GST is known as goods and service tax. The Goods and Service Tax Act was introduced in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017. Goods and Service Tax (GST) is an indirect tax charged on the delivery of goods and services. This law has cancelled many indirect tax laws that previously existed in India. GST is one indirect tax for the entire country. GST is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition.
GST will basically cancel the Cascading effect on the sale of goods and services. Removal of cascading effect will have the direct effect on the cost of goods. Since the tax on tax is eliminated in this regime, the cost of goods decreases. GST is mainly technologically driven. All processes like registration, return filing, application for refund and response to notice needs to be done online on the GST Portal. This will speed up the processes and is hassle free.
The main component of GST:
There are 3 taxes applicable under this system: CGST, SGST & IGST.
- CGST: Collected by the Central Government on an intra-state sale (Eg: transaction happening within Delhi)
- SGST: Collected by the State Government on an intra-state sale (Eg: transaction happening within Delhi)
- IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to Rajasthan)
GST has also introduced with it a single nation-wide system of waybills by the introduction of “E-way bills”. This system started on 1st April 2018 for Inter-state movement of goods and 15th April 2018 for intra-state movement of goods in a staggered way. By this system, manufacturers, traders & transporters get benefit by a common portal where e-way bills can be generated and presence of its visibility to all stakeholders in the process of moving goods from the place of its origin to its destination. Tax authorities have also an advantage, as this reduces the time at check -posts and help reduce tax evasion.
Effect of GST on Consumers
GST is very beneficial for consumers, Here is how it impacts the Indian consumers is as following:
- Simpler Tax system
- Reduction in prices of goods & services due to the elimination of cascading
- Uniform prices throughout the country
- Transparency in the taxation system
- Increase in employment opportunities
Impact of GST on Traders
GST is also beneficial for traders. how it affects the traders is as following:
- Reduction in a multiplicity of taxes
- Mitigation of cascading/ double taxation through input tax credit
- More efficient neutralization of taxes especially for exports
- Development of common national market
- Simpler tax regime
- Fewer rates and exemptions
- The distinction between Goods & Services no longer required
There are around 160 countries in the world that have introduced GST. GST is a destination based tax, where the tax is collected in the State where goods are consumed. GST has been implemented in India from July 1, 2017, and it has adopted the Dual GST model in which both States and Central levies tax on Goods or Services or both.