Business

Understanding Goods And Service Tax (GST)

gst

Goods and service tax(GST)

It is a single destination based indirect consumption tax . It has replaced most of the other indirect taxes in our country. In the old tax structure the state of origin received tax revenue but now the state in which goods and services are consumed will receive that revenue.

Indirect taxes

Below are a list of some of the indirect taxes – both central and state that will be affected by the GST

Central indirect taxes

gst central

  • Central excise duty
  • Service tax
  • Additional excise duties
  • Excise duty levied under the medicinal and toilet Preparations{excise duties act}1955
  • Additional duty and special additional duty of customs.
  • Central cesses and surcharges in so far as they relate to supply of goods and services.

State indirect taxes

gst

  • VAT/sales tax
  • Central sales tax
  • Octroi and entry tax
  • Purchase tax
  • Luxury tax
  • Taxes on lottery, betting, and gambling
  • State cesses and surcharges in so far as they relate to supply of goods and services.

Dual GST

In this model, the tax would be jointly levied by both center and state on the supply of goods and services.

gst

The components of dual GST are:

  • Central goods and services tax{CGST}
  • State goods and services tax {SGST}
  • Integrated goods and services tax {IGST}

On intrastate transactions, CGST+ SGST will be applicable and on interstate transactions, IGST will be applicable.

One of the greatest advantage of GST is that it avoids problems  such as multiplicity of taxes, uniformity, double taxation and cascading effect. In layman terms, the taxes are now normalized and made simpler.

GST registration number is a 15 digit alphanumeric number. It consists of 5 elements such as state code, pan number, entity number of the same pan holder in a state, alphabet Z by default and digit.

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