Characteristics of Goods And Services Tax (GST)

GST is a comprehensive Indirect tax:

GST is a comprehensive indirect tax which

replaced all indirect taxes that were earlier

levied except custom duty, taxes on alcohol

for human consumption, taxes on petroleum

and taxes levied by Local Bodies.


GST is a value added tax:

GST is Value Added Tax because GST Paid (termed as Input GST) is set off against GST collected (termed as output GST). As a results, GST is levied on the incremental value of goods and/or services supplied (sold). For example, goods purchased for Rs10,000 paying IGST @ 18%,i.e., Rs1800 are sold for Rs 15,000 charging IGST @ 18%, i.e., Rs 2,700. Rs 1,800 paid at the time of purchase is set off against Rs 2,700 charged at time of sale and balance Rs 900 is payable in the Government Account. In effect, GST is levied on differential amount of sale and purchase, i.e. 5,000.

GST Paid is not Cost:

GST paid (Input GST) on purchases of goods and/or service is not a cost for the purchaser but is an asset since it can be set off against GST collected on sale of goods and/or services. Similarly, GST collected (Output GST) on sale of goods and/or services is not an income of the seller but is a liability and is payable in the government account after adjusting Input GST in the prescribed order.


Uniform GST Rate on goods and services across all states:

Every state and union territories have their own Goods and Services Tax Acts. However, GST is levied on goods and/or Services supplied (sold) under each classification at the same rate.

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