Goods and Services Tax: Some Detailed Facts About GST

The Goods and Services Tax (GST) is one indirect tax for the entire nation, which will form India into one unified common market. GST is the sole tax on the supply of goods and services, right from the manufacturer to the purchaser. GST is paid by consumers but handed over to the government by the businesses selling the goods and services. The credit of input taxes paid in each phase will be accessible in the following stage of value addition.

That makes Goods and Services Tax necessarily a tax only on value addition at each phase. The final customer will thus carry only the GST levied by the last dealer in the supply chain, with setting forth benefits at all the earlier stages. GST is the common tax adopted by most countries globally. France was the first country to administer the GST in 1954. Since then approximately 140 countries have embraced this tax system in some form or another. Several countries with a GST include Vietnam, Singapore, the United Kingdom, Canada, Spain, Australia, Brazil, Nigeria, Italy, and India. 

What is Goods and Services Tax?

Goods and Services Tax is mentioned as GST. GST is a consumption tax that is multi-staged and comprehensive in nature. It is exercised on the supply of goods and services. The main goal of this taxation system is to check the streaming effect of other indirect taxes. It is administered throughout India. It is an Indirect Tax that applied to restore a variety of earlier indirect taxes including VAT (Value added tax), purchase tax, service tax, and others. Goods and Services Tax is such a tax that India enforces on the supply of particular goods and services. This is the sole tax executes in India.

When Does It Start in India?

The origin of the introduction of Goods and Services Tax in the country set down in the historic budget talk of February 28, 2006, wherein the then Finance Minister set down April 1st, 2010 as the date for the establishment of Goods and Services Tax in the country. In May 2015 the Constitution Amendment Bill passed by the Lok Sabha. The bill with specific amendments finally passed in the Rajya Sabha. After that, it passed in Lok Sabha in August 2016. Furthermore, the bill owns approved by an appropriate number of states and has since obtained the approval of the President on September 8, 2016. From then it has been enacted as the 101st Constitution Amendment Act, 2016. The Council of Goods and Services Tax has also been advised w.e.f September 12, 2016. The Council of GST is being counseled by the Secretariat. 

The scheme of GST was first proposed by the Atal Bihari Vajpayee government in 2000. The Finance Ministers of states created an Empowered Committee (EC) to build a layout for GST. Based upon their expertise in designing the state VAT. Members from the states and centers desired to inspect several aspects of the Goods and Services Tax proposal. And make reports on the points of taxation of services, taxation of inter-state supply, and exemption. The committee was led by Asim Das Gupta, West Bengal’s Finance Minister. He managed the Committee till 2011. 

From Where Indian Government Adopted this Feature?

Goods and Services Tax: The Indian GST model is rooted in the Canadian dual GST model. This dual GST model meant that the taxation is managed by both the union and state governments. The transactions made within a sole state are charged with central GST (CGST) by the central government and SGST is State GST by state governments. It is different from the sole national Goods and Services Tax model where the taxes are charged only by the center requiring sharing of such revenues with the states. It is approved in countries like Australia. The dual GST model is also different from the sole state GST model where states have full rights to charge and gather taxes like in the USA. 

Goods and Services Tax: Features of GST Model

• Goods and Services Tax has two elements that is one charged by the center which is known as central GST and the other levied by the states which is called State GST.
• The total gathered as the state GST and Central GST must be independently deposited to the state and center accounts.
• State GST and Central Goods and Services Tax will be enforced on all supplies of goods and services.
• The constitution does not allow cross utilization of input tax credit between the state GST and central GST excluding where inter-state supply prevails.
• State GST and central GST shall be served independently, signifying that the taxes paid against the CGST are permitted to be well considered as ITC.
• Credit accumulation rooted in the refund of GST is to be averted by both state and central governments excluding exports, purchase of capital goods, and input tax at a higher rate than output tax, among others.
• There is a consistent process for accumulating both SGST and CGST as authorized in their individual legislation. 
• Both floor tax and upper ceiling rates regarding the annual aggregate turnover should be stable for composition or compounding schemes under Goods and Services Tax. 
• The taxpayer should yield returns periodically in a usual format to both state and concerned central GST officials.
• Every taxpayer is assigned a 15-digit PAN-based detail number under GST mostly known as the GSTIN. 

Goods and Services Tax: Types of GST

Presently the types of Goods and Services Tax in India are SGST, CGST, and IGST. the simple variance assists the difference between intra-state and inter-state supplies and lightens indirect taxes. 

State Goods and Service Tax

SGST is a tax that the state government charge on intra-state goods and services businesses. SGST includes previous taxes such as luxury tax, entertainment tax, VAT, purchase tax, and tax on lottery, etc. Union Territory Goods and Services Tax restores SGST in union territories like Chandigarh or Andaman and Nicobar islands. 

CGST

Goods and Services Tax: The Central government charges GST on intra-state goods and service businesses. The Central government gathers the revenue created through central goods and service tax. It is charged along with UGST or SGST and revenue are split between the state and the center.

Goods and Services Tax: For example, if a producer makes a product in Maharashtra and sells it inside the state only, then CGST and SGST both will be accessible but SGST will go Maharashtra State governments money box and CGST will go to the Central government cash box.

Maharashtra has been leading the list of highest GST gatherings by a state for a long, succeeded by Karnataka. The entire tax accountability is split into two equal halves and shared equally between the state and central government. GST council decides these rates.

Goods and Services Tax: What are the Slabs of GST?

Goods and Services Tax: The key GST slabs for constant taxpayers are presently 0%, 5%, 12%, 18%, and 28%. There are several GST rates that are commonly used such as 3% and 0.25%.

Also, the structure taxable person should pay GST at less or formal rates such as 1.5% or 5% or 6% on their income. There is a theory of TCS and TDS under GST as well whose rates are 1% and 2% respectively. There is a whole GST rate of IGST for interstate supply or the addition of both SGST and CGST for intra-state supply. The GST rates will be increased by the calculable value of the supply to come at the GST amounts in a tax bill. Further, the GST law charges cess in addition to the above GST rates on the sale of a few things such as petrol, tobacco, motor vehicles, and cigarettes rates broadly differ from 1% to 204%. The 47th GST Council meeting occurred on the 28th and 29th of June 2022. 

GST Codes of Different States

The Goods and Services Tax Code refer to a distinctive code allotted by the government to every Union Territory and State. It is characterized by numbers serially allocated to every Union Territory and State. For example, GST State Code 27 defines Maharashtra. Whereas Goods and Services Tax State Code 29 stands for Karnataka. Gst state code became important when it began in India.

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