Basic Term and Full Form of GST

GST stands for Goods and Services Tax. Under the GST regime, the government levies GST on all goods and services

Basic Term and Full Form of GST

Basic Terminology and Full Form of GST

GST stands for Goods and Services Tax. Under the GST regime, the government levies GST on all goods and services. To better understand this tax regime, you must first understand the history of GST and its various terms. More fascinating information about the GST regime can be found in this post.

GST's History

Before the new GST regime, India's tax system was quite different. It was primarily based on production, and there were numerous central and state taxes. This system was not universal, and different states imposed different taxes based on state laws.

It wasn't entirely clear. As a result, there was widespread corruption, and consumers faced numerous challenges. Prior to the GST regime, numerous indirect taxes were levied on consumers, such as customs duty, entertainment tax, and so on.

The debate over implementing the GST regime was heated and protracted. It was first implemented in India in 2000 by Prime Minister Atal Bihari Vajpayee. He formed a committee and proposed changes to the current tax system.

The union ministry proposed implementing GST in 2006. However, it was later amended several times. It was revealed in 2011. On March 29, 2017, the central government passed the bill. In 2017, GST was implemented for the first time.

Why was GST implemented?

GST was implemented to reduce the amount of tax levied by the state and central governments, as well as to simplify and improve India's tax system. The central government promoted the 'One Nation, One Tax' slogan.

The implementation of the GST regime was revolutionary because it was required to make the tax system consistent across India's various states. Because it is simplified, the new tax regime is much easier for consumers to understand, and each state has a uniform and fixed tax structure.

The GST system significantly reduced the possibility of corruption, which greatly benefited the country's general citizens. However, the main reason for instituting the GST system was to completely eliminate the previous tax system's cascading effects.

In the previous tax system, a tax was levied on a tax for a product at each level of sale, resulting in a cascading effect. As a result, tax is levied and paid on a regular basis.

In the previous tax system, the end consumer was forced to pay "tax on already paid tax" because the tax was levied on a value that already had the previous consumer's tax. The GST regime was implemented by the government to eliminate the cascading effect of taxes, so that the end user does not have to pay taxes repeatedly. This ensured that the entire nation was taxed only once.

GST Components

The new GST regime distinguishes four types of GST components:

UTGST

UTGST is an abbreviation for Union Territory Goods and Services Tax. This tax is levied by the government on the supply of goods and services to all Union Territories in India. Lakshadweep, Andaman and Nicobar Islands, Chandigarh, and other union territories exist in India. Furthermore, the CGST may be levied in addition to the UGST.

IGST

IGST is an abbreviation for Integrated Goods and Services Tax. The central government levies this tax on the exchange of goods and services between Indian states. After collecting all IGST taxes, the central government divides them evenly among the states. The IGST is also levied on imported goods.

SGST

The acronym SGST stands for State Goods and Services Tax. The state government collects this tax, which is levied on the supply of goods and services within the state.

CGST

CGST is an abbreviation for Central Goods and Services Tax. This tax is levied by the central government on the supply of goods and services between states.

GST Advantages

  • Because the consumer does not have to pay taxes on a regular basis, the price of goods is significantly lower.
  • Tax cascading has been eliminated, and the end consumer now only has to pay one tax. As a result, the tax system has become extremely simple and uniform.
  • GST helped to reduce corruption by discouraging the practise of selling without any receipts.
  • The Government of India has made it law that companies with a turnover of less than 20,000 are exempt from paying GST, which has greatly aided small businesses.
  • Small businesses have benefited greatly from GST because they only have to pay one tax.
  • The tax filing process has become simpler now that you can register and file for GST online.
  • The transparency and accountability of India's unorganised sectors have greatly improved since the implementation of GST. For online payments in the unorganised sectors, numerous provinces and compliances have been added.
  • Businesses with a turnover of up to 75 lakhs rupees can participate in various composition schemes and pay only 1% of their turnover in GST.

GST Council

The GST Council's regulatory body consists of approximately 33 members. Members were chosen based on their geographical location. The council is made up of 29 members from various states, two from the central government, and the remainder from Union territories. The member must be the finance minister of their home country.

GST Benefits for Businesses

  • Filing returns is a simple process - The returns can be easily filed online. To file your taxes, you must first register and then follow a simple procedure.
  • Investigates corruption - Since the GST motto was "One Nation, One Tax," it is relatively simple to track corruption in the country.
  • Taxation at a consistent rate - Because the tax on the product is the same across the country, it directly contributes to the country's economy.
  • Tax cuts that cascade - Since all indirect taxes have been replaced with GST, the tax cascading effect has been completely eliminated.

GST Disadvantages

Expensive

Every business was required to update their books and accounting software with new GST software (the ERP software). ERP software is relatively expensive, and it requires proper training to operate and manage the software.

Penalties for non-GST businesses

Every business is required to register for GST through the GST portal or face penalties.

Conclusion

The implementation of GST has greatly improved India's tax collection system. It has numerous advantages and has helped many businesses thrive. Although not perfect, with a few minor changes, this tax structure has the potential to significantly improve our country's economy and encourage foreign investment. It is critical to gain a better understanding of this system. From now on, this article by Jordensky will help you better understand all of the components, benefits, and drawbacks of GST, as well as its history.