What is GST in India?
GST is known as the Goods and Services Tax. It is an indirect tax which has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017.
In other words, Goods and Service Tax (GST) is levied on the supply of goods and services. Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country.
Have a question? Contact our GST Team
Objectives Of GST
- To achieve the goal of ‘One Nation, One Tax’
GST has replaced many indirect taxes, which were prevalent under the earlier tax regime. The advantage of having one single tax means every state follows the same rate for a particular product or service. Earlier there was no unified and centralised tax on both goods and services. Hence, GST was introduced.
Tax administration is easier with the Central Government deciding the rates and policies. Common laws can be introduced, such as e-way bills for goods transport and e-invoicing for transaction reporting. Tax compliance is also better as taxpayers are not bogged down with multiple return forms and deadlines. Broadly speaking, it’s a unified system of indirect tax compliance. It has greatly reduced the compliance burden on taxpayers and eased tax administration for the government.
- To increase the taxpayer base
GST has helped in widening the tax base in India. The stricter laws surrounding input tax credits have helped bring certain unorganised sectors under the tax net. For example, the construction industry in India.
- To curb tax evasion
GST laws in India are far more stringent compared to any of the earlier indirect tax laws. GST being a nationwide tax and having a centralised surveillance system, the clampdown on defaulters is quicker and far more efficient. Hence, GST has curbed tax evasion and minimised tax fraud to a large extent.
- Online procedures for ease of doing business
Earlier taxpayers had a tough time dealing with different tax authorities under each tax law. Besides, while return filing was online, most of the assessment and refund procedures took place offline. Now, GST procedures are carried out almost entirely online. It has eased taxpayer compliance to a massive extent.
Components of GST?
There are three taxes applicable under this system: CGST, SGST & IGST.
- CGST:It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)
- SGST:It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)
- IGST:It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)