What is the Goods and Services Tax (GST)?
GST is a single uniform indirect tax which was introduced to replace Central and State indirect taxes such as Excise, Service Tax, VAT and others.
GST applies on all types of businesses, small or large. This makes it one of the greatest tax reforms in the country.
The entire nation will follow a unified tax structure. As the name suggests, GST will be applicable on both goods and services and India will follow a dual system of GST to keep both the Centre and State independent of each other.
The GST council will be headed by the Union Finance Minister and it will consist of various State Finance Ministers.
GST will be devised as a four-tiered tax structure with tax slabs of 5%, 12%, 18%, and 28% for various different categories of products and services. 0% rate is kept for most essential goods such as rice, wheat, Vegetables etc.
What is CGST, SGST, IGST?
Under GST..
CGST is a tax levied on Intra State (within a particular state only) supplies of both goods and services by the Central Government and will be governed by the CGST Act.
SGST will also be levied on the same Intra State supply but will be governed by the State Government SGST Act.
This implies that both the Central and the State governments will agree on combining their levies with an appropriate proportion for revenue sharing between them.
However, it is clearly mentioned in Section 8 of the GST Act that the taxes be levied on all Intra-State supplies of goods and/or services but the rate of tax shall not be exceeding 14% each.
IGST is a tax levied on Inter State (outside a particular state) supplies of both goods and services by the Central Government and will be governed by the IGST Act.
Note: Any tax liability obtained under SGST can be set off against SGST or IGST input tax credit only.