Question

What do you understand by G.S.T? How good is the system of G.S.T as compared to the old tax system? State its categories.

Answer 1

“Goods and services tax means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption.”. It is an indirect tax which has integrated various taxes like Sales tax, excise tax, VAT, etc., into one single tax for the entire nation. By replacing the various archaic tax structures, GST is levied at every stage of the supply chain of the goods or services from production to the last retail level.

The system of G.S.T is good as compared to the old tax system in the following ways:

1. Abolition of different tax structures- Service Tax, Union Excise Duty, Central Sales Tax (collected by states), Customs Duty etc. being imposed by central government and Value Added Tax, Entry Tax, Octroi, Luxury Tax etc. being imposed by state governments have been abolished with the introduction of GST. Levy of cess, resale tax, additional tax, turnover tax etc. have also been nullified.

2. Widening of tax bases- GST has increased the tax bases for the governments. This has reduced the administrative cost of governments.

3. The benefit of Input tax credit-Levy of GST is applicable at every stage whether it is manufacturer, intermediary or the end user. Side by side the assessee is given the advantage of input tax credit which means he needs to pay a difference of Output tax and Input tax only. So, following the lines of VAT; GST has removed the cascading effect of the tax.

5. Neutralization to process, business models, structure and location-GST is supposed to boost the economic growth, efficiency and sustainability because of its neutral feature of the tax regime.

6. GST may lead to the enhancement of the export because of the reduced effect of duties on many items which will provide an edge to the exporters over the competition being faced by them in the international market.

7. Increased demand and production of goods and services-GST due to reduced cost of production would lead to an expansion of manufacturing units and an increase in demand for goods and services.

GST is categorized in three ways i.e. Central GST, State GST and Integrated GST.

Central GST- CGST is levied on intra-state supply of goods and services by the central government. It is collected by the central government which is 50% of the applicable tax rate. CGST is further classified into:
1. Output CGST
2. Input CGST

State GST- SGST is levied on intra-state supplies of goods and services by the state governments. It is collected by state governments being 50% of the applicable tax rate. SGST is further classified into:

1. Output SGST

2. Input SGST

Integrated GST- IGST is levied on interstate supplies of goods and services by the central government. It is collected by the central government only. IGST is further classified into:

1. Output IGST

2. Input IGST