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Components of GST

By Finserv MARKETS - Mar 24,2020
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What are the components of GST?
Goods & Services Tax (GST) combines all the indirect taxes into a comprehensive single tax, both at the Central and State level. And hence, GST plays an important role in eliminating the cascading effect of multiple indirect taxes that are levied on any product or service. GST effectively solves the drawbacks of the previous indirect tax system and for the same, it’s also called a well-designed VAT. Before we get to know the components of GST, let’s first understand the subsumed taxes under GST:

State Taxes

  • Central Sales Tax
  • State VAT
  • Purchase Tax
  • Luxury Tax
  • Entry Tax
  • Taxes on Lotteries, Betting and Gambling
  • Entertainment Tax
  • Taxes on Advertisements
  • State Cesses and Surcharges

Central Taxes

  • Countervailing Duty (CVD) of Customs
  • Central Excise Duty
  • Special Additional Duty of Customs
  • Service Tax
  • Duties of Excise Under Medicinal and Toilet Preparations Act
  • Additional Duties of Excise
  • Cesses and Surcharges

There are 4 major components of GST

1) Central GST (CGST)

2) State GST (SGST)

3) Integrated GST (IGST)

4) Union Territory GST (UTGST)

CGST

Central Goods & Services Tax or CGST is a tax levied upon the transaction amount when you purchase any goods or services. The transaction amount is the value that you pay while buying any goods. CGST is governed by Central Goods & Services Act, 2017.

SGST

State Goods & Services Tax or SGST is levied upon the transaction amount of the goods and services and is governed by section 15 of SGST Act. This GST is levied upon the Intra-state supplies of goods and services.

IGST

Integrated Goods & Services Tax or IGST is an indirect tax imposed by the Central Government for the inter-state supply of goods and services. IGST is applicable for only the goods or services in case of import from India or export from India.

UTGST

It is an indirect tax levied and collected by the Union Territory on the supply of goods or services that take place in Union Territories. This tax is governed by the Union Territory Goods and Services Act (UTGST), 2017 UTGST is levied upon the intra-state supply of goods and services.

There are two kinds of supplies

Intra-state Supply

This is a kind of supply where the location of the supplier and the destination of supply are in the same State or Union Territory. In this type of supply, a seller must collect both CGST & SGST. CGST & SGST are deposited to the Central Government & State Government respectively.

Inter-state Supply

In this kind of supply, the location of the supplier and the destination of supply are in:

  • Two different States
  • Two different Union Territories
  • A State & a Union Territory

The inter-state supply of Goods & Services, IGST tax is levied and is collected by the Central Government.

Benefits of GST

1. Simplified & uniformed tax structure

One of the major highlights of GST is that it combines all the indirect taxes under a single umbrella making the tax structure simplified and uniform.

2. Higher threshold for registration

In the VAT structure, a business with a turnover of more than 5 lakhs was liable to pay VAT but with GST, this threshold is increased to 20 lakhs.

3. Easy online procedure

The complete procedure for GST, right from registration to filing returns can be done online and is super easy.

4. Composition scheme for small businesses

Small businesses with turnover up to 70 lakhs can enjoy the benefit of lowered taxes by utilizing the composition scheme.

5. Lesser number of Compliances

In contrast to other tax structures, there is just one unified return that needs to be filed. This reduces the number of returns and compliances.


Now that you know all about GST and its advantages, you can make well-informed decisions and grow your business using business loans at Finserv MARKETS.

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