Meaning of GST :

 Goods and service tax (GST) is a comprehensive indirect tax levied at the prescribed rate on every supply, i.e., sale of goods and/or service except on petroleum and alcohol for human consumption. Supply of goods means sale of goods whereas supply of services means rendering of services.

Characteristics of Goods And Services Tax (GST)

1. 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.

2. 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.

3. 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.

4. 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. 

Objective Of Goods And Services Tax (GST):-

1.       Developing Common national Market: GST is levied at same rate on similar Goods and Services in all the states and union territories. For example, Computers sold across India are levied GST (Say) @ 18%. It sets a ground for developing common national market.

2.       Ease of Doing Business: In the pre-GST period, there were many indirect taxes administered by different authorities. As a result, a business had to register itself separately under each such Act and also had to comply with each such indirect tax. For example, Excise Duty, sales Tax and Service Tax etc. were separately administered. The introduction of GST has eased the going of business as it will be registered and administered only under one indirect tax, i.e., GST. Hence, ease of doing business.

3.       No cascading Effect of GST: GST paid (Input GST) on purchases of goods and/or services is set off against GST collected on sale of goods and/or services. As a result, GST is levied on the difference between sale value and purchase value. In effect, GST does not have cascading effect.

4.       To Simplify Indirect Tax Regime by having one Tax and Fewer rate of taxes: GST has replaced many indirect taxes (Excise duty, Sale Tax, Service etc.).The earlier indirect tax regime had been complex both for the Government and business. Since, GST has replaced almost all indirect taxes, it simplifies the application and administration of indirect taxes.

5.       Better Tax Management: GST, being administered through computer system beside it being a single indirect tax, has resulted in better tax management as tax evasion is controlled besides timely collection of tax. For example, credit for input GST is granted if the tax payer collecting GST has paid the tax in government account.

6.       Goods becoming cheaper: Since GST paid (Input GST) is set off against GST collected (Output GST), GST does not have cascading effect as against earlier years when there was no set off of indirect taxes. (e.g. Excise Duty) paid against indirect taxes collected. As a result, goods and services have become cheaper.

7.       Attracting Foreign Investors: Investments from outside India were not high because of multiple indirect taxes. Introduction of GST and removal of multiple indirect taxes shall increase Foreign direct Investment (FDI) in India.

8.       Uplifting GDP: The structure of GST is such that is levied at every stage of sale of goods and/or services. It means businesses will be largely through recorded transactions resulting in tax collection by the government due to recorded sales resulting in uplifting GDP.

Classification OF  GST :-  GST in levied under following three categories:

1.       Central GST (CGST):- CGST is levied on intra-state supply (supply within the state) of goods or services or both along with SGST. In case of intra-state supply/sale both CGST and SGST is levied at half of the prescribed rate of tax. For ex., if rate of GST is 18%, 9% will be levied as CGST and 9% as SGST (or UTGST).

2.       State GST (SGST) or union Territory GST (UTGST):- SGST (or UTGST) is also levied on intra-state supply (i.e., supply within the state) of goods and/or services or both along with CGST. In case of intra-state supply(sale) both  SGST (or UTGST) and CGST is levied at half of the prescribed rate of tax. For example, if rate of GST is 18%, 9% will be levied as CGST and 9% as SGST

Note: For the discussion, SGST and UTGST are referred as SGST.

3.       Integrated GST (IGST):- IGST is levied on inter-state supply (i.e., supply outside the state) of goods and/or services, import of goods and/or services into India and export of goods and/or services from India.

Reverse charge:- Reverse charge means that GST is not charged by the person selling the goods and/or services or both but is paid by the person purchasing the goods and/or services or both.

Certain purchases of goods and services are placed under Reverse charge. Thus, the seller of goods and/or services placed under reverse charge will not charge GST but instead the purchaser of goods and/or services will deposit GST in the Government account and claim it as Input GST. Goods and/or services falling under reverse charge Mechanism are: payment of fee to lawyer; payment for use of copyright; purchase of Goods and/or Services by registered person from unregistered person; transports of goods; Insurance commission; and sponsorship

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