Goods & Service Tax (GST) of India

Introduction to GST (Goods and Services Tax)

What is Tax

Taxes can be defined as "an economic burden imposed on individuals or property owners to support the government. Payments are required by legislative authorities. Taxes are "not voluntary payments or gifts, but compulsory contributions imposed under legislative authority.

In simple words, taxes are money that citizens must pay to the government to provide public services.

Direct & Indirect Taxes

Direct Tax:

is not possible to transmit direct taxes to another person; they are levied directly against people or organizations. The taxpayer pays these taxes straight to the government.

Instances include income tax, corporation tax, wealth tax, capital gains tax, estate tax, and property tax.

Indirect Tax:

Indirect taxes are levied on products and services. Intermediaries, such as manufacturers and retailers, gather these taxes and then transfer them to the final customer.

Instances include sales tax, excise tax, customs duty, value-added tax (VAT), goods and services tax (GST), and so on.

What is GST

Goods and Services Tax is referred to as GST. It is an indirect tax that is levied on Indian suppliers of goods and services. Many other indirect taxes, including VAT, service tax, central excise duty, entry tax, and more, were superseded by the GST.

The following are the main features of GST:

Uniform Tax System: By combining different federal and state taxes, the GST sought to produce a single tax structure that would apply to the entirety of the nation.

Destination-based tax: The GST is a destination-based tax, in contrast to the prior origin-based tax system. In other words, the tax is imposed at the point of consumption as opposed to the place where the goods or services are produced. 

Dual Tax System: The Goods and Services Tax (GST) is split into two parts: the State Goods and Services Tax (SGST), which is imposed by the State Governments, and the Central Goods and Services Tax (CGST), which is imposed by the Central Government. Because of this dual structure, taxation is carried out by both branches of government.

Input Tax Credit (ITC): A fundamental aspect of Goods and Services Tax (GST) is the smooth transfer of input tax credits throughout the supply chain. Companies can lower their overall tax burden by claiming credit for the tax they have paid on their inputs.

Multiple Tax Slabs: Different tax rates apply to different goods and services under the Multiple Tax Slabs (GST) regime. The tax rates are divided into slabs, such as 0%, 5%, 12%, 18%, and 28%. Generally speaking, the rates for necessities are lower than those for luxury goods.

Basic Concept of GST

Value Added Tax: Value-added taxes, or GSTs, are assessed on supply, which includes the production, retail, and service industries.

Continuous Chain Of Tax Credits: GST taxes just the value added at each stage of the supply chain by providing a full and continuous chain of tax credits from the producer's point, or service provider's point, up to the retailer's level, or consumer's level.

Final Customer Burden Borne: At every stage, the supplier is allowed to claim a credit for the GST paid on the products and/or services purchased, which he can then deduct from the GST he would have to pay when supplying the goods and services. With set-off benefits at every level of the supply chain, the ultimate customer is the only one who pays the GST levied by the last provider.

Elimination Of The Cascading Tax Effect: There is no tax on tax or cascading of taxes under the GST system because only the value contributed at each stage is subject to taxation.

Type Of GST

The main type of GST in India:

CGST: The Central Government imposes a tax known as the Central Goods and Services Tax (CGST) on the intra-state supply of goods and services. The Central Government is the recipient of the CGST revenue.

SGST: The SGST is a tax that state governments impose on the intrastate exchange of goods and services. The relevant State Government, in which the supply of goods or services takes place, receives the SGST revenue.

IGST: When goods or services cross state borders, they are subject to the IGST. The Central Government imposes it, and the States split the proceeds with the Central Government. The IGST makes sure that taxes are paid to the destination state after being collected by the central government.
UTGST: Similar to SGST, UTGST is also applicable to India's Union Territories. UTGST is applied when products or services are provided inside a Union Territory; the money collected is used to fund the administration of that specific Union Territory.

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