GST is an Indirect Tax that has replaced many Indirect Taxes in India. The Goods and Services Tax Law was passed in Parliament on March 29, 2017. This Act came into effect on July 1, 2017; The Goods & Services Tax Law in India is a comprehensive, multi-stage tax based on the objectives imposed on each value addition.
What is GST?
“GST (Goods and Services Tax) is India’s largest indirect tax reform. GST is a single tax on the supply of goods and services. This is a destination-based tax. GST has included taxes such as Central Excise Law, Service Tax Law, VAT, Entry Tax, Octroi, etc. GST is one of the largest indirect tax reforms in the country. GST is expected to unite the country’s economy and increase the country’s economic growth as a whole.
GST is one of the indirect taxes for all countries.
So, before the Goods and Services Tax, the tax collection pattern is as follows:
There are several changes of goods that enter through its supply chain: from manufacturing to final sales to consumers.
Let’s consider the following case:
- Raw Material Purchases
- Production or Manufacture
- Warehousing of Finished Goods
- Sold to Wholesalers
- Product Sales to Retailers
- Sales to End Consumers
Goods and services tax will be charged at each stage which makes it a multi-stage tax.
Manufacturers that make biscuits buy flour, sugar and other ingredients. The input value increases when sugar and flour are mixed and baked into biscuits.
Advantages of GST
GST will primarily remove the cascading effect on the sale of goods and services. Removal of the cascading effect will have a direct impact on the cost of goods. Because taxes on taxes are removed in this regime, the cost of goods decreases.
What are the GST Components?
There are 3 taxes that apply under this system: CGST, SGST & IGST.
CGST: Collected by the Central Government for Intra-Country sales (For example: transactions occur in Maharashtra)
SGST: Collected by the State Government for Intra-Country sales (For example: transactions occur in Maharashtra)
IGST: Collected by the Central Government for sales between countries (For example: Maharashtra to Tamil Nadu)