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The Goods and Services Tax, better known by its acronym GST is an indirect tax , which was passed in the parliament in March 20107 and came into effect in July 2017. The government of India introduced the GST mainly to replace the multiple taxes and have a single tax system.The GST, which replaced several indirect taxes, is a comprehensive, destination-based and multi-stage tax that is levied on every value addition.In simple terms, the GST is an indirect tax that is levied on the supply of all goods and services. It is ONE tax that is applicable all over India.
What are the different components of GST?
The GST has three critical components – CGST, SGST, and IGST
- CGST – The Central Government of India collects it on the intra-state sales of goods.
- SGST – The State Government collects it on the intra-state sale.
- IGST – The Central Government of India collects it on the interstate transactions.
The Central Taxes Replaced by GST
The introduction of the GST has replaced the following taxes, which was levied earlier.
- Central excise duty
- Central sales tax
- Service tax
- Additional duties of customs
- Additional duties of excise
- Excise duty levied under the textiles and textile products
The State-level Taxes Replaced by GST
Benefits of GST
- Several experts have corroborated that the implementation of GST has had a significant impact on the economy, and it will help increase the GDP in the long run. In the short-run, the GST has succeeded in broadening the taxpayer base and made tax compliance easy for all. Additionally, the introduction of an all-online portal has made filing GST returns easy, and it has helped reduce the chances of tax fraud.
- Since the introduction of the GST has abolished the cascading effect of taxes, experts believe the new tax system will play a key role in reducing the prices of goods and services in the long run.
- Small companies that are registered under the GST and have a turnover up to Rs. 75 lakhs can benefit from the composition schemes and pay only 1% tax on their annual turnover.
- GST is aimed at reducing the corruption relating to sales without receipts.
- The introduction of GS has reduced the taxes on specific goods like cars, smartphones, etc.
Thus, the introduction of GST has benefitted both the business owners and the public.
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.
