What is GST and how it works ?

GST is also mainly technologically driven. All activities like registration, return filing, application for refund and response to notice needs to be done online on the GST Portal; this accelerates the processes.

4. What are the components of GST?

There are 3 taxes applicable under this system: CGST, SGST & IGST.



CGST: Collected by the Central Government on an intra-state sale (Eg: transaction happening within Maharashtra)
SGST: Collected by the State Government on an intra-state sale (Eg: transaction happening within Maharashtra)
IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to Tamil Nadu)

5. Tax Laws before GST

In the earlier indirect tax regime, there were many indirect taxes levied by both state and centre. States mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different set of rules and regulations.

Interstate sale of goods was taxed by the Centre. CST (Central State Tax) was applicable in case of interstate sale of goods.

Other than above there were many indirect taxes like entertainment tax, octroi and local tax that was levied by state and centre.

This led to a lot of overlapping of taxes levied by both state and centre.

The following is the list of indirect taxes in the pre-GST regime:

* Central Excise Duty
* Duties of Excise
* Additional Duties of Excise
* Additional Duties of Customs
* Special Additional Duty of Customs
* Cess
* State VAT
* Central Sales Tax
* Purchase Tax
* Luxury Tax
* Entertainment Tax
* Entry Tax
* Taxes on advertisements
* Taxes on lotteries, betting, and gambling

6. What changes has GST brought in?

In the pre-GST regime, every purchaser including the final consumer paid tax on tax. This tax on tax is called Cascading Effect of Taxes.

GST has removed this cascading effect as the tax is calculated only on the value-addition at each stage of the transfer of ownership.

Understand what the cascading effect is and how GST helps by watching this simple video:

GST is a type of value added tax and a proposed comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level.

It will replace all indirect taxes levied on goods and services by the Indian central and state governments.

Further, the Goods and Service Tax (GST) is considered to be one of the biggest reforms in India’s indirect tax structure since the economy began to be opened up twenty five years ago.

In this article, we look at how GST differs from the current regimes and how it will work.

GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India.

Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State GST are charged. Inter-state sales are chargeable to Integrated GST.

How GST will Transform India

Goods and Services Tax (GST) is actually an indirect tax reform which ultimately aims to remove taxation barriers between states and create a single market which is open to all to buy, sell, import, export within the country.

It’s exclusively designed and has class within it which provides economic freedom to Traders.

Ultimately, GST will make it easier for businesses and consumers.

Under GST, the common man benefits in two ways: firstly, all the taxes are directly collected at the point of consumption.

Now let us try to understand the definition of Goods and Service Tax – “GST is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.”

For example, if a shirt is taxed at 15%, it will include both central government’s taxes and state government’s taxes.

Secondly, when tax barriers are broken between the states; the consumers would not need to end up paying tax on tax which is what happens when goods move across state borders – ultimately reducing the tax paid.

GST is a type of value added tax and a proposed comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level.