Good and service tax (GST)

Introduction

Goods and services tax commonly known as GST is an indirect tax that applies to most of the supplies of goods and services. That is like having a single, combined price instead of many taxes which are usually complex. The collection of GST is done at every point of the production and supply chain, but, the end consumer has to bear the GST incurred. Under GST, it is almost certain that business entities and other individuals shall enjoy a more improved taxation system, lower taxation rates, and higher government collections.

Meaning of good and service tax

GST is a type of tax whereby the government levies a tax on the goods that the people purchase and on the services they consume.

Think of it like this:

For instance, when you purchase something such as a book or a shirt, you add a little extra cash which is in the form of tax going to the government.
Whenever you go for a particular service, for example, if you want to get your hair cut, you also have to part with extra cash which is in the form of tax going to the government.

This is the money that the government uses to build roads, schools, hospitals and other things that are important for the development of the nation.

GST is a way where so many taxes form one which makes it easier for people and businesses to pay taxes.

Importance of Goods and Service Tax (GST)

Any economy stands to gain from GST and it is a game changer. It makes taxes to be easy to deal with as far as compliance is concerned, and the overall cost.
This results in efficiency that equals the low prices and the variety of the products that are offered to the consumers.
GST also minimize the incidence of tax avoidance which results in increased revenue collection for the government treasury for uses in establishment of public utilities and other social facilities.
A few of the advantages of GST include the following, GST promotes consumption, and aims at creating more businesses and job placements as it targets to unify India into a single market.

5. It helps in making Indian businesses more competitive on the global market front and the investment in India by foreign players is also encouraged.

6. Further, GST also reduces the rate of inflation, it also supports the small scale industries and is also pro-consumer.

Types of Goods and Service Tax (GST)

Here are some types of GST, GST Rates and GST Returns:

Types of GST:

CGST (Central Goods and Services Tax):

This was through taxes collected by the central government.
When referring to intrastate sales, that is, sales within a particular State
A revenue that is divided between the central and the state government.
Examples: The concept of selling or providing goods and services within a state, such as a sale made in Delhi.

Purpose: For the purpose of taxing goods and services manufactured and consumed within the state.

SGST (State Goods and Services Tax):

Controlled and gathered by the state government
Applied to intrastate sales, that is the passing of title to tangible personal property from one resident to another within a particular state.
Amount of money that remained with the state government after subtraction of total expenditure from total receipts.
Examples: Expenditure incurred for purchase of goods and services within a state like any expenditure made within Maharashtra.

Purpose: To tax products manufactured and supplied to the specific state as well as those services enjoyed within the same state.

IGST (Integrated Goods and Services Tax):

Acquired by the individual component of the central system.
Applicable to ‘interstate sales’, which involves the sale of goods between different states.
Tax revenues collected by both central and state governments.
Examples: Interstate sales means selling products or services from one State to another, for instance from Delhi to Mumbai.

Purpose: To tax goods and services that may be in transit from one state to the other

Types of GST Rates:

Nil Rate (0%):

These include basic needs such as food, health services and education.
No tax charged.
Examples: New phones, new clothes, newspapers, magazines, fruits and vegetables, packed milk, and health care facilities.

Purpose: For the purpose of excluding some goods and services from the list of taxable ones:

Low Rate (5%):

Meals and other requirements including spices, tea, coffee and even medicines.
Reduced taxes, so that people can afford items and services at reasonable prices.
Examples: Meats, fruits, vegetables, spices, tea, coffee, tobacco, medicines and drugs.

Purpose: Purpose of this paper is to provide an understanding of how to minimize the tax burden on necessities.

Standard Rate (12% and 18%)

The majority of imports and exports include consumer or capital goods such as computers, textiles, and foods.
Standard tax utilized.
Examples: Such purchases like electronics, garments, meals, and cinema tickets.

Purpose: To apply standard taxes means a standard rate that you apply to most of the products and services that are produced or rendered.

High Rate (28%):

Some of the items that fall under this category are cars, tobacco, aerated beverages, and other luxurious items and services.
Taxes at a higher rate will reduce the levels of consumption in the economy.
Examples: Golf, tobacco products, and soft agro-processed products.

Purpose: In order to control expenditure on luxuries to the general public.

Types of GST Returns:

GSTR (Goods And Service Tax Return)-1:

Information about goods and services sold by a business to other businesses or consumers
Submitted on or before the 10th of the next month
Examples: All outgoing bills such as sales invoices, debit notes and credit notes.

Purpose: In order to give information about the products that have been sold by a particular business.

GSTR (Goods And Service Tax Return)-2:

Information about the received supplies or services by the business durchח
To be submitted to the examiner before the 15th of the following month
Examples: Sales invoices, purchase invoices, credit notes and debit notes.

Purpose: To record the amounts of products bought by a business

GSTR (Goods And Service Tax Return)-3:

Summary of sales and purchases, and payment of tax
Submissions made on or before the 20th of the following month
Examples: Sales and purchases summary and payment of taxes

Purpose: For the purpose of providing an outline of sales, purchases, and payment of taxes

Conclusion

Therefore, GST is one of the most revolutionary tax reforms in India that makes the taxation system more effective and efficient. Thus, GST had been beneficial and helpful for business and has improved government collections. . The development of a single market to encouraged economic liberalization, the emerging of employment opportunities, and supported the growth of new Indian businesses across the international markets. Also, GST had lowered inflation rate, promoted the growth of small businesses, and enhanced the consumer’s gains. In conclusion, GST aims at making taxation easier and more efficient for every individual involved in the process.

FAQs

Here are some FAQs about Goods and Services Tax (GST):

Q1: What is GST?

A: GST is a single tax on goods and services across India.

Q2: Who pays GST?

A: Consumers pay GST, but businesses collect and deposit it.

Q3: What is the purpose of GST?

A: GST simplified taxes, reduces evasion, and increases revenue.

Q4: How does GST work?

A: GST is levied on value added at each stage of production and distribution.

Q5: What is the benefit of GST?

A: GST reduced prices, increases efficiency, and promotes economic growth.

Q6: Is GST applicable to all goods and services?

A: Most goods and services are subject to GST, with some exemptions.

Q7: How many GST rates are there?

A: There are four GST rates: 5%, 12%, 18%, and 28%.

Q8: Do small businesses need to register for GST?

A: Businesses with turnover above ₹40 lakhs must register for GST.

Q9: Can GST be refunded?

A: Yes, GST can be refunded in case of excess payment or exports.