What is GST and how it works ?

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.

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

The Consumer: Finally a retailer buys the shirt from the wholesaler. He adds a margin of Rs.10 to his purchase of Rs.150. Therefore the gross value of the shirt he sells goes up to Rs.160 (Rs.150 + 10). At this stage the tax a 10% will be Rs.16. By setting off this tax (Rs.16) against the tax on his purchase from the wholesaler (Rs 15), the retailer brings down the effective GST incidence on himself to Rs.1 (16 –15). Thus we come to an conclusion of the total GST on the entire value chain from raw material i.e