbook
Proof of Registered Office Address
Authorisation Letter Signed by Authorised Signatory

Benefits of Central Goods and Services Tax

There are several benefits of the Central Goods and Services Tax, some of which are listed below.

Elimination of Multiple Taxes: Before the GST was implemented, both the Centre and states charged different rates of taxes on the same goods and services. As a result, multiple taxes were levied on goods and services, which resulted in a high burden of taxation on taxpayers.
Reduces Costs: The CGST has resulted in reducing the prices of goods and services and is helping the common man save more money.
Ease of Business: CGST has the same concept across all states, which makes it easier to conduct interstate business without worrying about different taxes being levied.
Seamless Tax Filing and Documentation: CGST has made tax filing and maintaining documentation significantly easier for businessmen and made compliance processes hassle-free.
Reduces Taxes’ Cascading Effects: Since CGST ensures tax benefits at every stage from manufacturing to consumption and tax is handled on margin price only, it has stopped the cascading effect of taxation in India.