GST or goods and service tax is a comprehensive tax that subsumes various other taxes in the country. The act was passed on March 29, 2017, and came to function on July 1, 2017, to substitute multiple indirect taxes into a single one. It operates on the principle of ‘one nation, one tax’; thereby, it is unified across the country. Before GST, the states had their power when it came to taxation, and the State and Central Governments collected it differently. However, the GST regulated the tax culture of the country into one.
Further, multiple taxes were charged on a single good or service; however, GST unified the taxation system across the country. The GST tax is a destination-based, comprehensive, and multi-staged tax. It is charged on the consumption of various goods and services. However, the tax is charged at every point of sale, and is multi-staged because it is collected at every point of sale. The GST is a destination-based because it is charged at every point of consumption though charged at the ultimate point of consumption, and it is comprehensive because it subsumes various indirect taxes into one. Some of the taxes thatGST covered are as follows:
- Excise duty on taxes
- Custom taxes
- Service tax
- Central sales tax
- Tax on lottery and gambling activities
- Value-added tax
- Purchase tax
- Luxury tax
- Entertainment Tax
The advent of GST has brought down various advantages in the country’s taxation regime. GST removed the cascading effects of taxes into the country, regulated the unorganized sector, eased the registration process for filling in the income tax, regulated the e-commerce industry, and most importantly brought in the composition scheme for small businesses. All these benefits of GST have brought down a resolution in the Indian taxation.
The GST functions through three components which are CGST, SGST and IGST. CGST is the Central Goods and Services Tax; the Central Government collects that on the intra-state transactions. Even the SGST or the State Goods and Services Tax is collected on the intra-state purchases and sales. IGST, on the other hand, is the integrated Goods and Services Tax, that is collected on the inter-state transactions regarding the sale of goods and services. In the case of intrastate transactions, the CGST and SGST, the revenue collected through the GST is to be distributed within the Central and the State Government. In the case of IGST transactions, the GST revenue is collected by the Central Government, who further distributes it.
The GST is charged on all the goods and services, imported, produced and supplied across all states in the country. However, the GST is not charged on the export of Goods. Various products are also exempted from the GST tax such as alcohol, natural gas, electricity, diesel, natural gas, and petroleum products like crude oil. The GST tax is beneficial for all whether, the manufacturers or traders, the Central or the State Government or the consumers.
It must be noted that before the GST was brought into the picture, the burden of the tax was imposed on one person, and was paid by another person, especially in the case of indirect tax. Further, different states had different ways to function with tax collection. The transparency that GST brought to the tax regime will help the country utilize funds to the full potential. Thus, it has brought about a variety of benefits that will create a good opportunity for a sustainable and robust economy.