MGCO
16 Dec 2022
GST (Goods and Service tax) is described as an Indirect Tax which has replaced many Indirect Taxes in India. Simply, it is a Comprehensive, multi-stage, destination-based tax that levied on the supply of goods and services on every value addition. The GST Law was passed in the Parliament on 29th March 2017. But it came into effect on 1st July 2017. This law has replaced many indirect tax laws that previously existed in India.
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Therefore, before GST, the pattern of tax levy was as follows:
But after the introduction of Goods and service tax, all the taxes have been subsumed such as Central Excise Law, Service Tax Law, VAT, Entry Tax, Octroi etc. Besides, it has been proven the biggest indirect tax reforms in the country. The motive behind the introduction of Goods and service tax is to bring together state economies and improve the overall economic growth of the nation. In intra-state sales case, there are two kinds of GST i.e Central GST and State GST whereas inter-state sales will be charged to integrated GST.
Let us understand the concept of Goods and service tax at multi-stage given below:
From manufacture to the final sale to the consumer, there are multiple change-of-hands an item goes through along its supply chain. Consider the following case:
Goods and Services Tax will be levied on each of these stages which makes it a multi-stage tax.
In the above figure, the manufacturer who makes biscuits buys flour, sugar, and other material. When the flour and sugar are mixed and baked into biscuits then the value of the inputs increases. Then, the manufacturer sells the biscuits to the warehousing agent who packs large quantities of biscuits and labels it. Here, another addition of value will occur after which the warehouse sells it to the retailer. He packages the biscuits in smaller quantities and invests in the marketing of the biscuits. Therefore, its value increases. On the other hand, Goods and services tax will be levied on these value additions i.e the monetary worth added at each stage to achieve the final sale to the end customer.
In the current regime, Goods and service tax launching is taken as a significant step in the reform of indirect taxation in India. The nation was dealing from so long with the double taxation system, cascading, a multiplicity of taxes, taxable events, classification issues etc but the amalgamation of various central and state taxes into a single tax would help the country to get rid of all of them.
Following are the benefits offered by Goods and services tax to the Indian Economy:
Following are the benefits for consumers:
Following are the positive impact of Goods and services tax on Traders:
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