2. GST has two major components
GST has become the worldwide standard due to the enhancement of international trade in services. Currently, the proposed tax system will take as the dual GST that is charged concurrently by the state and central government. This dual GST comprises of the following aspects.
CGST (Central Goods and Services Tax) – It will be charged by the central government
SGST (State Goods and Services Tax) – It will be charged by the State Government
IGST (Integrated Goods and Services Tax) – It will be charged by central government on the inter-supply of goods and services
3. GST charge all goods and services except
- Electricity – comes under electricity duty
- Alcohol – state excise + VAT
- Real estate – Stamp duty + property taxes
- Petroleum products
4. It removes cascading of the taxation effects
5. Codification is applicable to all goods and services in the proposed GST structure. A new HSN code can be used for sorting of goods and previous accounting code can access for categorization of services
6. Goods and Services tax will be applicable at each phase of the value added in a chain
GST offers plenty of advantages for the people as well as the country economy. Below-mentioned is some of the benefits that you can reap from Goods and Services Tax.
- One of the biggest advantages of GST is the elimination of the multiple indirect taxes. Currently, not all the indirect taxes will be on the ground due to the establishment of GST. That means current indirect taxes such as sales tax, excise, service tax, and much more will not be valid. It is because all the indirect taxes fall under one common tax, which is called as GST
- For the common people, GST actually means the elimination of double charging in the taxation system. This will eventually minimize the cost of the goods and services. Therefore, it helps the common person for saving more money in their daily expenses. You can expect the cost reduction in the items like expensive cars, electrical products, etc.
- Goods and Service tax will bring the concept of one country one tax. Thus, in turn, it prevent unhealthy competition among the states across the country and it is very beneficial to do inter-state business
- Concerning the businesspeople, GST will be surely a boon because it does not have multiple taxes. This means there is no difficulty in compliance and documentation. You will do easy and hassle-free tax payment, return filing, and refund process
- GST is applicable to all stages of the goods right from manufacturing to the consumption. This will render tax credit advantages at each phase in the chain. Therefore, it will reduce the cascading effect of the tax by minimizing the product cost
- By replacing all 17 indirect taxes with one, it increases the product demand and so there will be increased tax revenue for both central and state government
- GST makes a huge increase in GDP and provides more employment opportunities. In addition to, you can see reduction in tax evasion
You may refer to this example for a clear understanding of GST process.
A product or item original cost is ₹ 1000 and after charging excise duty at 12.5%, the product price is ₹ 1125. On sales of the goods VAT/ sales tax is charged at 12.5%, now the product value to the consumer is ₹ 1356.62. However, in the proposed GST taxation system, the consumer can purchase base rate of ₹ 1000 product as ₹ 1200 including both CGST and SGST levies. Therefore, the industry can compete well in the worldwide environment. Thus, GST is a single comprehensive tax charged on the goods and services consumed in the country.