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Act 2017 Explained

CGST Act — Central Goods and Services Tax

The Central Goods and Services Tax Act 2017 is the centre's GST law. It covers intra-state supplies, input tax credit, registration, and returns — alongside the matching SGST Act for states.

Introduction

The CGST Act 2017 is one of four laws that make up India's GST system. It was passed by Parliament to replace central indirect taxes such as central excise, service tax, and customs duty. The CGST Act governs the tax the centre collects on goods and services supplied within a single state.

Before GST, you paid excise at the manufacturer level and service tax on top. GST unifies these into one tax with two parts: CGST collected by the centre, and SGST collected by the state. Both appear as separate line items on your invoice when you buy from a supplier in your own state.

Key concepts

Intra-state supplies

When a supplier and buyer are in the same state, CGST applies alongside SGST. The tax base is shared: CGST goes to the centre, SGST to the state.

Supply — the taxable event

GST is charged on 'supply' — the sale of goods, transfer of goods, or provision of services. The definition of 'supply' under CGST is broad and includes barter, exchange, and rental.

Input tax credit chain

Every registered person can claim ITC on inputs used in making a supply. The ITC flows through the supply chain: manufacturer → wholesaler → retailer → consumer.

Registration threshold

Every business with turnover above ₹40 lakh in a financial year must register under GST (₹20 lakh for special category states). Casual taxpayers and e-commerce operators must register regardless of turnover.

CGST vs IGST — when each applies

Transaction type GST law applied Who collects
Within one state CGST + SGST Centre + State
Between two states IGST only Centre (re-distributes to state)
Imports into India IGST + customs duty Centre

Frequently asked questions

What is CGST?
CGST stands for Central Goods and Services Tax. It is the central part of India's unified GST system. When you buy something within your own state, two taxes apply: CGST (collected by the centre) and SGST (collected by the state). The CGST Act 2017 is the law that governs this tax.

How is CGST different from GST?
GST is the overall system. CGST is the central law that governs the centre's share of GST on intra-state supplies. IGST (Integrated GST) applies to inter-state supplies. Together, CGST + SGST = total GST on intra-state transactions.

Who pays CGST?
Any registered person making a taxable supply must collect CGST on sales and pay it to the government. As a consumer, you pay CGST embedded in the final price. Businesses can claim CGST paid on purchases as input tax credit.

What is input tax credit under CGST?
Input tax credit (ITC) means a registered business can reduce its CGST liability by the CGST it paid on its own purchases. If you buy goods for ₹10,000 carrying ₹1,800 CGST, and then sell goods for ₹20,000 collecting ₹3,600 CGST, you owe only ₹1,800 CGST to the government (₹3,600 − ₹1,800 ITC).

Where can I read the CGST Act?
The CGST Act 2017 is published on the CBIC website at gst.gov.in. The GST Council at gstcouncil.gov.in maintains a consolidated list of all GST Acts and amendments.

Sources

Last reviewed by FinWiz24 Research Desk.