Taxation in India and GST Notes for SSC Exams: Direct, Indirect Taxes and GST
Rahul Kumar
SSC Exam Expert & Content Editor
In this note
- 1.What Is a Tax? Basic Terms
- 2.Direct and Indirect Taxes
- 3.Division of Taxes Between the Centre and the States
- 4.Goods and Services Tax (GST): Key Facts
- 5.Types of GST
- 6.GST Rates (Latest Changes)
- 7.Other Important Taxes and Concepts
- 8.Important Questions Explained
- 9.Quick Tips to Remember
- 10.Common Mistakes to Avoid
- 11.Quick Revision Points
- 12.Practice Questions With Answers
- 13.How to Practise This Topic
- 14.Related Notes and Practice
- 15.Frequently Asked Questions
PDF Notes: Taxation in India and GST Notes for SSC Exams: Direct, Indirect Taxes and GST
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Taxation and GST are scoring topics of the Indian economy, because the questions are very direct: the date of the GST, the Constitutional Amendment of the GST, the Article of the GST Council, the types of GST and the difference between the direct and the indirect taxes. These taxation in India and GST notes for SSC explain every point in simple tables, with 20 practice questions. Read them with the Fiscal Policy, Budget and Deficits Notes, Union Budget 2026-27 Highlights Notes and Inflation and its Types Notes notes.
What Is a Tax? Basic Terms
- A tax is a compulsory payment made by the people and the companies to the Government, without getting any direct benefit in return. It is the main source of the revenue of the Government.
- A fee is paid for a service (a passport fee), a cess is an extra tax for a special purpose (for example, the Health and Education Cess) and a surcharge is an extra tax on the tax for the high income.
- Tax base is the item on which the tax is levied (the income, the goods); tax rate is the part of the base that is paid as the tax.
- Adam Smith gave four canons of taxation: equality (ability to pay), certainty, convenience and economy.
- Types of taxes on the basis of the rate: progressive (the rate rises with the income, such as the income tax), proportional (a fixed rate for all) and regressive (the burden is more on the poor, such as the indirect taxes).
Direct and Indirect Taxes
| Point | Direct tax | Indirect tax |
|---|---|---|
| Meaning | Paid directly to the Government by the person on whom it is imposed; the burden cannot be shifted | Paid by the consumer through the price of the goods and services; the burden can be shifted |
| Examples | Income tax, corporate tax, wealth tax (abolished in 2015), capital gains tax, securities transaction tax | GST, customs duty, excise duty on some goods (petrol and diesel), stamp duty (state) |
| Nature | Generally progressive | Generally regressive |
| Collected by | CBDT (Central Board of Direct Taxes) | CBIC (Central Board of Indirect Taxes and Customs) |
| Evasion | More chance of the tax evasion | Less chance of evasion |
- Both the boards, the CBDT and the CBIC, work under the Department of Revenue, Ministry of Finance.
- Income Tax Day is celebrated on 24 July, GST Day on 1 July and Central Excise Day on 24 February.
- TDS (Tax Deducted at Source) means that the tax is cut at the source of the income; PAN is the 10-character permanent account number.
- The new Income Tax Act, 2025 replaces the Income-tax Act of 1961 from 1 April 2026.
Division of Taxes Between the Centre and the States
| Taxes of the Centre (Union List) | Taxes of the States (State List) |
|---|---|
| Income tax (other than the agricultural income), corporation tax, customs duties, the export duties, the taxes on the capital gains, securities transaction tax | Land revenue, the tax on the agricultural income, the stamp duty on the registration, the state excise duty on alcohol, the tax on the professions, the entertainment tax (now GST in many cases), the property tax by the local bodies |
After the GST, the Centre and the states share the power to tax the supply of goods and services (Article 246A). The taxes of the Centre are shared with the states according to the recommendations of the Finance Commission (see the Constitutional Bodies of India Notes note).
