After much deliberation, GST was implemented in India in 2017. It was in 2000 that the Late Prime Minister Shri. Atal Bihari Vajpayee formed a committee to draft the GST bill. The UPA government then introduced the bill in the Lok Sabha in 2011. In 2014, the NDA government introduced the bill again with several changes after which it was finally passed by both the houses of the parliament in 2017.

If you are new to GST, here is a list of 4 important features of GST that you should know about-

1. Single Indirect Tax

GST has been introduced as a single, unified tax reform. It has eliminated many existing indirect centre and state taxes like Central Value Added Tax, Special Additional Duty of Customs, Service Tax, and VAT and converted them into a single tax. The elimination of these indirect taxes has not only made tax compliance easier for businesses but has also helped in making many of the goods and services more affordable for the consumers.

2. Input Tax Credit System

One of the most prominent GST features in India is the input tax credit. If a manufacturer or service provider has already paid input tax on a purchase, the same can be deducted from their total output tax liability. The input and output invoices need to match to take advantage of the tax credit. This helps in removing the cascading tax effect or the traditional ‘tax-on-tax’ regime. Moreover, it also helps in reducing tax evasion.

3. GST Composition Scheme

SMEs with an annual turnover of up to Rs. 1 crore or Rs. 75 lakhs in specified states can also voluntarily opt for the composition scheme. With this scheme, the businesses can pay a fixed GST rate of 1% on their turnover. However, such businesses can then not use the input tax credit benefit. A business needs to select between whether they want to use the composition scheme or the input tax credit feature.

4. Four-Tier Tax Structure

GST has a 4-tier tax structure of 5%, 12%, 18%, and 28%. All the goods and services can only be taxed as per this tax structure. Many of the essential commodities such as food items do not have any GST. Improved transparency and cheaper goods and services are two of the biggest advantages of this 4-tier structure.

There are several GST features, and they are already working as a game-changer for the Indian economy. While it still has a long way to go, industries, consumers, and the government has already started experiencing the benefits which are expected to extend further in the future.

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DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



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