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GST Overview

What is GST ?

The GST regime was implemented in India on 1 July 2017. This indirect tax replaced several taxes that were levied by the State and Central Government. In short GST (Goods and Services Tax) is a single tax that has subsumed several indirect taxes that were previously levied on the sale of goods and services. It is applicable to the manufacture, sale, and consumption of all goods and services in India.

Why do we need GST?

The previous tax system involved multiple taxes, complex compliance procedures, and intervention by several State and Central tax divisions. This made it highly difficult to set up and run a business in India.

Under the GST regime, instead of applying taxes on the total value of the product at each stage, the GST only imposes tax on value addition. Since it provides credit for the input tax paid at each previous stage of a supply chain, this method considerably reduces the overall cost of manufacturing and selling goods

What are the different types of GST? 

The Goods and Services Tax or GST can be divided into 4 broad categories based on the tax collecting authority and the status of its geographical application. They can be listed as follows:

  1. CGST:The CGST or Central Goods and Services Tax is applicable in terms of intra-state sales, i.e. sales taking place within the geographical boundaries of a state. This is collected by the Central Government.
  2. SGST:The SGST or State Goods and Services Tax is applicable in terms of intra-state sales, i.e. sales taking place within the geographical boundaries of a state. This is collected by the respective State Governments.
  3. IGST:The IGST or Integrated Goods and Services Tax is applicable in terms of inter-state sales, i.e. sales taking place within the geographical boundaries of different states. This is collected by the Central Governments.
  4. UTGST or UGST:The UTGST or UGST stands for Union Territory Goods and Services Tax. It is applicable for transactions taking place in a Union Territory (UT). It is collected by the respective Union Territory Governments.

Benefits of GST

The Goods and Services Tax (GST) has been introduced with the sole intention of eradicating the cascading effect of tax on the transactions related to goods and services. The main idea is to cut down the charging of tax on tax which will help reduce the final price of the goods and services. The advantages of the newly reformed indirect tax system can be summed up as follows:

  • Removal of the cascading effect of tax on the sale of goods and services.
  • Regulation of the unorganized sectors of business.
  • Lower burden of compliances.
  • Wider threshold for registration.
  • Proper and defined treatment for e-commerce.
  • Fully digital procedure for registration, filing returns, and applying for refunds under the same online portal.
  • Composition Scheme for small businesses

 

GST Tax Rates on some common items

Tax Rates Products
5% Household necessities such as edible oil, sugar, spices, tea, and coffee (except instant) are included. Coal , Mishti/Mithai (Indian Sweets) and Life-saving drugs are also covered under this GST slab
12% This includes computers and processed food
18% Hair oil, toothpaste and soaps, capital goods and industrial
intermediaries are covered in this slab
28% Luxury items such as small cars , consumer durables like AC and Refrigerators, premium cars, cigarettes and aerated drinks , High-end motorcycles  are included here.

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