What is GST and types of GST

GST is a tax that has to be paid on the purchase of any goods or services. Even after 5 years of its implementation on 1st July 2017, many things are not understood by the common people. Keeping this problem of people in mind, i have prepared this blog.

What is GST?

Goods and Services Tax is the official name of the tax. For obtaining goods or using services, it must be paid. Many current tax categories have been eliminated in order to replace them with a tax known as the GST (Excise Duty, VAT, Entry Tax, Service Tax, etc.) It became effective in India on July 1, 2017. All 50 states and the union territories have adopted this method.

What was the problem with the old tax system?

Businesses had to pay several forms of taxes at various stages, from production to sale, under the tax system in place before July 2017, which applied to both the federal government and the states. For instance, excise duty had to be paid on the items as soon as they left the plant. Many products were subject to distinct additional excise taxes. Entry tax was levied as soon as the products arrived in the state if they were being shipped from one state to another. After that, octroi in various locations.

Sales tax, often known as VAT, had to be paid when the products were sold. Purchase taxes were frequently imposed as well. Service tax had to be paid separately if the commodities were offered at a hotel, restaurant, etc.

Thus, it is clear that a commodity or service had to go through a variety of taxes or duties before it left the manufacturer and got into the hands of the customer. By establishing GST, an effort has been made to shield businesspeople from this web of levies.

Why was GST implementation necessary?

• The Central Government had the authority to impose taxes on the production of goods and services under the previous taxation provisions of the Indian Constitution. However, the state governments were given the authority to impose taxes on the sale of products.

• Everyone fixed the categories and filed their taxes on their own terms. On each item in this case, several taxes were applied. Tax on tax situations have occasionally also arisen. Dealing with their rules and regulations was a very challenging undertaking for small business owners and companies.

• GST was introduced as a unified law that can be used on both goods and services to eliminate these inconsistencies. Additionally, this can be used from manufacture to sale.

• There is only one fixed basis for GST, Supply, in order to do away with the separate screw of production and sale. In order to do this, the tax laws were modified, and the Parliament approved a constitutional amendment process.

Major Featuers of GST 

In order to correct the shortcomings of the old tax system in the country, the government implemented GST. The main features of this new tax system implemented from July 2017 are as follows-

1. Tax on Consuption

In the GST system, tax is recouped upon the sale of goods and services. The GST tax that is mandated thereon is also included in the final price of the goods or services. It is obtained from the buyer by the supplier of the goods or services. It is deposited later on into the government's account. This indicates that it is the provider of the goods or services who is responsible for recovering the GST. Every time there is a buying and selling transaction involving a good or service, GST is due.

2. Input credit System

An object goes through a buying and selling process from the time it is made until it is delivered to the final customer. Since every purchase and transaction must be taxed under the GST system, As a result, the product must become extremely expensive by the time it is purchased by the final user. But this is not the case. because the input credit system applies here. Wherever the tax has been put in this system prior to the tax being imposed at the last stage, there is also a way to recover it.

If you have deposited GST at any previous step but are not the final or actual consumer, you will receive Credits instead.These credits can be used to reimburse the government for GST.

You can get your GST corrected through the Tax Credit System when you submit your GST return each month. 

3. No Cascading of taxes 

Before the introduction of the GST, a variety of taxes were imposed, not just on a single good but frequently even on the tax itself. Because so many goods fit into two or more categories, this used to happen. This issue is already resolved. Due to the fact that the GST must now only be paid to consumers. If someone has to pay GST in the interim, his money will be deducted from the tax credit system.\

4. No arbitrary rates

Earlier taxation was used. Previously, state governments would voluntarily impose taxes on the products offered here. Its tariff was also established on its own terms. That won't happen anymore. For any changes to the GST rate, the GST Council has been established. The head of this council will be the Union Finance Minister. Its members will also include the state's finance ministers.

The Center will have one-third of the voting authority on any GST Council decision, while the state governments will have two-thirds of the voting power. Each state's voting power will be equal. Any council decision must receive the support of three-fourths of the council members to be accepted.

How GST is Beneficial of Every Class

Transparency and accountability in the tax system have increased with the advent of the GST system. On the one hand, this has benefited the government, but it has also been helpful to businesspeople and consumers.

Advantages for Common People

1. Different kinds of taxes on items have been eliminated. Since there is no longer a tax on tax, the price of items does not needlessly rise. Because of this, it is in a position to benefit all consumers.

2. On the things that matter most in life, there are little taxes. This will make items more affordable and beneficial to the general public. The underprivileged and those with limited incomes will receive relief.

3. The government will earn more money when a larger and larger portion of commerce is brought under the GST. This can be used to enhance public amenities including transportation, health care, and education.

Advantages for Businessmen

1. It was difficult for the goods traders to comprehend the various tax structures in each state. Different octroi forms were utilised to raise the burden in isolation. The intricate nature of the rules was also exploited improperly by tax officials and staff. Now, merchants won't have to deal with these inconveniences. Business will move more quickly and easily. In the end, this will enhance the total amount of benefits as well.

2. All documentation pertaining to businesses are available online under the GST system. This will prevent facts from being misrepresented. There will be an option to correct any errors or document losses online. The requirement for businesspeople to visit offices will no longer be necessary.

3. The federal and state governments make concessions to encourage small businesses and entrepreneurs. Even successful businessmen used to demonstrate their large enterprise by performing it in several tiny sections in order to benefit from this. This won't be necessary under the GST system. In order to compete, businesses will be able to produce more affordable goods. Products might be designed to compete on the global market.

Which Taxes Replaced by GST

The GST presently encompasses more than thirty indirect taxes imposed on goods and services throughout the nation and its states. 

• CGST: Central Goods and Service Tax

• SGST: State Goods and Service Tax

• UTGST/UGST:Union Territory Goods and Service Tax

• IGST: Integrated Goods and Service Tax

Note:

You will be required to pay two taxes on each intrastate transaction at the same time. CGST goes to the federal government, while SGST goes to state governments. One IGST tax will be due in the event of a transaction involving two states. Only the federal government will receive that. However, the state that consumes goods later receives a portion of this IGST.

By Moni Sinhmar