Goods and Services Tax (GST): Key Facts
| Point | Fact |
|---|---|
| Meaning | A single, destination-based, multi-stage indirect tax on the supply of goods and services, with the credit for the tax paid on the purchases (input tax credit) |
| Slogan | "One Nation, One Tax, One Market" |
| Constitutional Amendment | The 101st Amendment Act, 2016 (the Constitution (101st Amendment) Act); it inserted Articles 246A, 269A and 279A |
| Launch | 1 July 2017 (the midnight launch in the Central Hall of the Parliament) |
| GST Council | Article 279A; chaired by the Union Finance Minister; the members are the Union Minister of State for Revenue and the state finance ministers |
| Voting in the Council | The Centre has one-third of the votes and the states together have two-thirds; a decision needs three-fourths of the weighted votes |
| Network | The GSTN (GST Network) is the IT system for the GST |
| Registration limit | Rs 40 lakh a year for the supply of goods and Rs 20 lakh for the services (lower for the special category states) |
| Which taxes did it replace | Central: excise duty, service tax, CVD, SAD. State: VAT, entertainment tax, luxury tax, octroi and entry tax |
| Outside the GST | Alcohol for human consumption, and the petroleum products (crude oil, petrol, diesel, natural gas and the aviation fuel) are still outside the GST; the electricity is also outside |
Types of GST
| Type | Meaning |
|---|---|
| CGST (Central GST) | Collected by the Centre on the intra-state supply |
| SGST (State GST) | Collected by the state on the intra-state supply |
| IGST (Integrated GST) | Collected by the Centre on the inter-state supply and on the imports; the Centre shares it with the destination state |
| UTGST | On the supplies in the Union territories without a legislature |
| Compensation cess | Levied on the luxury and the sin goods to compensate the states for the loss of the revenue in the first five years |
- Example: on an intra-state sale at 18 percent, 9 percent goes to the Centre (CGST) and 9 percent goes to the state (SGST); on an inter-state sale, the entire 18 percent is IGST.
- The input tax credit (ITC) removes the cascading effect (the "tax on the tax").
- Reverse charge means that the buyer and not the seller pays the tax in some cases.
- The Government changes the compensation cess arrangement after the five years, so check the latest news.
GST Rates (Latest Changes)
- Before September 2025, there were four main slabs: 5, 12, 18 and 28 percent, apart from the 0 percent for the basic items (fresh milk, vegetables, books), the special rates of 0.25 percent (rough diamonds) and 3 percent (gold).
- From 22 September 2025, the GST rates were simplified (the "next-generation GST reforms"): the main rates became 5 percent and 18 percent, and a special higher rate of 40 percent was kept for a few luxury and sin goods.
- The rates are decided by the GST Council in its meetings, so always check the latest rate before the exam.
- The gross GST collection reached a record of about Rs 2.37 lakh crore in April 2025 (as per reports); the monthly collection is released on the first day of the next month.
Other Important Taxes and Concepts
| Term | Meaning |
|---|---|
| Customs duty | The tax on the goods that are imported or exported |
| Anti-dumping duty | A tax on the imports that are sold at a price lower than the normal price |
| Capital gains tax | The tax on the profit from selling an asset (short term and long term) |
| Securities Transaction Tax (STT) | The tax on the sale and purchase of the shares |
| Stamp duty | The state tax on the documents of the property |
| Tax evasion vs tax avoidance | Evasion is illegal (hiding the income); avoidance is using the legal ways to reduce the tax |
| Black money | The income on which the tax has not been paid |
| Tax-GDP ratio | The tax revenue as a percentage of the GDP; the ratio of India is lower than that of the developed countries |
| Direct Tax Code | The earlier proposal to replace the income tax law; now the Income Tax Act, 2025 |
Important Questions Explained
Question 1: When was GST launched in India?
Answer: On 1 July 2017.
Question 2: Which Constitutional Amendment introduced the GST?
Answer: The 101st Amendment (2016).
Question 3: Which Article provides for the GST Council?
Answer: Article 279A.
Question 4: Who chairs the GST Council?
Answer: The Union Finance Minister.
Question 5: Which tax is collected on an inter-state supply?
Answer: IGST (Integrated GST).
Question 6: Name the two boards that collect the direct and the indirect taxes.
Answer: CBDT (direct taxes) and CBIC (indirect taxes).
Question 7: Which Act replaces the Income-tax Act of 1961?
Answer: The Income Tax Act, 2025 (from 1 April 2026).
Quick Tips to Remember
- Remember the numbers: GST on 1 July 2017, 101st Amendment, Article 279A, 246A and 269A.
- Remember the examples for the direct taxes (income tax, corporate tax) and for the indirect taxes (GST, customs).
- Remember that the GST Council needs three-fourths of the weighted votes.
- Remember that the petroleum products and alcohol are outside the GST.
- Learn the example of CGST + SGST = 18 percent to solve the numerical questions.
- Check the latest GST rates and the Budget announcements before the exam.
Common Mistakes to Avoid
- Writing the GST as a direct tax.
- Writing the 100th Amendment for the GST (it is the 101st).
- Mixing CGST (Centre) and SGST (state).
- Writing that the petrol and the diesel are under the GST.
- Writing the date of the GST as 1 April 2017.
Quick Revision Points
- GST: 1 July 2017; 101st Amendment; Articles 246A, 269A, 279A.
- GST Council: chaired by the Union Finance Minister; decisions by three-fourths of the weighted votes.
