GST, or the Goods and Services Tax, is a type of indirect tax that has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Parliament approved the GST Act on March 29, 2017, and it came into effect on 1st July 2017. To put it simply, GST is charged on the sale of goods and services. In India, GST is a thorough tax system, a comprehensive, multi-stage, destination-based tax levied on every value addition. It's a unified indirect tax law for the entire country. In the GST system, the tax is levied at every point of sale. In the case of intra-state sales, both Central GST and State GST are charged. All the inter-state sales are applicable for Integrated GST.
Let us find out the definition of GST, in detail:
Multi-Stage: An item passes through many hands in its supply chain journey, from manufacture to the consumer's final sale.
Let's look at these stages:
Buying raw materials
Making or manufacturing
Storing finished goods
Selling to wholesalers
Wholesalers selling to retailers
Retailers selling to customers
The GST is levied in each of these stages making it a multi-stage tax.
Value Addition: A biscuit maker purchases flour, sugar, and other materials. The value of these ingredients rises when the sugar and flour are mixed and baked into biscuits.
Next, the biscuit manufacturer sells the biscuits to the warehousing agent who packs large quantities of biscuits in cartons and labels them. This adds more value to the biscuits. Then, the warehouse operator sells it to the retailer.
The retailer divides the biscuits into smaller quantities and invests in the marketing of the biscuits, thus increasing their value. GST is charged on these value increases, i.e. the monetary value added at each stage to achieve the final sale to the end customer.
Destination-Based:
Think about products made in Maharashtra and sold to the final consumer in Karnataka. Because GST is applied where the goods are consumed, the entire tax revenue will go to Karnataka and not Maharashtra.
The journey of GST in India started in 2000 when a committee was set up to draft the law. It took 17 years from then for the Law to evolve. In 2017, the GST Bill was approved in the Lok Sabha and Rajya Sabha. The GST Law officially came into force on 1st July 2017.
Objectives Of GST: Here are the objectives of GST:
To achieve the ideology of ‘One Nation, One Tax’
To subsume a majority of the indirect taxes in India
To eliminate the cascading effect of taxes
To curb tax evasion
To increase the taxpayer base
Online procedures for ease of doing business
An improved logistics and distribution system
To promote competitive pricing and increase consumption
