GST (Goods and Services Tax) is a comprehensive, indirect tax levied on the supply of goods and services in many countries. It replaces multiple indirect taxes, such as sales tax, excise duty, and service tax, creating a unified taxation system. GST is designed to streamline the tax structure, promote efficiency, and reduce cascading taxes (tax-on-tax effect).
GST was implemented in India on 1st July 2017. This type of tax has replaced all the previously existing indirect taxes in India.
Key Features of GST :
Comprehensive Tax : GST applies to nearly all goods and services, with some exemptions or reduced rates for essential items.
Destination-Based Tax : GST is collected at the point of consumption rather than the point of origin. For example, if goods are manufactured in State A but sold in State B, GST is collected in State B.
Dual Structure (in some countries) : In federal systems like India, GST is divided into:
* CGST (Central GST) : Tax collected by the central government.
* SGST (State GST) : Tax collected by the state government.
* IGST (Integrated GST) : Tax collected on inter-state transactions and shared between central and state governments.
Input Tax Credit (ITC) : Businesses can claim credit for GST paid on inputs (raw materials, services) against GST collected on sales, ensuring only the value added is taxed.
Simplified Compliance : GST uses a unified tax filing system, reducing the burden of multiple tax returns and compliance requirements.