- CGST + SGST for the intra-state supply; IGST for the inter-state supply.
- Direct: income tax, corporate tax (CBDT). Indirect: GST, customs (CBIC).
- From 22 September 2025: main rates 5 percent and 18 percent and a 40 percent special rate.
- Income Tax Act 2025 from 1 April 2026.
Practice Questions With Answers
- What is GST?
Answer: A single indirect tax on the supply of goods and services (One Nation, One Tax). - When was GST implemented?
Answer: 1 July 2017 (Midnight launch). - Which Amendment introduced GST?
Answer: 101st Amendment (2016). - Which Article created the GST Council?
Answer: Article 279A (Constitutional body). - Who is the Chairperson of the GST Council?
Answer: The Union Finance Minister (Council has state ministers). - What is the share of votes of the Centre in the GST Council?
Answer: One-third (States have two-thirds). - What does IGST stand for?
Answer: Integrated GST (Inter-state supply). - Which tax is levied on the intra-state supply by the Centre?
Answer: CGST (Central GST). - Which is an example of a direct tax?
Answer: Income tax (Also corporate tax). - Which is an example of an indirect tax?
Answer: GST (Also customs duty). - Which board collects the direct taxes?
Answer: CBDT (Income tax). - Which board collects the indirect taxes?
Answer: CBIC (GST and customs). - Which items are outside the GST?
Answer: Petrol, diesel and alcohol for human consumption (Also crude oil and natural gas). - What is the registration limit of GST for the goods?
Answer: Rs 40 lakh (Rs 20 lakh for services). - What is the name of the IT system of GST?
Answer: GSTN (GST Network). - What was the GST Day date?
Answer: 1 July (Every year). - What is the date of the Income Tax Day?
Answer: 24 July (Every year). - Which Act replaces the Income-tax Act 1961?
Answer: The Income Tax Act, 2025 (From 1 April 2026). - What is the tax on the profit of selling an asset called?
Answer: Capital gains tax (Direct tax). - What does TDS stand for?
Answer: Tax Deducted at Source (Direct tax collection).
How to Practise This Topic
- Make a table of the direct and the indirect taxes with examples.
- Learn the GST facts in one list: the date, the Amendment, the Articles and the Council.
- Practise the numerical examples of CGST, SGST and IGST.
- Attempt the practice questions without looking at the answers.
- Read the latest GST news and solve the SSC practice papers and the previous year papers.
Related Notes and Practice
- Fiscal Policy, Budget and Deficits Notes
- Union Budget 2026-27 Highlights Notes
- Inflation and its Types Notes
- Important Government Schemes Notes
- Indian Economy Notes
- SSC practice papers
Frequently Asked Questions
What is GST?
GST (Goods and Services Tax) is a single indirect tax on the supply of goods and services in India. It replaced many central and state taxes from 1 July 2017.
Which Amendment brought the GST in India?
The 101st Constitutional Amendment Act, 2016 brought the GST.
What is the GST Council?
The GST Council is a constitutional body under Article 279A that recommends the GST rates and the rules. The Union Finance Minister is its chairperson.
What are CGST, SGST and IGST?
CGST is the central GST and SGST is the state GST on the intra-state supply, while IGST is the integrated GST on the inter-state supply and the imports.
What is the difference between direct and indirect tax?
A direct tax is paid directly by the person on whom it is imposed (income tax), while an indirect tax is paid by the consumer through the price (GST).
What are the present GST slabs?
From 22 September 2025, the main GST rates are 5 percent and 18 percent, with a special rate of 40 percent for a few luxury and sin goods. Check the latest notification before the exam.
Which items are outside the GST?
Alcohol for human consumption and the petroleum products such as petrol, diesel, crude oil and natural gas are outside the GST.
What is input tax credit?
Input tax credit allows a business to reduce the tax that it has paid on the purchases from the tax that it has to pay on the sales.
What is the registration limit of GST?
The limit is Rs 40 lakh for the goods and Rs 20 lakh for the services, and it is lower for the special category states.
Which Act replaces the Income-tax Act, 1961?
The Income Tax Act, 2025 replaces the Income-tax Act, 1961 from 1 April 2026.
How many questions come from taxation and GST in SSC exams?
Usually 1 or 2 questions come from taxes and the GST in each SSC exam.
How can I prepare GST for SSC?
Learn the date, the Amendment, the Articles, the types of GST and the latest rates, and solve the MCQs.
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Rahul Kumar
SSC Exam Expert & Content Editor
Rahul is a senior SSC exam strategist with 8+ years of experience helping aspirants crack CGL, CHSL and MTS exams. He writes in-depth notification breakdowns, exam pattern guides and preparation strategies.