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Goods and Services tax act 2017- GST explained

Goods and Services Tax

Goods & service tax-GST explained

Here is a very interesting and informational post on the topic of goods and services tax which is mostly known as GST.
we will learn about 

Goods and services tax (GST) is said to be the most revolutionary tax reform that was undertaken since independence. It is going to replace all major indirect tax applicable in our country.

Before understanding, GST let’s first under the tax system applicable in India before the GST launch.

Taxes can be divided into two broad categories. First is direct tax and second are indirect taxes.

Direct Tax

Direct tax is the tax that is imposed on the person and paid directly to the government by taxpayers. For example income tax if there is a liability of income tax on any person he has to pay directly to the government.

Indirect tax

Indirect tax on the other hand is imposed on goods and services are paid indirectly to the government by taxpayers.

For example Service tax when you are dining in a restaurant you pay service tax which is included in the bill to the owner of the restaurant that restaurant owner paid service tax the portion to the government.

In this way, you pay the taxes to the government by a third person so it is an indirect tax.

In our country, indirect tax is leveled by the central government as well as the state government. Some major indirect tax liability by the central government.

Excise Duty

It is a type of indirect tax which is charged on goods manufacturing in India.

Service tax

Service tax is a type of indirect tax which is applicable and charged on the provision of services.

Central sales tax (CST)

Central sales tax (CST) is a type of indirect tax which is applicable and charged on interstate sale and good that is when goods are sold one state to other states.

Custom Duty

Customs duty is a type of indirect tax, it is a liability on import and export goods.
So this major indirect tax is leveled by the state government.

Value-added tax (VAT)

Value-added tax (VAT) is a type of indirect tax which is applicable and charged when goods are sold within the state.

Entertainment tax

Entertainment tax is imposed on various forms of entertainment example movie tickets.

Luxury tax

The luxury tax is imposed on Luxury hotel groups.

Entry tax

Entry tax is the type of the indirect tax which is charged by some state government leveled of things are transferred.

This was a quick overview of a major indirect tax imposed by the central government and state government.

If you want to have clearly understood to represent the tax system I would suggest you read my previous post in which I have explained everything in detail. Click here.

Now let’s understand what Goods and services tax (GST).  

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What is Goods and services tax (GST)

As a name suggest it is an Indirect tax leveled on goods and services. It is clear that GST is an indirect tax and it is not going to have any impact on rates and structure of the direct tax. Which means income tax rates leveled the same.

The reason it will be a game-changer once implemented because GST has replaced major indirect tax that is leveled by the central government and state government.
Tax such as Excise Duty, service tax, Value added tax(VAT), Central sales tax (CST) custom Duty, Luxury and Entertainment have all be replaced by goods and services tax(GST).

There are two parts to GST.

1.     CGST (Central Goods and Services Tax).
2.     SGST (State Goods and Services Tax).

All central level Indirect tax accepts custom duty has replaced by CGST and all state-level tax have replaced by SGST.

Advantages of goods and services(GST).

Economy says the new the system could add at least two people in India GDP and that should help keep India’s economy moving some major benefits are:-

     1. It will replace all major indirect taxes
     2. It will remove the cascading effect.

Cascading effect is a situation where tax is imposed on salary tax. In simple words, it means the tax on tax. A product on which excise duty has been charged can also be able to VAT.

.Example a manufacturing cost of goods is Rs.100. He charges excise duty @12% and sells it to the shopkeeper to the Rs.112 that shopkeeper sells the same item to the consumer after charging VAT @12.5% in this VAT charge by the dealer is Rs.14.
This Rs.14 has two components one is @12.50% which is on the cost of goods and services which is a charge on excise duty. This is called a cascading effect.

3.     It will reduce the flow of Black money

Black money is money on which tax is not paid to the government. There is a person who not reporting income in every transaction they save indirect tax and more able to furnish under-report their income GST in single tax on supply of goods and services directly from the manufacturer to consumer credit of input that tax each state will be available on substitute of value addition.

How to file GST Return

To file GST return there is two major documents are required PAN CARD and AADHAR CARD. This will help the income tax department to track the transaction. It is the beginning of a new era corruption will gradually subside. Everyone can submit their GST Return online.

One India One market

GST will facilitate make in India by making one India. There are dozens of taxes that prevent India from becoming a common market under GST is the single tax will be imposed all over the country on production, sales, and services, Turning India into a common market.

Seamless flow of goods across the nation on many occasions might have seen a long line of a truck on both sides of state these rows of tuck.

sometimes turning into miles to pay entry tax every time goods are from one state to another state tax is paid to the border.

This tax is collected by Individual Street; imagine a situation where a truck has to pass multiple streets. Some manufacture does not export goods on another state because of CGST. GST will results easiest transportation from goods one state to others by replacing CST.

Ease of doing Business

At present a businessman has to get registered with various tax authorities to maintain many people and file system returns to different tax authorities after the maintenance of GST.

There will be a single registration single return and less paperwork. The businessman will be able to put his time in an inter doing business, rather than complain about various tax laws.

Goods and services tax (GST) rates

The government has recently announced the rates of new goods and service tax (GST). There will be four main GST slab rates ranging from 5% to 28% on the goods and services tax. These four rates are 5%, 12%, 18% and 28%.

According to government essential items (e.g. grain) including food items will be tax at 0%. The lowest 5% rate would be for commonly used items, while 12% and 18% will be two standard rates of GST. The highest 28% will be applicable on luxury items.

Impact of GST on a common man

In the non-GST region, indirect tax all goods are 27% to 32% of the cost of goods in general and about 5% cost of services. however when GST comes to impact the cost of goods likely to come down.

When the cost of services will rise but overall tax burden on the consumer is likely to reduce in general.

The certain item on which GST will not be applicable e.g. alcohol, tobacco, petroleum product, taxon The electricity bill is some of the items on which GST will not be applicable. This item retains its previous tax shares.

I hope all you have to know about the fundamentals of Goods and services tax.

Taxinvestcare advised you please do any kind of action related to taxes in the presence of experts.

All images credit is Pixabay and Shutterstock.

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