Guide to Goods and Services Tax (GST)

Guide to Goods and Services Tax (GST) 

 Goods and Services Tax (GST) is a reform in India's indirect tax system. Introduced in 2017, it replaced a complex web of taxes like VAT, excise duty, and service tax with a single, unified tax system. The system aims to:

•      Eliminate multiple taxes
•      Increase tax compliance
•      Reduce overall tax burden
•      Boost economic efficiency

How Does GST Work?

GST is a value-added tax (VAT) levied at each stage of the supply chain. The final consumer pays the GST included in goods and services. Businesses then collect and forward this tax to the government.

Types of GST Transactions

There are two main types of GST transactions:

•       Intra-State Transactions: These occur within a single state. The tax collected is divided between the central government (CGST) and the state government (SGST).
•        Inter-State Transactions: These occur between two different states. A single Integrated Goods and Services Tax (IGST) is levied in such cases.

Understanding the Different GST Components:

•        SGST (State Goods and Services Tax): This is Levied by the state government on intra-state supplies.
•        CGST (Central Goods and Services Tax): Which is levied by the central government on intra-state supplies.
•        UTGST (Union Territory Goods and Services Tax): Which applies to Union Territories (UTs) instead of SGST.
•        IGST (Integrated Goods and Services Tax): This is Levied on inter-state transactions and imports/exports.

Who Pays GST?

•         Businesses registered under GST for taxable supplies.
•         Individuals under the reverse charge mechanism (RCM).
•         Businesses are required to deduct tax at source (TDS).
•         E-commerce operators collecting tax at source (TCS).
•         Agents supplying goods or services on for a supplier/manufacturer.

GST Rates

Goods and services are categorized under different GST slabs with varying tax rates. These rates are periodically reviewed and revised by the GST Council.

Benefits of GST

•        Simplified Tax System: Eliminates the need to comply with multiple taxes.
•        Transparency: Increased transparency in tax collection and administration.
•        Reduced Compliance Burden: Streamlined procedures for businesses.
•        Boost to Exports: Makes Indian exports more competitive globally.
•        Increased Revenue: Expected to increase overall tax revenue for the government.

GST Exemptions

Some goods and services are exempt from GST:

•        Food items like fruits, vegetables, cereals, etc.
•        Raw materials like cotton, wool, raw jute fibre, etc.
•        Essential tools like agricultural implements and tools for the disabled.