Types of GST in India – CGST, SGST, IGST & UTGST
What is GST?
When the consumer buys goods or services, goods and services tax (GST) is imposed on indirect tax. India’s current tax scenario is tilted with various indirect taxes, whose goal is GST with a single pan India comprehensive tax, by bringing all such taxes under a single umbrella. The purpose of the bill to eliminate the cascading effect of taxes on production and distribution prices on goods and services.
Cascading effect of taxes due to the levy of various tariffs by states and central governments is different. In this tax structure, Indian products are burdened by taxes, which affect their prices, and as a result, sales in the international market. This is the reason that the new tax system will help boost exports. In the changed scenario, under central and states, the following tasks will be reduced to the following GST.
Types of GST in India:
- UTGST (UGST)
CGST: Central GST
Its full form is Central Goods and Services Tax. This tax is paid to the Central Government at the time of purchases goods or services within the state or intra-state supply. If a trader of a state purchases goods or services from another dealer in his own state, then on this deal he will have to pay the CGST to the Government of India. At present, the rate of CGST is equal to the SGST rate in India and it is recovered at the same time.
SGST: State GST
Its full form is State Goods and Services Tax. SGST also seems to be in the position of intra-state supply within the state of goods and services. If a trader of a state purchases goods or services from another dealer in his own state, then he will also have to pay SGST on this transaction. At present, the rate of SGST is equal to the CGST rate in India.
IGST: Integrated GST
Its full form is Integrated Goods and Services Tax. IGST is charged when a product or service is taken from the state to the state. This tax will be collected by the central government and further distributed in the respective states.
UTGST: Union Territory GST
Its full form is the Union Territory Goods and Services Tax. This is actually the other name of State GST i-e, SGST. Those who come under the category Union Territory States. On behalf of these state GST, UTGST is recovered in Union Territory States instead of SGST. Likewise SGST, UTGST has to pay over the deals within the union territories. It has to be paid with the CGST and in equal proportions.
Central Taxes replaced by GST Bill
- Central Excise Duty
- Additional Duties of Excise and Customs
- Special Additional Duty of customs(SAD)
- Service Tax
- Cess and Surcharges on the supply of goods and services.
State Taxes Subsumed in the GST Bill
- VAT – Value Added Taxes
- Central Sales Tax
- Luxury Tax
- Purchase Tax
- Entry Tax
- Entertainment Tax
- Taxes on advertisement
- Gambling and State Cess and Surcharges
The Lok Sabha passed the GST Bill
The Lok Sabha had passed the Constitution (122nd Amendment) (GST) Bill, 2014 on August 8, 2016. The GST bill was passed by the two-thirds majority, in which 443 members were voting in their favor and there was no one in the last vote. The GST bill was passed in favor of 203 votes by the Rajya Sabha on 3rd August 2016 and there was no one against of it. With the passage of this historic GST bill, the concept of “One Nation, one Tax” has become concrete.
The Central Government has set ambitious targets to get out of goods and services tax (GST) from April 1st, 2017. After unveiling a detailed roadmap for GST implementation, Union Finance Minister Arun Jaitley announced this. This announcement was made after Rajya Sabha had passed the Constitution (122nd Amendment) GST Bill, 2014.
GST: Goods Service Tax & its Provision and Benefits For Businesses, Government, Consumers
Provisions of the Bill
- The GST will have two components keeping in mind the federal structure of India: Central GST(CGST), State GST (SGST)
- For goods and services that pass through several states or imports, the central will levy another Tax, the Integrated GST(IGST)
- Alcohol for human consumption has been kept out of the purview of GST.
- It empowers the center to impose an additional tax of up to 1% on the inter-state supply goods for two years or more. This Tax will accure to states from where the supply originates.
- Tobacco and tobacco products for compensation to states for revenue losses arising from the implementation of GST for up to 5 Years, based on the recommendations of the GST Council.
- Initially, GST will not apply to some products such as
- petroleum crude
- high-speed diesel
- motor spirit (petrol)
- natural gas and aviation turbine fuel.
The GST Council will decide when GST will be levied on them.
Benefits of GST
For Industries and Businesses
- There will be uniformity of tax rates and structures across the country. It will increase certainty and ease of doing business i-e, make it tax neutral, irrespective of the choice of place of doing business in the country.
- Reasons to remove unlimited tax credits in systematic cascading, price chains, and state borders. This will help to reduce the hidden costs of doing business.
- This will make compliance easy and transparent. There will be a strong and comprehensive IT system in the GST regime. Therefore, all taxpayer services like registration, payment, and returns etc. will be available to online taxpayers.
- This would reduce the transaction costs of doing business which will eventually lead to better competition for trade and industry.
- The replacement of major central and state indirect taxes in GST will reduce the cost of locally manufactured goods and services. It would increase the competition for Indian goods and services in the international market and promote Indian exports.
For Central and State Governments
- To end the IT system, it will be easier to administer a strong end-supported GST center and all other indirect taxes in the state.
- GST will have better tax compliance as a result of the strong IT infrastructure of the government, which will stop leakage and encourage tax compliance by traders.
- GST would lead to higher revenue efficiency as the government is expected to reduce the cost of collection of tax revenue.
For the Consumers
- Due to the proportion of the value of goods and services, similar to the single and transparent tax. This will remove many hidden taxes, which will create transparency of taxes made to the final consumer.
- The burden of total tax on most commodities would come down due to efficiency gains and leakage prevention which would benefit the consumers.
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