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Goods and Service Tax (GST) is a single inclusive tax for the entire country. The introduction of Goods & Service Tax replaced several indirect taxes in India, including the tax levied by Central Government on manufacture (Central Excise duty), provision of services (Service Tax), special additional duties of customs etc. Other than this the tax levied by State Governments on retail sales (VAT), Luxury Tax, entry of goods in the State (Entry Tax), etc. also fall under GST. GST further is divided into four types which include SGST, CGST, IGST, UTGST.
GST is charged on supply of goods or services or both at each stage of the supply chain from manufacture or import and till the last retail level. This means that all the taxes that were levied by the Central or State Government on the supply of goods or services fall under the umbrella of GST.
The introduction of GST is aimed at creating a single national market, common tax base, and common tax laws for States and the Centre. Other significant features of GST include the use of technology through Goods and Services Tax Network (GSTN), which helps in creating transparency in tax burden and improve the accountability of the tax administrations of Centre and State governments. In this blog we shall discuss in detail GST and its types including SGST, CGST, IGST and UTGST.
State Taxes replaced by introduction of GST:
Central Taxes replaced by the introduction of GST:
There are four types of GST, namely:
The applicability of SGST, CGST, IGST depend upon the locations of the supplier of the goods/services and that of consumers. Therefore, to determine the applicability of CGST, SGST and IGST it is important to know whether the taxable transaction is an Intra-State or an Inter-State supply.
Intra-State Transactions: In case of Intra-State transactions where the supply of goods happens within the same state, the seller collects both SGST and CGST from the buyer. SGST is deposited with the State Government whereas CGST gets deposited with the central Government.
Inter-State Transactions: In case of Inter-State transactions where the supply of goods happens between two different states, the supplier charges IGST. For an Inter-State transaction, a seller has to collect IGST from the buyer.
Following is the detailed explanation of SGST, CGST, IGST and UTGST:
First, let us understand what is Input Tax Credit?
The Input Tax Credit means while paying tax on the output (final product) one can reduce the tax already paid on inputs (purchase).
For example, you are a manufacturer, and you have to pay Rs 500 as the tax on output (final product), and you have paid Rs 300 as the tax on input (purchase). Here, you can claim Input Credit of Rs 300, and you will only have to pay Rs 200 in taxes.
Conditions to claim Input Tax Credit:
Input Tax Credit applies to the business activities registered under the GST Act, and only a registered taxable person is applicable to claim the benefit of Input Tax Credit of GST. Further, the registered person needs to fulfill the following conditions to claim ITC:
Some Important Points related to GST Input Tax Credit
Read our article: Composition scheme under GST & Presumptive Taxation Scheme
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