The newly introduced goods and service tax has been effective from 1st July 2017. We can say that it is going to affect the economy drastically. Certain changes and additions in the norms will completely modify the Indian taxation system.
What is GST? And why it is implemented?
The GST is basically a unified indirect tax across the country on products and services. In the earlier system i.e. before GST, tax was levied at every stage distinctly by the Union government and the States at fluctuating rates, on the complete value of the goods. But according to the GST system, tax will be levied only on the value added at each stage. It is a single tax (collected at multiple points) with an entire set-off for taxes paid previous transactions in the chain. So the last consumer in the chain will be charged the GST applied by the last dealer in the supply-chain with set-off advantages at all the earlier stages. Goods and Services Tax will be levied on all the stages from buying raw material to selling the final product to the last consumer, which makes it a multi-stage tax.
Let’s say that a manufacturer wants to produce a plastic bottle. For this he needs to buy plastic which will get transformed into the bottle after the manufacturing process so, the value of the plastic is now augmented. Then, the manufacturer sells it to another agency where the bottles get labeled. That is another stage of value-chain and after that the retailer’s stage comes where the retailer invests in the marketing and packaging of that bottles thus the prices get increased before the bottles are sold individually to the final customers.
So now there are four components of GST
Central GST (CGST) and State GST (SGST) are applied for the transactions within a state levied on the value of goods and services. Both the Centre and the States will together levy GST across the value chain.
While talking about inter-State transactions, the Centre would levy and accumulate the Integrated Goods and Services Tax (IGST). The IGST would be roughly summed up as CGST plus SGST.
GST under supply of goods and services takes place in Union Territories like Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Delhi (National Capital Territory of Delhi), Lakshadweep, Puducherry etc. is accounted under UTGST.
A separate Act is being implemented for Union Territory states to impose and administer GST in India in the name of UTGST Act. Under UTGST Act, the details of GST rates payable against the movement of goods and services in Union territories are explained.
So the pictorial explanation will look like this
BUT why GST came in practice?
GST will replace the current tax system i.e. direct and indirect tax. The implementation of GST is part of the Government’s tax restructuring program to improve the efficiency and effectiveness of the existing taxation system.
GST is verified to be a better tax system as it is more efficient, clear and business friendly and is capable of ensuring the economic growth as well as creating more exposure in the global market. GST excludes double taxation under SST. Customers will be charged fairer rates for many of the goods and services compared to SST also it will be completely administrated in a computerized environment which ultimately assures the faster and reliable transactions.
The perks of GST:
The younger generation should be prepared and should get familiar with this system of taxation as it is the present and future of the Indian economy. It is bit complicated for the students to understand it completely but Nilaya ICATS institute of Commerce can help you cope up with this situation as they have included GST in their curriculum. So the students will be completely prepared regarding GST when they step out in the corporate world.