On 1 July 2017, the Government of India introduced the Goods and Services Tax (GST), which consolidates all indirect taxes levied on goods and services. With basic GST slabs of 5%, 12%, 18%, and 28%, it simplifies taxation. Before GST rates were put in place, the centre and the state governments implemented systems to calculate and charge taxes on goods and services as they saw fit.
To ensure seamless compliance, businesses should familiarise themselves with the GST state code list, which is essential for accurate GST filings and understanding state-specific tax implications. Types of GST also play a vital role in understanding the different categories of taxation.
Here is a look at the taxes that GST has replaced.
CGST explained
The central Goods and The Central Goods and Services Tax (CGST) is a crucial component of the Goods and Services Tax (GST) framework implemented in India. Enacted to simplify and streamline the indirect taxation system, CGST specifically pertains to the taxation of intra-state transactions of goods and services. In the context of CGST, "intra-state" refers to transactions that occur within the boundaries of a single state.
Understanding CGST is crucial for businesses to ensure compliance with the prevailing tax regulations, benefit from input tax credits, and contribute to the overall efficiency of the GST system. Additionally, staying informed about updates and amendments to CGST provisions is essential for businesses to navigate the dynamic landscape of indirect taxation in India.
Taxes levied by the centre that falls under GST
- Central excise duty
- Additional excise duty
- Special additional duties of customs
- Service tax
- Additional customs duty or countervailing duty
SGST explained
State Goods and Services Tax (SGST) is an integral component of India's Goods and Services Tax (GST) framework. Specifically designed for intra-state transactions, SGST is levied by state governments. It operates in conjunction with Central Goods and Services Tax (CGST), ensuring a comprehensive taxation structure. Revenue generated through SGST remains within the respective state, empowering state governments to meet their fiscal responsibilities. Businesses must comply with SGST regulations, including filing returns and adhering to state-specific tax rates, contributing to the overall effectiveness of the GST system at both central and state levels.
State taxes that fall under GST
- State value-added tax.
- Central sales tax
- Luxury tax
- Octroi and entry tax
- Entertainment and amusement tax
- Tax on advertisements
- Purchase tax
- Taxes on lotteries, betting, and gambling
- State surcharges and cess that relate to goods and services.
Now that you know the taxes that it replaces, look at how GST is beneficial.
Benefits of GST
Increase in revenue
It has been predicted that GST will boost the economy and increase India’s GDP in the long run. As far as the immediate impact goes, GST has undoubtedly broadened the taxpayer base by standardising the threshold for liability. Tax compliance is also going to be easier in the long term. An online taxation system means greater efficiency, accountability, and therefore lowers the chances of getting away with tax fraud.
Additional read: What is GST?
Simplifies tax filing
As a business owner, you may find that adjusting to the new GST regime requires time, money, and management. But in the long term, the process of filing GST returns will become a lot easier. Moreover, since all major indirect taxes have been consolidated, you no longer need to maintain large departments focused on extensive tax documentation. What is more, if you are a start-up, you no longer need to register for various individual taxes like VAT and service tax.
Additional read: Impact of GST
Made certain items affordable
If you are a private taxpayer, you will notice that the cost of certain products has been reduced—for example, the decrease in the tax on private taxis from 6% to 5%. For air travel, flying economy class got marginally cheaper with a tax of 5%. The price of eating out has not seen any significant changes. However, this depends on the nature of the establishment. Whether it has AC or not, whether it serves alcohol, and whether the turnover is less than Rs. 50 lakh per year. On you will find that you do not have to pay GST on unprocessed cereals like rice and wheat, unprocessed milk, vegetables, fish, meat, and unbranded flours.
With this information in hand, be sure to stay abreast of the latest GST updates and deadlines. This way, you can make sure that you file GST returns and charge customers GST appropriately.
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