GST
What is GST?
GST (Goods & Services Tax) Law in India is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition. In simple words, GST is an indirect tax levied on the supply of goods and services. GST Law has replaced many indirect tax laws that previously existed in India.
Under the GST regime, the tax will be levied at every point of sale.
Now let us try to understand “GST is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition.”
Multi-stage
There are multiple change-of-hands an item goes through along its supply chain: from manufacture to final sale to a consumer.
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 GST
Removing the cascading tax effect.
Higher threshold for registration.
Composition scheme for small business.
The online simpler procedure under GST.
Lesser compliances.
Defined treatment for e-commerce.
Increased efficiency in logistics.
Regulation in the unorganized sector.
What are CGST, SGST and IGST?
India is a federal democracy that is one which has clear demarcation of powers, responsibility and revenue collection between the states and the centre in its constitution. For example, law and order fall under the state jurisdiction while the national defence is the centre responsibility. The GST too needs to have clear provisions on what areas the centre and the state are allowed to collect revenue from taxation to prevent overlapping.
The Central GST or CGST is the areas where the centre has the powers and State GST 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.