Goods and Services Tax is an indirect tax applicable to the financial transactions in the Indian econ0my, which has successfully replaced many other indirect taxes. On 29th March 2017, the proposal of the application of GST was passed and approved in the parliament, and it became effective from 1st July 2017. It is a multi-stage, destination-based, value-added and comprehensive law in India, which is levied on the supply of goods and services. Previously there were many indirect taxes in India, which were equally confusing for the taxpayers. GST is the easiest way to replace the taxes that existed.
Before the GST was applied, the taxation procedure was such as:
Whenever the manufacturers used to buy raw materials, they needed to pay VAT. During the time of warehousing or wholesaling, the VAT was paid along with excise duty. At the time of sale to the retailer again, the VAT was needed to be paid. At the time of the final sale to the consumer, VAT was applied upon that.
As per the Goods and Services Tax regime, the taxation at every stage has been levied, and Central GST and state GST are applicable instead.
THE HISTORY OF GST (GOODS AND SERVICES TAXES) IN INDIA?
The drafting of the proposed law of GST was initiated in 2000. Simply it took 17 long years for the law to get applied in the Indian economy. In 2017, the Lok Sabha and the Rajya Sabha finally accepted the proposal of GST. In 2000 the former PM of India Vajpayee set up a committee for the drafting of the Law. The Goods and Services Tax law was proposed by the finance minister for the first time in 2006. In 2014 the same law was reintroduced to the parliament, before it got accepted and executed on 1st July 2017.
WHAT ARE THE ADVANTAGES OF GST?
The cascading effect on the sale of goods and services was prevailing until the GST got introduced to the market. The introduction of GST by the government, made the removal of the cascading effect and also impacted the costs of goods. Previously it was a tax upon tax pattern in the economy. Since the GST got implemented, the costs of the goods have also decreased.
GST is a law technologically driven, thus every step required for GST certification by government like to register, file, apply, refund or response- are done through the portal of GST.
WHAT ARE THE MAIN COMPONENTS OF GOODS AND SERVICES TAX?
Generally, there are three taxes applicable under GST
CGST: It is collected by the central government when an intra-state sale is initiated. For example, if the transaction is being made within Madhya Pradesh.
SGST: This is also collected when intra-state traction is initiated. It is collected by the State government
IGST: This tax is applicable when inter-state tractions are done, and the central government is the body to collect this tax. For example, when a transaction is being made from Madhya Pradesh to Maharashtra.
WHAT ARE THE CHANGES BROUGHT BY GST?
GST is a set of entirely new laws regarding the taxation process of India. In the previous taxation regime, every purchaser needed to pay tax for the same product, including the final consumer. This practice is commonly known as the cascading effect of taxes.
After GST regimes were introduced, all the other taxes have been levied and left with only one taxon complete purchase. GST helped in the improvement of tax collection and also helped in boosting the development of the Indian economy, by removing many barriers in the inter-state transactions. Goods and Services Tax has also brought the centralized system of waybills and introduced E-waybills for the goods which are transported from the origin to the destination.