GST stands for Goods and Services Tax. It’s a comprehensive, multi-stage, destination-based tax that is levied on every value addition. Introduced on July 1, 2017, GST replaced multiple indirect taxes like VAT, excise duty, and service tax, aiming to unify India’s complex tax structure into a single system.
Components of GST
GST in India is divided into four main components:
- CGST (Central Goods and Services Tax): Levied by the Central Government on intra-state supplies.
- SGST (State Goods and Services Tax): Levied by State Governments on intra-state supplies.
- IGST (Integrated Goods and Services Tax): Levied by the Central Government on inter-state supplies and imports.
- UTGST (Union Territory Goods and Services Tax): Levied by Union Territory Governments on intra-UT supplies.
How GST Works
GST is a destination-based tax, meaning it’s collected in the state where the goods or services are consumed, not where they’re produced. For example, if a product is manufactured in Maharashtra and sold in Karnataka, the tax revenue goes to Karnataka.
GST Rate Slabs
GST is applied in multiple slabs:
- 0%: Essential items like fresh fruits, vegetables, and milk.
- 5%: Items of mass consumption like sugar and edible oil.
- 12% & 18%: Standard rates for most goods and services.
- 28%: Luxury items and sin goods like tobacco and high-end cars.
Key Features
- Multi-Stage Tax: Applied at every stage of the production process.
- Value Addition: Tax is levied only on the value added at each stage.
- Input Tax Credit: Businesses can claim credit for the tax paid on inputs.
- Digital Compliance: GST processes are managed through an online portal, simplifying filing and compliance.
Understanding GST is crucial for businesses and consumers alike, as it affects pricing, compliance, and the overall economy.
