GST which is the abbreviation for Goods & Service Tax is a single unified tax system introduced by the Government of India. The purpose of this tax system is to unite India’s complex taxation structure to a ‘One Nation-One Tax’ regime. It’s termed to be the biggest tax reform since India got its independence. Many people are not aware about exactly what GST is and how it differs from the current tax structure. Those who are aware about it feel that the introduction of GST is a turning point in the current tax regime of the country and will benefit everyone. So, let’s know about this newly introduced tax structure and its impact on the economy.
Introduction of GST and its Impact
The main purpose behind introducing GST was to eliminate the geographical barriers for trading, and transform the entire nation to ‘One Common Market Place’. Now, let’s know what GST really means. It’s primarily a dual concept tax system under which the tax is administered, collected, and shared by both the Centre and the State governments based on the nature of transaction (within the state or interstate).
Tax Components of GST
There are three tax components of GST, they are:
- CGST: CGST stands for Central GST which is applicable on supplies within the State. The tax collected out of this will be shared with Centre.
- SGST: SGST stands for State GST which is applicable on supplies within the State and the tax collected out of this will be shared with the State.
- IGST: IGST stands for integrated GST which is applicable on interstate and import transactions and the tax collected are shared between the Centre and State.
Subsuming of Taxes in GST
The basic principal for subsuming of taxes in GST is provided as follows:
- Those taxes which begin with import/manufacture/production of goods or provision of services at one end and the consumption of goods and services at other end
- The taxes, fees and levies which are not associated with the supply of goods and services need not be subsumed under GST
- Taxes on items such as the petroleum products and alcohol are kept out of GST. These products will be continued to be taxed under current tax structure
- Tobacco products do come under GST and the tax on these products will be subject to GST. However, the government has the option to levy the additional excise duty over and above GST
- The taxpayers having a gross annual turnover less than 1.5 crore are exempted from CGST and SGST
- PAN based identification number will be allowed to each taxpayer to have integration of GST with direct tax
The above write up illustrates that GST is quite different than the current tax structure and will be useful to both State and Central Government in simplifying the tax structure once implemented.
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