Goods and Service Tax (GST)
The Goods and Service Tax (GST) is a tax levy on the consumption, manufacture or sale of goods and services in India. It is a system of indirect taxation that has replaced most other indirect taxes in the country. The Indian Government had introduced this tax on 1st July 2017. GST is levied every time there is a value addition that is made to a product or service. The taxation also takes place at every point of sale.
Types of GST
There are four different types of GST levied on the goods and services in India that are as follows:
- Central Goods and Services Tax (CGST) – The Central Government of India charges the CGST on transactions related to goods and services within a state.
- State Goods and Service Tax (SGST) – The State Governments in India charge the SGST on transactions related to goods and services within a state. It gets charged along with the CGST.
- Union Territory Goods and Service Tax (UGST) – The Union Territories in India charge the UGST on transactions related to goods and services within their boundaries. It gets charged along with the CGST.
- Integrated Goods and Service Tax (IGST) – If the transaction related to goods and services is between two states, the government will impose the Integrated GST. It is also applicable to imports and exports. The Taxes charged under IGST are shared both by the centre and state.
Objectives of GST
The main objectives of GST are as follows:
- It helps create a common market in India with a uniform taxation system and curb tax evasion in the country. The laws for GST are far more stringent compared to the erstwhile indirect tax laws. The aim is to have a nationwide surveillance system under GST, making it easier to catch defaulters and tax evaders.
- It removes the cascading effect of the indirect taxes on a single transaction. It also allows the setting off for prior taxes that are related to the same transactions in the form of the input tax credit. Under GST, the tax is applicable only on the net value added during each stage of the supply chain.
- The government aims to reduce the need for multiple documentation under the previous taxation system by introducing a consolidated tax like GST. The idea is to help companies with an uncomplicated tax filing procedure that will improve their efficiency and cut down the overall costs associated with business processes.
- It helps to subsume most indirect taxes into a single taxation system that reduces the burden of compliance for taxpayers and eases the government’s tax administration process. The main aim of this taxation system is to simplify the entire process of paying taxes and simplify compliance. Compared to the erstwhile indirect taxes, almost the whole GST process, including registration, returns filing, refunds and e-way bill generation, has shifted to the online mode.
- One of the primary objectives of GST is to widen the tax base in India. Most of the erstwhile indirect taxes had their threshold limits for registration based on the turnover of a business. Under GST, there is greater scope for an increase in the number of firms coming under the tax registration net because it includes all transactions related to goods and services in the country.
GST is vital for the functioning of the Indian economy. The government aims to simplify the entire taxation procedure and bring more businesses under the taxation system. It will help them generate significant revenue from these taxes, which they can use for the developmental activities within the country.