GST in Simple Words

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What is GST ( Goods & Service Tax )in Simple Words?

GST( Goods & Service Tax) in simple words is a destination-based tax on the consumption of goods and services. It is proposed to be levied in the least stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as depart. In a nutshell, only value addition is going to be taxed and therefore the burden of tax is to be borne by the ultimate consumer. The concept of destination-based tax on consumption implies has the tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply. It is also called one Country one tax.

We can also call it a multi-level tax, that is, Multi-Level Tax. It is an unused tax (Indirect Tax) which has been brought in place of many types of Indirect Taxes (e.g. VAT, Service Tax, etc.) in India Replace GST Act passed in Parliament on 29 March 2017 and GST was implemented across India from 1st July 2017.

GST in simple words, GST is an indirect tax (Indirect Tax) on goods and services which is levied on every value addition i.e. Value Addition, We can understand it in such a way that GST is levied at every point of sale – Tax Levied at Every Point of Sale. In India, GST has replaced various central and state indirect taxes on almost all goods and services such as Excise Duty, VAT, Service Tax, etc., but there are still some products that still do not GST apply. For example, Petroleum Products and Alcohol (Alcohol).

How GST works

Generally, GST is on the Supply of all kinds of goods and services (Goods and Services| In simple terms, GST will apply to the Supply of all kinds of goods and services (Goods & Services) which have been Define in the GST Act except Petroleum Product and Alcohol. Normally there are two types of Supply (Transaction) under which GST is Central Govt and State Govt Collect-

  • Intra State Supply – In the same State, when there is a Transaction between the two sides, it will be considered as intra-state supply, If Intra State Supply, the tax levied according to the GST Rates will go to the governments by CGST two parts and equal lying in the SGST For example, as a Sohan Enterprise bought raw material worth Rs. 20,000, the GST Rs. 3600 per 18% and he CGST Rs. 1800 (9%) and SGST Rs.1800 (9%) .They will be divided into equal parts and the governments will be taken by the same.
  • Inter-State Supply – When there is a Transaction between two parties from one State to another, it is called inter-state supply, There IGST a single tax on supply (Inter-State Supply) between the two States which will go to the Central Government. While it is an integrated tax, how the Central Government will share it is a different issue. If the above Example is taken, the Rs. 3600 which has been made at the rate of 18% will go to the Central Government as a full IGST. Thereafter, as per the rules laid down, the Central Government will give part of it to the State Government.
GST in simple words features a twin factor with the Centre and States concurrently levying on a frequent assets . There are three primary factors of GST which are CGST, SGST, IGST capability Central Goods and Services Tax.

Types of Taxes under GST in Simple Words

  • CGST:Taxes collected under CGST will represent the revenues of the Central Government. The present central taxes like central excise duty, extra excise duty, one-of-a-kind excise duty, central income tax etc., will be subsumed below CGST. SGST ability State Good and Services Tax.
  • SGST:- A series of SGST is the income of the State Government. With GST all kingdom taxes like VAT, amusement tax, luxurious tax, entry tax etc. will be merged. For example, Ramesh a supplier in Punjab sell items to Seema in Punjab well worth Rs. 10,000. If the GST fee is 18%, i.e., 9% CGST and 9% SGST, Rs. 900 will go to Central Government and 900 will go to Punjab Government.
  • IGST:- IGST means Integrated Goods and Services Tax. Revenue collected under IGST is split between Central and government as per the rates specified by the govt. IGST is charged for the transfer of products and services from one state to a different one. Import of products and services also are covered under IGST. For example, if the products are transferred from Madhya Pradesh to Rajasthan then this transaction will attract IGST. Let us extend the above example to know SGST. If Ramesh in Bihar sells goods to Anand in Rajasthan worth Rs. 1,000,000. THE Applicable GST rate is eighteen i.e., 9% CGST and 9% SGST. In this case, the dealer will charge 18,000 as IGST and can attend the Central Government.

How is GST Input Works

Now understand what is the input tax credit in GST. In simple terms, the Concept of GST is such that the last consumer of the goods or services will be charged GST and the entire GST will be burdened with it. So, keeping this in view, the traders have been given the facility of Tax Credit so that the burden of tax generated in the transactions does not come to them. Understand this from an example –

Transaction Amount of Product GST 18% GST Input
Suppliers sold the mobile to the Distributor ( 3000/-) 2542/- 458/- 458/-
Distributor sold the mobile to Retailor  ( 4000/-) 3390/- 610/- 152/- ( Balance Rs.458 Tax Input to Distributor)
Retailor sold the mobile to Consumer ( 5000/-) 4237/- 763/- 153/- ( Balance Rs.610 Tax Input to Retailor)

The consumer will be paid Rs.5000 and the government will be collecting GST amt Rs. ( 458+152+153=763/-).

Characteristics of G S T in Simple Words

  1. GST is a common law and procedure throughout the country under a single administration.
  2. GST is a destination-based tax and levied at a single point at the time of consumption of goods and services by the end consumer.
  3. GST is a comprehensive levy and collection of both goods and services at the same rate with the benefit of input tax credit or subtraction of value.
  4. The minimum number of rates of tax does not exceed two.
  5. There is no scope for levy of cess, resale tax, additional tax, turnover tax etc.
  6. There are no multiple levies of tax on goods and services, such as sales tax, entry tax, octroi, entertainment tax or luxury tax etc.

Advantages of G S T in Simple Words

  1. The introduction of GST has resulted in the abolition of more than one sorts of taxes on goods and services.
  2. GST widens the tax base and increased revenue to the Centre and State thereby reducing administrative cost for the Government.
  3. GST has reduced compliance cost and increases voluntary compliance.
  4. GST has affected rates of tax to the utmost of two-floor rates.
  5. GST has removed the cascading effect on taxation.
  6. GST will end in enhancing manufacturing and distribution system affecting the value of production of products and services and consequently, the demand and production of products and services will increase.
  7. t will eventually promote economic efficiency and sustainable future economic process as GST is neutral to business processes, business models, organizational structure and geographical location.
  8. GST would help to extend the competitive edge in the international market for goods and services produced in the country leading to increased exports.

Taxmann's GST Ready Reckoner-Ready Referencer for All-Important Provisions of the GST Law | Amended up to 1st November 2020
Taxmann’s Ultimate Best-Seller ‘GST Ready Reckoner’, authored by Mr V.S. Datey, is a ready referencer for all provisions of the GST Law. It covers all important topics of GST along with relevant Case Laws, Notifications, Circulars, etc.  The Present Publication is the 14th Edition & Updated till 1st November 2020. This book follows the Six-Sigma approach to achieve the benchmark of ‘zero-error.

GST GOOD & SERVICE TAX
GST GOOD & SERVICE TAX
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