GST is an indirect tax that is levied on the consumption, sale and manufacture of goods and services. With the introduction of GST, the present indirect taxes are replaced. It is normally levied at National Level. As per the previous indirect taxes prevailing in India, taxes are levied at each stage of sale and purchase. Such taxable goods are normally taxed at single rate till the goods are reaching to the ultimate customers.
With the introduction of GST, the rate of export will be zero and that of import will be taxed at the rate at which the domestic goods are taxed. GST will bring an overall reform in the taxation system of India. The central and states taxes will be amalgamated without any cascading effects. The overall burden on the goods and services will be reduced. This will help to encourage the movement of goods freely from one state to another.
There are three types of GST-
CGST- The full form of CGST is Central goods and service tax. CGST will subsume all the present taxes along with surcharges and cesses. Revenue will normally be collected at centre. Input tax credit can be used to make the payment against the Central goods and service tax.
SGST – The full form of SGST is state goods and service tax. All types of state taxes on such goods and services are subsumed. The revenue will be collected at state.
IGST – The full form of IGST is integrated goods and service tax. If the goods are moved from one state to another, IGST is levied. The rate is equal to domestic rate in case of import of goods and is zero rated in case of export. When the goods are manufactured or services are rendered, it is imposed. With the introduction of GST, taxes such as VAT, Excise duty, Sales tax, Import Duty and Export Duty are subsumed.
Previously, if the tax is levied at one stage, it will be taxed at another stage as well. This is known as cascading effect. It is necessary to bring amendment in the structure of taxes. With the implementation of GST, VAT has been replaced. There will be comprehensive tax base with least amount of exemptions with the introduction of GST. The cascading effect will be reduced to a great extend. It has its direct impact on the structure of tax, tax compliances and the payment of tax.
It will overhaul the current system of indirect taxes in India. It will also have its effects on the business. Such as an impact on Accounting, pricing, etc. VAT will be completely abolished with the introduction of GST. Indirect taxes such as service tax, excise duty and VAT will be subsumed. Separate rules are provided for the supply of goods and services. Place and time of the goods and services play an important role. It is necessary to determine the time and place of supply of goods and services under GST.
Thus, introduction of GST will make huge difference.