What is GST?
Goods and services tax, usually known as GST, is an indirect tax. It is a tax on goods and services sold domestically for consumption. The tax is included in the final price and paid by consumers at the point of sale and passed to the government by the seller.
Types of GST
There are three major types of GST they are,
1. CGST (Central Goods and Services Tax)
2. SGST (State goods and services tax)
3. IGST (Integrated goods and services tax)
1. IGST
The Integrated Goods and Service Tax is a tax under the GST regime that is applied on the interstate (between 2 states) supply of goods and services as well as on imports and exports. The IGST is governed by IGST Act. Under IGST, the body responsible for collecting the taxes is the Central Government. After the collection of taxes, it is further divided among the respective states by the Central Government. For instance, If a trader from West Bengal has sold goods to a customer in Karnataka worth Rs. 5,000, then IGST will be applicable as the transaction is an interstate transaction. If the rate of GST charged on the goods is 18% the trader will charge Rs. 5,900 for the goods. Rs. 900 is collected as IGST which will go to the Central Government.
2. SGST
The State Goods and Service Tax is a tax under the GST regime that is applicable on intrastate (within the same state) transactions. In the case of an intrastate supply of goods and services, both State GST and Central GST are levied. However, the State GST or SGST is levied by the state on the goods and services that are purchased or sold within the state. It is governed by the SGST Act. The revenue earned through SGST is solely claimed by the respective state government. For instance, if a trader from West Bengal has sold goods to a customer in West Bengal worth Rs.5,000, then the GST applicable on the transaction will be partly CGST and partly SGST. If the rate of GST charged is 18%, it will be divided equally in the form of 9% SGST. The total amount to be charged by the trader, in this case, will be Rs.5,900. Out of the revenue earned from GST under the head of SGST, i.e, Rs.450, will go to the West Bengal state government in the form of SGST.
3. CGST
Just like state GST, the Central Goods and Services Tax of CGST is a tax under the GST regime that is applicable on intrastate(within the same state) transactions. The CGST is governed by the CGST Act. The revenue earned from CGST is collected by the Central Government. As mentioned in the above instance, If a trader from West Bengal has sold goods to a customer in Werst Bengal worth Rs.5,000, then the GST applicable on the transaction will be partly CGST and partly SGST. If the rate of GST charged is 18%, it will be divided equally in the form of 9% CGSTand 9%SGST. The total amount to be charged by the trader, in the case, will be Rs.5900. Out of the revenue earned from GST under the head of CGST, i.e, Rs.450, will go to the Central Government in the form of CGST.
Impact of GST in India
As GST replaced all taxes and is the major and compulsory tax now thus, With GST taxes of our state and central government have been merged. This has removed the cascading efforts of GST, reducing the burden on the buyers and sellers, so even if it may look like one big chunk of tax to be paid. You pay lesser hidden taxes.
What is the importance of GST?
1. As GST aims to reduce corruption, black money, and sales without receipt
2. GST removes the needs of small companies to comply with excise.
3. GST brings accountability and regulations to unorganized sectors such as the textile industry.
Benefits of GST
1. Reducing black money.
2. Reducing corruption.
3. Creation of a unified common market.
4. Increase in the manufacturing process.
5. Enhancement of exports and investment.
6. The poor will receive their due.
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