GST, a destination-based tax is one of the biggest tax reforms in the Indirect tax regime in India. It brings in altogether a new perception to the taxing principles, by putting in place a robust system. GST eliminates most of the limitations that were relevant in the earlier tax regime. It comes with a dual levy with State GST (SGST
) and Central GST (CGST
). Also, inter-state supplies attracts an Integrated GST (IGST
), which is the sum of SGST and CGST.
The following direct and indirect taxes have been axed after introducing GST:
- Excise duty
- Service Tax
- Luxury Tax
- Entertainment Tax
- Entry Tax
- Cess and Surcharge
- Octroi Tax
Suppliers and consumers, both get benefit from GST. Here are some of the benefits:
- Reducing distortion of prices due to tax policies
- Foster a common market across the country
- Distributing the burden of taxation equitably between manufacturing and services
- Lowering the tax rate by broadening the tax base and reducing exemptions
- Reducing the burden on the taxpayer by eliminating cascading effect of taxes at multiple levels
- Simplify inter-state commerce
Here’s what the newer taxes look like:
- SGST: State Goods and Services Tax (SGST) is levied on all transactions occurring within a state. It is collected by the State.
- CGST: Central Goods and Services Tax (CGST) is levied on intra-state transactions for goods and supply. It is collected by the Centre.
- IGST: Integrated Goods and Services Tax (IGST) is levied on inter-state supply of goods and services. It is collected by the Centre and shared with the State.
GST not only streamlines the movement of goods and services across the country with a single tax structure and integrate the country economically but also ensures reduction in cost of tax compliance. This in turn, increases tax revenues and the country’s GDP. In today’s global economy, a simple and transparent tax structure is always advantageous as it attracts the foreign investment and also gives the domestic players a level playing field and makes them globally competitive.