What is GST?

What is GST & how it works?

GST stands for Goods and Services Tax. It is an Indirect tax which introduced to replacing a host of other Indirect taxes such as value added tax, service tax, purchase tax, excise duty, and so on. GST levied on the supply of certain goods and services in India. It is one tax that is applicable all over India.

 Given below is how will GST works:

• Manufacturer: The manufacturer will have to pay GST on the raw material that is purchased and the value that has been added to make the product.
•  Service Provider: Here, the service provider will have to pay GST on the amount that is paid for the product and the value that has been added to it. However, the tax that has been paid by the manufacturer can be reduced from the overall GST that must be paid.
•  Retailer : The retailer will need to pay GST on the product that has been purchased from the distributor, as well as the margin that has been added. However, the tax that has been paid by the retailer can be reduced from the overall GST that must be paid.
•  Consumer : GST must be paid on the product that has been purchased.

•  History Of GST

   On July 1st 2017, the Goods and Services Tax implemented in India. But, the process of implementing the new tax regime commenced a long time ago. In 2000, Vajpayee, then Prime Minister of India, set up a committee to draft the GST law. In 2004, a task force concluded that the new tax structure should put in place to enhance the tax regime at the time.

   In 2006, Finance Minister proposed the introduction of GST from 1st April 2010 and in 2011 the Constitution Amendment Bill passed to enable the introduction of the GST law. In 2012, the Standing Committee started discussions about GST, and tabled its report on GST a year later. In 2014, the new Finance Minister at the time, Arun, reintroduced the GST bill in Parliament and passed the bill in parliament in 2015. Yet, the implementation of the law delayed as it was not passed in parliament.

   GST went live in 2016, and the amended model GST law passed in both the house. The President of India also gave assent. In 2017 the passing of 4 supplementary GST Bills in parliament as well as the approval of the same by the Cabinet. Parliament then passed 4 supplementary GST Bills and the new tax regime implemented on 1st July 2017. 

  Tax Laws Before the Implementation of GST,

  •  The Center and the State used to collect tax separately. Depending on the state, the tax regimes were different.
  •  Even though import tax was levied on one individual, the burden was levied on another individual. In the cases of direct tax, the taxpayer must pay the tax.
  •  Prior to the introduction of GST, direct and indirect taxes were present in India.

   Any company that is eligible under GST must register itself in the GST portal created by the Government of India. The registered entities will get a unique registration number called GSTN.