What is GST? Tax rates, types, meaning and example
Why is GST important?
Before GST came into existence, there was VAT and excise duty, which was being levied on products and service tax on services.
Several litigations were being considered when it came to the tax, which was essential to be collected like excise duty or service duty and VAT. Now the process has been made more simple by only one tax, which is called GST.
What is the goods and service tax in India? Meaning of GST:
GST is referred to as goods and service tax in India, which is an indirect tax considered for the entire nation.
There are around 17 taxes, which are considered in this one GST tax, which are known as – service tax, entry tax, VAT, and so on.
Here are some advantages and disadvantages of GST:
Advantages of GST:
- It helped in simplifying the tax system by reducing the number of indirect taxes.
- Reduced the litigations which were there on the differentiation of goods and services.
- Made doing business easier because now one only needs to register for GST.
- More transparency because of the system.
- The input of a Tax credit mechanism helps reduce the prices of goods and services and further helps the customers.
Disadvantages of GST:
- There is no concept for centralized registration. If a company was operating from many states, then one could take the registration called centralized. Now there is no centralization, so if a person is operating from many states, they need to take registration from every state.
- Compliance has increased the cost of small businessmen.
- The tax rates have also increased in many commodities.
- The threshold limit for manufacturers has become quite less now.
- The cost implementation has also been raised for the small businessmen.
GST structure- How does GST work?
The government has now opted for a dual taxation system. Both the central and state should levy a tax on the supply of goods and services. There are different types of GST which are as follows:
- IGST – Integrated goods and service tax
- SGST- State goods and service tax
- CGST – Central goods and service tax
If the goods and services are being provided in the state, then the CGST and SGST should be levied. If a different state is providing the goods and services, then the IGST will be levied.
GST tax rates on different items and products:
Everyone wanted to have the simplification and only one tax system so that there are no complications. The necessary items are charged at the same rates and the rates are as follows 0%, 0.25%, 3%, 5%, 12%, 18%, and 28%.
There is another tax system that is in the GST, which is Compensation Cess. There are different charges on different products as there is no fixed percentage of compensation cess.
GST has made the tax system a little simpler and better as now there are no different complex terms that you need to register for.