Today I am writing about
the GST. I am sure you all must have known that Rajya Sabha has passed the GST
bill almost unanimously this bill is being touted as one of the biggest reforms in India after
1991 financial reforms. So what is exactly this table and how does it impact
us? Before moving to that we will first understand what is GST?
GST means goods and
services tax, which means taxes which applies uniformly to goods and services and
also it is a uniform tax across India. To understand GST better we need to
understand our present taxation system. Tax structure in India is basically
divided into two broad categories:
Direct Taxes: Direct taxes
are basically the taxes which are taken directly from the individuals for
example income tax, corporate tax or direct taxes.
Indirect Taxes: Indirect
taxes are paid by the intermediaries on behalf of the final consumer. Indirect
taxes are collected by both central and state governments in which central
government collects majorly three type of indirect taxes; excise tax, service
tax and customs. Excise tax is the tax on production and manufacturing of goods
obviously applied by central government and similarly service tax is the tax
which is on services provided or are to be
provided by the vendor and custom is the tax on international trade.
Moving on to state level
taxes where our sales tax is applied on goods distributed within state. Central
sales tax is applied on goods moving from one state to another. Similarly
entertainment, acts of trial, luxury or all other taxes which state levies now.
To understand this better
let's take an example, we already know the central excise is applied on the
manufacture of the product and our sales tax is applied on the distribution of
the product, so here the good is supposed at 100 rupees and the Central Excise
is at 10 percent which makes it at 110. Now why it is applied on that 110 at
14% which comes out at 15.4 which basically takes tax to 25.4 and our product
becomes from 100 to 125.40. Now with GST both central and state GST is applied
on the supply side of the product not on the manufacturing so if we take
Central GST at 10 percent which is same as Central Excise. We have taken in
above example that it comes out to be 10 and state GST at 14 which is at same
percentage as VAT. So its beneficial that we don’t need to pay tax on tax.
0 Comments