The GST or the Goods and Services Tax is an indirect tax imposed on products & services supply. The legislature approved the Goods and Service Tax Act on the 29th of March in 2017 and it came into force on 1st July 2017. GST provides tax consistency and has substituted many of India’s indirect taxes. Goods and Service Tax is a complex, purpose-based tax with a multi-stage levy on any value-added product or service.
GST India is enforced on wholesalers, retailers, and end-users at each and every point of the supply chain, from the procurement of raw materials to the production.
Each monetary value applied to a service or product is taxed through GST at each point before the final sale to the customer is complete.
The GST tax is imposed at the point of sale regardless of the location of manufacturing, output, or distribution of the product concerned.
Types Of GST
With the implementation of GST throughout the nation, it absorbed many Indirect taxes that were levied on citizens before, and there 4 kinds of GST in India, such as:
CGST Act or Central Goods and Services Tax is the central government imposed indirect tax. It is enforced on the exchange of products and services performed, i.e. intrastate, inside the State. The tax received under the “CGST” heading is paid to the treasury of the Central Government. The CGST is paid with, and at the same levels, SGST or UTGST. This is achieved according to the Dual GST model adopted in India, where there are separate taxation assemblies of both state and central governments.
SGST or State Goods and Services Tax reflects the tax that the State Government imposes. SGST is imposed on intrastate transactions of products and services, i.e. sales inside a state. SGST is charged on a product or service, together with and at the same rates as CGST. This tax is levied by all of India’s states but was also introduced by two union territories Puducherry and Delhi, the reason being as these two union territories have their own legislative council.
IGST full form is Integrated Goods And Services Tax which is imposed by the Government on all interstate supplies of products and services. Unlike UTGST, CGST, and SGST, which is imposed on the supply inside a state on products or services. IGST has established tax standardization for the distribution of products and services manufactured outside of the state. It refers to both an off-state supply and those manufactured outside the nation.
UTGST or Union Territory Goods and Services Tax is almost the same as SGST. The only distinction is that, for the corresponding government of the union territory where the products and/or services were ultimately consumed, the tax revenue ends up going to the treasury. There is a major disparity between the territories of the union and the States. The territory of the Union is completely under the jurisdiction of the central govt and does not have an elected legislature, as in the scenario of states. But in each situation only one tax shall be imposed between SGST or UTGST at a time along with CGST.
Reasons Why GST Was Implemented
GST (Goods & Service Tax) has been introduced to boost taxation at any nodal point and align the nation by a unified GST tax rate. The Indian economy will also obtain a major boost by eliminating the long list of indirect taxes imposed separately by the center and the states.
After the government passed the following four bills namely the Integrated GST Bill, Union Territory GST Bill, Goods and Services Tax Bill, and Compensation GST Bill.
Goods and Service Tax (GST) has been implemented to restructure the whole tax structure that was implemented in India. The goal of the GST bill is to give taxpayers, both suppliers and customers alike, a streamlined program. The simpler approach would also hopefully maintain inflation under control, as per India’s minister of finance, Mr. Arun Jaitley. In addition, GST tackles the lack of consistency in multiple product and service taxes levied in various states. GST has made taxation more effective and straightforward by setting the GST rates of products and services depending on the category belong to.
GST implements a 4-tier tax structure as the government considers it unwarranted to levy standardized tax rates on essentials as well as luxury items. The GST tax slabs for products and services in India, therefore, are 5%, 12%, 18%, and 28%. The daily mass-consumption goods such as agricultural commodities, poultry, jaggery, pepper, wheat, etc. will not incur taxation. Many widely used goods such as shampoos, tea, sugar, herbs, and toothbrush face taxes of 12% -18%, which is lesser than the previous rate of over 20%.