Know about Goods & Services Tax (GST)

What is GST ?

GST is a broad based and a single comprehensive tax levied on goods and services consumed in an economy. GST is levied at every stage of the production-distribution chain with applicable set offs in respect of the tax remitted at previous stages. It is basically a tax on final consumption. To put at a single place, GST may be defined as a tax on goods and services, which is leviable at each point of sale or provision of service, in which at the time of sale of goods or providing the services the seller or service provider may claim the input credit of tax which he has paid while purchasing the goods or procuring the service.

It is seen as the panacea for removing the ill-effects of the current indirect tax regime, prevalent in the country. If adopted and implemented, GST may neutralise the existing problem of taxes being levied on top of taxes. For instance, when a shoe company produces a pair of shoes, the Central Government charges an excise duty on them as they leave the factory. At the retail level, the state where the outlet is located, charges VAT (different states charge different rates of VAT) without giving credit on the excise duty levied earlier (the state tax is levied on top of a Central tax). In the GST system, both Central and state taxes may be collected at the point of sale. Both components (the Central and state GST) may be charged on the manufacturing cost.

This system is basically designed to simplify current level indirect tax system. It integrates the union excise duties, customs duties, service tax and state VAT into a single levy known as GST. GST may be rightly termed as national level VAT on goods and services with only one difference that in this system not only goods but also services are involved and the rate of tax on goods and services are generally the same.