0Gst or Goods And Services Tax is a form of Indirect Tax. Before we understand what GST is, we must understand the differences between direct and indirect taxes.
Direct Taxes Vs Indirect Taxes: Tax can be defined as an obligatory contribution paid to the Government, which, in turn, provides public services to the people. In India, taxes can be broadly classified as Direct Taxes and Indirect Taxes.
Direct Taxes:
- The burden of tax is on the taxpayer and cannot be passed on.
- Tax is paid directly to the Government.
- Direct Taxes are Progressive in nature: Poor do not feel the burden of tax.
- Tax is levied on Income not Consumption;
- Income Tax comes under the purview of Direct Taxes.
Indirect Taxes:
- The burden or the incidence of tax is passed on in stages, and is finally borne by the consumer.
- At each stage, tax is paid to the Government, wherein, the taxpayer collects his tax debt from the next party.
- The final customer pays the actual tax.
- Indirect taxes are regressive in nature poor may feel the burden of tax.
- These are taxes on Consumption and not on Income.
- GST comes under the purview of Indirect Taxes.
GST is applicable on the “supply” of services or goods as opposed to the earlier concept of taxation on the manufacture of goods (Excise duty); sale of goods (Sales tax); or providing of service (Service Tax).
GST is a destination-based tax structure unlike the origin-based structure that existed previously. In order to implement GST, a dual GST system has been adopted which is imposed concurrently by the Centre and States.
As per the dual GST system, Goods and services are simultaneously taxed under GST by the Centre and States. GST extends to whole of India including the State of Jammu and Kashmir.
GST comprises of:
- Central Goods and Service Tax (CGST): Levied and collected by Central Government.
- State Goods and Service Tax (SGST): Levied and collected by State Governments/Union Territories with State Legislatures, on intra-State supplies of taxable goods and/or services.
- Union Territory Goods and Service Tax (UTGST): Levied and collected by Union Territories without State Legislatures, on intra-State supplies of taxable goods and/or services.
- Integrated Goods and Service Tax (IGST): Levied by Central Government on all Inter-State supplies.
