The Goods and Services Tax (GST) was introduced in India in 2017 to replace multiple indirect taxes. Service tax, value-added tax (VAT), and excise duty created a single unified taxation system.
GST is a VAT levied at the production and distribution stages, which makes it a multi-stage, destination-based tax levied as further value is added to the product. This might sound complex, so we’ve explained GST in detail in this blog. We’ll explain what kind of tax is GST and the current GST tax slabs.
GST is an indirect tax levied on the supply of products and services used for domestic consumption. It is levied on the consumers' final price of the products. Businesses selling the said product are responsible for charging this GST from the consumers and sending it to the government. This ensures that GST is levied on every stage of value addition.
In India, GST has a dual structure in that central and state governments within their jurisdiction can levy GST on goods and services. The dual structure has two components — central GST (CGST) and state GST (SGST). These taxes are levied when goods' supply and consumption occur in the same state. The tax is collected by both the state and the centre.
When supply and consumption occur in different states, integrated GST (IGST) is levied. It is the sum of CGST and SGST collected by the centre and then distributed to the state where the product was consumed.
Following are the types of tax slabs available under GST:
GST was launched to simplify the tax system, reduce tax evasion, increase revenue collection, and increase compliance. It helped reduce the cascading effect of taxes by levying taxes only on the value added at each stage and not on the product's entire value. This lessened the tax burden and excessive costs for consumers.
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Goods and Service Tax is an indirect and value-added tax.
GST was implemented in India on July 1, 2017. The GST council is responsible for discussing various matters related to GST.