GST- definition, types, importance & tax slabs

GST is a term that we come across in our day to day lives. This was brought in use a few years ago and has helped in streamlining the tax levied on services and supplies.

The tax came into effect from 1 July 2017 through the implementation of the One Hundred and First Amendment of the Constitution of India. The GST was replaced by multiple taxes charged by the central and state governments.

Currently, our country has adopted a dual GST model, which means that taxation is administered and controlled by both the Union and state governments.?

Transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments.?

There are already around 160 countries across the globe who have implemented GST. This is a destination-based taxed where the tax is collected by the State where goods are consumed.

It’s main aim is to bring all the taxes under a single umbrella, eliminating the cascading effect of taxes on the production and distribution prices of goods and services

But what exactly is the GST?

Goods and Services Tax (GST) is basically a kind of indirect or consumption tax that is levied on the supply and purchases of goods and services.?

The GST is a well-thought and executed comprehensive, multistage, destination-based tax. It is said to be comprehensive as it has included all the indirect taxes except a few state taxes.?

It’s know to be Multi-staged because the process of GST is something that has been imposed at every step in the production process right from the beginning and is meant to be refunded to all the entities in the various stages of production. This is excluding the final consumer and as a destination-based tax. Just like the older times, GST is collected from point of consumption and not point of origin like previous taxes.

Rates and Taxes

GST's products and services are divided into five different tax slabs. This is to ease out the process of tax collection.?

The GST has been divided into five slabs-0%, 5%, 12%, 18% and 28%.

Let’s look at the importance of GST-

1. It has streamlined and eased out the usual as well as common procedures for registration of taxpayers, the refund of taxes, uniform formats of tax return, common tax base. This common system of classification of goods and services has brought in certainty.
2. Most notably, GST eliminates the tax chain effect.?
3. With the imposition of GST, it has brought in efficient neutralization of taxes mainly for those involved in exports. This has helped in taking the cause of Make In India ahead and the products more competitive in the international market and give a boost to Indian Exports.
4. GST is a comprehensive indirect tax levy on manufacture, sale, and consumption of goods as well as services at the national level. It has been replaced by all the indirect taxes levied on goods and services by states and Central that .
5. GST has the option of allowing small businesses to reduce taxes and it can be done utilizing the configuration system.?

Why was GST needed in India?

Introduction of GST has been considered to be a significant step in the reform of indirect taxation in the country as it has streamlined several processes.?

It has helped to bring in various Central and State taxes into a single tax that have helped in mitigating the double taxation, cascading, the multiplicity of taxes, classification issues, taxable event.

Before implementing the GST, the VAT rates and regulations differed from state to state. Ever since GST was brought in, there has been a. uniform tax system across all the states. And now the taxes have been divided between the Central and State government.

Types of GST in India-

There are four types of? GST types that are levied in India, which include the Integrated Goods and Services Tax (IGST), State Goods and Services Tax (SGST), Central Goods and Services Tax (CGST), and Union Territory Goods and Services Tax (UTGST). The taxation rate under each of them differs.

Over the past few years, the Goods and Services Tax (GST) has several local taxes that were levied on goods and/or services.

Integrated Goods and Services Tax or IGST

The Integrated Goods and Services Tax or IGST is a tax under the GST regime that is applied on the interstate (between 2 states) supply of goods and/or services as well as on imports and exports. The IGST is governed by the IGST Act. Under IGST, the body responsible for collecting the taxes is the Central Government. After the collection of taxes, it is further divided among the respective states by the Central Government.

State Goods and Services Tax or SGST

The State Goods and Services Tax or SGST is a tax under the GST regime that is applicable on intrastate transactions. In the case of an intrastate supply of goods and/or services, both State GST and Central GST are levied.?

Central Goods and Services Tax or CGST

Similar to that of the State GST, the Central Goods and Services Tax of CGST is a tax under the GST regime that is applicable on intrastate transactions. The CGST is governed by the CGST Act. The revenue earned from CGST is collected by the Central Government.

Union Territory Goods and Services Tax or UTGST

The Union Territory Goods and Services Tax or UTGST is the counterpart of State Goods and Services Tax (SGST) which is levied on the supply of goods and/or services in the Union Territories (UTs) of India. The UTGST is applicable on the supply of goods and/or services in Andaman and Nicobar Islands, Chandigarh, Daman Diu, Dadra, and Nagar Haveli, and Lakshadweep.