We hope this video has given you some insights about Common man’s Guide to How GST works?.
If you would like to know more here is the reference book used:
GST Made Simple: A Complete Guide to Goods and Services Tax in India
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In this lesson you will be knowing about
Three important questions How GST works in India, how gst impacts common man, how gst work.
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To get answers for these we will see gst simple explanation, gst simple explanation India. Typically gst in India is not the same as in the world. This gst lecture is prepared specifically for gst for upsc, gst for ias, gst ssc, topics in mind.
However, it is generally discussing what is gst, what is gst in India, gst rate structure in India, gst full form and varous other key aspects of the gst.
GST India 2017 reveals about India gst basic concepts and this is for gst explained upsc.
The lecture gst explained in English. We don’t have gst explained in hindi version as of now. We have covered this with gst examples India, gst example India.
What is GST?
GST’s Expansion is Goods and Services Tax. As the name implies it is the single tax system for both Goods sold physically and the services rendered.
We can define GST like this,
Goods and Services Tax is a single tax rate levied on the manufacture, sale and consumption of goods and services at a national level.
Before seeing how GST is fit into the Indian taxation system lets see what are the existing tax systems in India.
Types of Taxes in India
There are two kinds of taxes exist in India.
• One is Direct Taxes like Corporate tax, Income tax – which is paid by directly by individual to the government depends upons his income.
• And the other one is Indirect Taxes which is paid by a representative for example when we buy anything in the super market the MRP includes taxes and the tax is remitted to the Govt by the retailer after consolidating his sales.
Indirect taxes is collected by both the Central and state governments at different levels of production and sales.
Central Govt
- Excise Duty on Production
- Service Tax on services rendered within India
- Customs Duty on imports are some the taxes levied by central government
State Govt
- Central Sales Tax OR Value Added tax at each level of Sales like Wholesaler, Distributor and Retailer.
- Entertainment Tax, Luxury tax , Lottery Tax etc by the state governments.
Which taxes will be replaces by GST?
GST will be substituting all indirect tax levied by state and central government.
Exports and direct tax like income tax, corporate tax and capital gain tax will not be affected by GST.
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GST Rates
Excluded Items from GST :
1. Customs Duty is kept outside the purview of GST
2. Oil and Natural gas
3. Electricity
4. Alcohol for Human Consumption
The taxes imposed to these items shall be continued as per the structure before GST implementation.
Types of GST.
GST is levied only on the value-added at every stage of production. This will ensure that there is no cascading effect of taxes (tax on tax paid) on inputs that are used in manufacturing of goods.
Normally most of the countries take single GST system. But we in India going for Double GST where states will also will be able to collect taxes on certain scenarios.
The proposed tax system will take the form of “dual GST” which is concurrently levied by central and state government. This will comprise of:
• Central GST (CGST) which will be levied by Centre
• State GST (SGST) Which will be levied by State
• Integrated GST (IGST) – which will be levied by Central Government on inter-State supply of goods and services.
Example :
Now let us look at two real-time examples of the taxation to arrive at a better understanding of the taxation system on how it deals with avoiding cascading effect and combining all the indirect taxes.
First, we will see what will happen when we combine all taxes into a single taxation.
Now we will see how it reduces the cascading effect that is tax on taxes,
I am taking a software which is sold as a product like Microsoft Windows at various levels of its sales cycle for illustration.
Though it is projected as game changer it has a few disadvantages like
1. As advertised it is not single taxation still it has CGST and SGST which taxed separately
2. States may lose revenue (many considerations proposed to overcome this)
3. Tax system can only improve the nation on paper. Real growth does not depends on taxation methods.
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