Goods and Service Tax
Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on the supply of goods and services.
It is a comprehensive, multistage, destination-based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes.
Multi-stage
Multi-staged as it is, the GST is imposed at every step in the production process but is meant to be refunded to all parties in the various stages of production other than the final consumer and as a destination-based tax, it is collected from point of consumption and not point of origin like previous taxes.
Let us consider the following case:
- Purchase of raw materials.
- Production or manufacture.
- Warehousing of finished goods.
- Sale of the product to the retailer.
- Sale to the end consumer.
Advantages Of Good & Service Tax
- Removing cascading tax effect.
- Higher threshold for registration.
- Composition scheme for small business.
- Online simpler procedure under GST.
- Lesser compliances.
- Defined treatment for e-commerce.
- Increased efficiency in logistics.
- Regulation the unorganized sector.
What are CGST, SGST and IGST?
India is a federal democracy that is one which has a clear demarcation of powers, responsibility, and revenue collection between the states and the center in its constitution.
For example, law and order fall under the state’s jurisdiction while the nation’s defense is the center’s responsibility. The GST too needs to have clear provisions on what areas the center and the state are allowed to collect revenue from taxation to prevent overlapping.
The Central GST or CGST is the area where the center has the powers and State GST is where the State has taxation capabilities. The IGST or Integrated GST is for the movement of goods within the states of the Indian union.
This will be collected by the union however will be transferred over to the states. Thus it is essential that if and when the GST comes out it is rolled over in the entire nation simultaneously.
Conclusion
In conclusion, After the coming of Goods & Service Tax in India, many direct taxes come under one roof. Which simplifies the tax process in India. Digitalization played an important role in paying taxes in India via the online Process. GST reduces the multiplicity of tax.
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