ONE NATION , ONE TAX : The reform , as proclaimed by the Finance Minister , has been 16 years in the making, since it was initially proposed by the Prime Minister Atal Bihari Vajpayee , back in 2000.Our respected Prime Minister Shri. Narendra Modi launched GST (Goods and Service Tax) into operation on the midnight on 1st July,2017.
So, let’s first understand what GST is. So, basically Goods and Service Tax is an indirect tax used in India on the supply of goods and services. It is a multi-stage tax as it is imposed on every step in the production process, but is refunded to all the parties involved in it and hence, paid by the final consumer of the product. So, the final consumer is the one who bears the amount of GST charged on the product. Thus, it is also called the “destination-based tax”. And as a destination-based tax, it is collected from the point of consumption and not from the point of origin like the previous taxes.
The main idea of GST being introduced in India was the tax burden that falls both on companies and consumers. With the previous tax system, there were multiple taxes added at each stage of the supply chain, without taking credit for taxes paid at previous stages. As a result, the end cost of the product does not clearly show the actual cost of the product and how much tax was applied. This cascading structure was too complex and inefficient.
GST helped to integrate most taxes into a single one, that is applied to the sale and purchase of goods and services, with deductions for taxes paid at previous supply chain stages. Basically , GST is divided into 5 different tax slabs for the collection of tax – 0%, 5%, 12% , 18% , 28% , based on the classification of the products with the particular HSN (Harmonized System Nomenclature) code provided. However, there are some products like- petroleum, alcoholic drinks, electricity which are not taxed under the GST and are instead taxed separately by the individual state governments, as per the previous tax system. GST registration is mandatory for any business whose turnover in a financial year exceeds Rs.20 lakh and Rs 10 lakhs for North Eastern and hill states.
This structure is predicted to be easier to track both for the government and business owners. Based on the kind of transaction, there are four types of GST- Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), Integrated Goods and Services Tax (IGST), and Union Territory Goods and Services Tax (UTGST).
- Central Goods and Services Tax (CGST)
CGST is charged on the intra state supply of products and services. The Central Government levies CGST and it is governed by the Central Goods and Services Tax Act. CGST has effectively replaced all the previous Central taxes such as Central Excise Duty, Customs Duty, Service Tax, etc. It is charged to taxpayers along with SGST. The rate at which CGST is charged is usually the same as the SGST rate, and the revenue collected under CGST is remitted to the Central Government.
- State Goods and Services Tax (SGST)
SGST, like CGST, is charged on the sale of products or services within a state. The State Government is responsible for the levy of SGST. This tax replaces all the previous taxes such as Entry Tax, Value Added Tax, State Sales Tax, cesses, and surcharges. The revenue collected under SGST is remitted to the State Government.
- Integrated Goods and Services Tax (IGST)
IGST is charged on inter-state transactions of products and services. It is also levied on imports. The Central Government collects IGST and distributes it among states. IGST is levied when goods or services are transferred from one state to another. The tax was implemented so that states would only have to deal with the Union Government rather than dealing with each state.
- Union Territory Goods and Services Tax (UGST)
UTGST is levied on the supply of products and services in any of the Union Territories in the country, – Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli, Lakshadweep, and Chandigarh. UTGST is levied along with CGST.
Thus, this system of GST has helped integrating the country through a uniform tax rate and has also, improved the collection of taxes as well as the boost in the economic development , by being an humongous transformation in the technological field with the introduction of the e-way bills and invoices . However, there are some businesses which are worsely affected and burdened by the GST imposition like the textile industry and various small industries while few of them like cement, FMCG , Pharmaceuticals etc have a positive impact of the GST.
In conclusion, GST has been a revolutionary tax system for India. Most noteworthy, many experts hail it as one of the biggest tax reforms.
BBA- 5 MORNING B