What is GST? How does it work?

GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

Source: Government FAQ

Which taxes at the Centre and State level are being subsumed into GST? 

 At the Central level, the following taxes are being subsumed: 
a. Central Excise Duty
b. Additional Excise Duty
c. Service Tax
d. Additional Customs Duty commonly known as Countervailing Duty
e. Special Additional Duty of Customs

At the State level, the following taxes are being subsumed: 
a. Subsuming of State Value Added Tax/Sales Tax
b. Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States)
c. Octroi and Entry tax
d. Purchase Tax, 4 
e. Luxury tax
f. Taxes on lottery, betting and gambling

Source: Government FAQ

How would GST be administered in India? 

Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.

Source: Government FAQ