Understanding The Complete “GST” Story


Recently on July 1st 2017 the Indian government brought a new type of tax into effect; Goods and Service Tax (GST). Goods and Service Tax is an indirect tax, which means it is a tax collected is collected by the intermediary (retail store) from the source of final consumption (consumer). The intermediary later files a tax return and pays the tax proceeds to the government. Calculation of Indirect tax is generally unknown to the consumer, but with GST the consumer has a benefit of knowing to pay only one fixed tax for the goods and services he receives. But there are different types of GST namely Central Goods and Service Tax (CGST), State Goods and Service Tax (SGST), Integrated Goods and Service Tax (IGST), and Union Territory Goods and Service Tax (UTGST). To know more about them in details:

CGST- The Central Goods and Service Tax is imposed by the central government on the intrastate supplies of goods and service and is governed by the CGST Act. Intrastate supply means the location of supplier and the place of supply is within a state. On the same intrastate supplied goods and service, SGST is also imposed by the state government, and then the proceeds are divided among state and central in an agreed ratio. Taxes like Central Excise Duty, Service Tax, Central Sales Tax, Customs Duty (all types of customs duty) come under CGST. The major share of tax revenue under CGST is transferred to central government whereas the major share of SGST tax revenue is transferred to state government.

SGST- the State Goods and Service Tax is a tax imposed by the state government on intrastate supplies of goods and service governed under the SGST Act. Any tax liability incurring under SGST can be set off against only SGST or IGST input tax credit. SGST is to be paid to the account of the respective state government only. Taxes like State Sales Tax, luxury tax, Value Added Tax, Entertainment Tax, Tax on the lottery, State Ceases and Surcharges come under SGST.

IGST- Integrated Goods and Service Tax is applicable to all inter-state supply of goods and services and governed under the IGST Act. Inter-state supply of goods means that the location of the supplier is in a different state to the place of supply. The tax is also charged on any supply of goods in both cases of import into India and export from India. The IGST is shared between the central and state. And under IGST exports are zero-rated. IGST is a replacement for the previous Central State Tax.

UTGST- the Union Territory Goods and Service Tax is a kind of SGST since SGST cannot be charged in union territory without the legislature. The union territories of India are Chandigarh, Lakshadweep, Daman and Diu, Dadra and Nagar Haveli, Andaman and Nicobar Islands. The main purpose of GST is to apply a collection of tax on every Intra Union Territory supply of goods/service in union territories in the absence of a legislature. The properties of UTGST are mostly similar to those of SGST.

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