{"id":1581,"date":"2017-06-15T07:11:40","date_gmt":"2017-06-15T07:11:40","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=1581"},"modified":"2021-01-05T15:00:45","modified_gmt":"2021-01-05T09:30:45","slug":"what-is-gst-and-gst-benefits","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/what-is-gst-and-gst-benefits\/","title":{"rendered":"What is GST? Benefits of Goods and Service Tax"},"content":{"rendered":"

The introduction of the Goods and Service Tax (GST) is a revolutionary step taken by the Indian Government to create a simplified and integrated system of indirect taxation in India. It was launched on 1st<\/sup> July 2017 and replaced all the existing myriad of indirect taxes levied by the central and state governments like excise duty, VAT,  Central Sales Tax, Octroi and entry tax, entertainment tax, service tax etc.<\/p>\n\n\n\n

It brought all these taxes under the same fold and made compliance easier. One of the major benefits of Goods and Service Tax<\/strong> (GST) is to mitigate the cascading effect of taxes, i.e. the problem of charging tax on tax.<\/p>\n\n\n\n

What is GST?<\/h2>\n\n\n\n

GST is a comprehensive, multi-stage, destination-based consumption tax on value addition. The major change here is that GST is a destination-based tax, i.e. the taxing authority, having jurisdiction in the final place of consumption, collects the tax on such goods and services.<\/p>\n\n\n\n

Every trader before applying for GST registration in India<\/strong><\/a> first needs to understand the features of this tax regime. The above-mentioned definition of GST is discussed in detail in this article.<\/p>\n\n\n\n

When we say that it is a multi-staged tax, then it means that it is levied on every stage in a supply chain. For example, in the production cycle of an item, various stages are included in raw material procurement, manufacturing, warehousing, distribution and final consumption. GST will be levied on each of these stages separately.<\/p>\n\n\n\n

It is a tax on value addition; <\/strong>however, in real time it is very difficult for the government to keep track of every value addition. Therefore the concept of Input Tax Credit<\/strong><\/a> (ITC) is introduced, which allows the supplier to claim ITC on taxes already paid on input hence eliminating the cascading effect.<\/p>\n\n\n\n

The most important feature of GST is that it is a destination based consumption tax. <\/strong>It is a major reform and big shift from the existing tax regime where tax is charged at the place of origin. After the implementation of GST, the taxing authority of the final place of consumption will collect the taxes.<\/p>\n\n\n\n

 For example, A is the producer state from where the goods are supplied to State B where they are finally consumed. In the current scenario, taxes are collected and enjoyed in the state of origin i.e. State A. However in the new tax regime, though the taxes will be collected by State A, the final enjoyment of tax will be done by State B which is the consumer State.<\/p>\n\n\n\n

Note:<\/strong> Exports are zero-rated. As GST is a destination-based tax, in the case of exports, the place of final consumption is in the foreign land, which is outside the taxing authority of the Indian government thus as a result, exports are zero-rated. However, the input tax credit can be claimed against it.<\/div>\n\n\n\n

Who collects it?<\/h2>\n\n\n\n

We can say that GST is a dual system where taxes will be imposed at both federal and state levels. Broadly GST can be categorized into two types:<\/p>\n\n\n\n