Types of GST in India

GST is the most major tax reform in India. The GST aims to develop a single tax reform that pertains from the manufacturing stage to the delivery process of services and products. It combines as a single tax paid earlier in the global marketplace and is applied throughout the country. GST has inundated 17 different types of indirect taxes in the country. State government had their own set of taxes policies and regulations differently. The Federal Government implemented central state tax on the interstate transaction. 

The GST expedition started in the year 2000 under a committee order law. It passed 17 years to grow. On 1st July 2017, the GST bill was authorized in the Lok Sabha and Rajya Sabha. 

It incorporates all current, central, and State taxes into a single tax rate. The GST tax (Goods and Services Tax) was brought into application on 1st July 207 through an amendment in the Constitution of India. 

The GST will help to assemble the taxation process of In the main features dia’s $2.4 trillion economies. The GST implementation creates a positive impact, and that dropped 20% on interstate travel time. Besides, it had positive implications in the transportation sector like crude consumption. However, the GST is a type of tax that is a destination-based, multistage, and novel tax that inflicts on value-addition. 

All the Goods as services are dealt with types of tax under GST tax implications and are applied under GST Council rules. 

Main Characteristics of GST

The main traits of GST are as under:

  • GST has immersed 17 various types of taxes at the Central and State level. 
  • GST has introduced as a “one country one tax-rate” system that has an overall implementation
  • GST is called a consumption-based tax.
  • The tax is exorted on the “supply of goods and services.”
  • The tax has similar implications for Goods and Services 
  • The tax is a comprehensive approach to all goods and services
  • GST has generated a free flow of credit
  • GST is multistage and assembled on value addition at all steps of the supply chain.  

Different Types of GST

The newly implemented system introduced 4 main types of GST that include the following: 

1. SGST (State Goods and Services Tax) 

GST is thirsted by State Governments on intra-State trade and services or within the state trade known as SGST (State-GST). Owing to SGST, the revenue goes to the State government as traction takes place outside the State. 

For instance:

  • An individual in Mumbai makes a business deal with an individual in Dehli.  

2. UTGST (Union Territory Goods and Services Tax) 

UTGST, known as Union Territory Goods and services Tax, is the tax that applies on goods and services supply that are conducted in any of five territories of India. 

UTGST, the short form of Union Territory Goods and Services Tax, is nothing but the GST applicable on the goods and services supply that takes place in any of the five territories of India. 

For Example:

  • Andaman and Nicobar Islands
  • Dads and Nagar Haveli
  • Chandigarh 
  • Lakshadweep 
  • Daman and Diu, known as Union 

3. IGST (Integrated Goods and Services Tax) 

IGST is a tax imposed on all Inter-State supplies of goods and services. It is applicable for any supply of goods and services in import and export cases of India. 

Such as:

  • The sale that takes place within the same State is called intrastate sales
  • The sale comes within the union territory is known as Intrastate sales
  • The sale deals with another state are called Interstate

4. CGST (Central Goods and Services Tax) 

The central government inflicts CGST for an intra-state transaction of goods and services. The tax is collected along with SGST and UGST. 

The revenues generated get distributed between the State and the Central govt. IGST is collected on the goods and services that follow transactions between various states. 

For instance:

  • Service Tax
  • Cesses, 
  • Surcharges
  • Central Excise Duty
  • Duties of Custom

Why Do We Need GST?

We need all kinds of GST based on the following reasons. 

To gain the lack of uniformity in the tax structure and a considerable number of taxes hurt internal trade. 

Internal trade got harmed due to overlapping taxes at the state and federal levels and cascading effects on tax regimes. 

Benefits of GST 

The following reasons tend to implement GST to gain more advantage. 

  • The adoption of the GST would eliminate Cascading Effect. The GST framework allows dealing with input tax credit with ease. 
  • The GST tax rules will be more thoughtful in the regulation of the unorganized sector through streamlining the process of online compliance and payments. 
  • The GST assists in harmonizing the tax laws, procedures, and tax rates all over the country that brings a less complicated tax system.
  • Another reason for GST preference is the whole GST procedure is online, from registration to return filing. It will promote new businesses to grow as they would not go under any indirect tax system for registration.  
  • However, the GST will increase revenue since it replaces 17 indirect taxes with a single tax. It will increase product demand that will give a rise in revenue for federal and state governments. 

Tax Laws before GST Implementation

The Centre and State both collected indirect tax previously. States gathered taxes in the form of Value Added Tax (VAT) with different sets of rules. 

Moreover, CST (Central State Tax) imposed a tax on the Inter-state sale of goods. The indirect taxes, including octroi, entertainment tax, and local tax, were inflicted by both Centre and State. A significant number of caused overlapping of taxes imposed of both Centre and State. 

 For instance: 

At the time of manufacturing and selling of goods and, the Centre charged the excise duty tax. Along with this, VAT was demanded by the State. The situation began to worse due to tax high and the negative impact of taxation. The effect is also said to be the cascading effect of taxes. 

Following is the list of indirect taxes before GST implementation 

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

Nonetheless, CGST, SGST, and IGST have put back all these above taxes and introduced a new approach. 

Nevertheless, certain taxes like GST are imposed on inter-state at a negotiation-based rate of 2%. 

However, it applies to definite non-GST goods, including: 

  • High-speed diesel
  • Natural gas;
  • Petroleum crude;
  • Aviation turbine fuel
  • Motor spirit (commonly known as petrol);
  • Alcoholic liquor for human consumption.

Further, it has an application for the following transactions.

  • Utilization in manufacturing or processing purpose 
  • Resale
  • It employs in specific sectors like telecommunication networks, the generation or distribution of electricity, mining. 

Takeaway

Several indirect taxes had prevalence in India before the implementation of GST. The introduction of GST has created one nation tax and made it ease in the complex process. It has significantly liberated the time and effort required in procedural aspects. However, it has ended a considerable number of complexities with a positive and productive outcome. 

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