All You Need to Know About Types of GST in India

All You Need to Know About Types of GST in India

They say change is the only constant. India, ever since from its independence, is continuously being changing with the time for something better.

On July 1st, 2017 India took one more step towards betterment by introducing the most anticipated taxation system namely - GST (Goods and Services Tax). It is a dual taxation system where both State and Centre Government levy tax simultaneously. GST has given Indian economy a new direction.

Established the taxation system of One Nation – One Tax, GST is one of the most controversial economic reforms ever happened in the Indian history. Prior to implementation of GST, there were several taxes like Service tax, CST, VAT, excise and additional excise duty, luxury tax and etc. which were collected by the Government.

Now GST has subsumed all other taxes and boasted the country with a uniform taxation approach that helped in saving time, money and efforts.

To know more about the eco-system of unified taxation system we have to understand the GST types. The current taxation system is fostering majorly three types of GST, namely - CGST, SGST, and IGST. So, before we move ahead and start discussing the various kinds of GST, let us take a sneak peek on the taxes which are replaced by GST.

Taxes Before GST

A. State Taxes

  • VAT or Sales Tax
  • Entertainment Tax
  • Luxury Tax
  • Tax on Betting or Gambling
  • Octroi
  • Purchase Tax

B. Central Taxes

  • Central Excise Duty
  • Service Tax
  • Additional Excise Duty
  • Additional Custom Duty
  • Special Additional Duty of Customs
  • Excise Duty put under Medicinal and Toiletries Preparations.

So, from the above-given points, you can analyse that the taxes were charged by the State and the Central Government separately. Valuation of double taxes leads to waste of time and cost.

Therefore, all the above taxes were replaced by introducing unify taxation policy i.e GST.

We now start discussing newly introduced taxes individually.

1. CGST – Central Goods and Services Tax

Evident to its name, the tax is imposed by the centre Govt. of India on every transaction that takes place within any state of the country (Intra-State). The centralized part of GST, the CGST has replaced all the previously imposed central taxations.

It is the tax which is applicable to the transaction of all standard goods and services. The list of all the goods and services can be updated by Central Govt. after a certain period of time on its discretion.

Today instead of paying several other taxes such as Service Tax, Central Excise Duty, Customs Duty, Countervailing Duty, Additional Duty and other centralized taxations, one merely has to pay CGST.

The Central Government possess all the revenue that is being collected under CGST. The section 8 of GST Act states that the tax rate shall not exceed more than 14% on all the intrastate supplies of goods and services.

2. SGST – State Goods and Service Tax

It is another prominent part that falls under the tax structure of Goods and Services. The State GST is imposed on every transaction of goods and/or service that takes place within the state.

All the revenue that is being generated under the eco-system of Goods and Services Tax is being collected solely by the State Government.

The previous state taxes such as VAT, state sales tax, luxury tax and entertainment tax which were levied under state taxation system are now replaced after the implementation of SGST system.

3. IGST – Integrated Goods and Services Tax

Until now we have discussed the two most important tax systems under the radius of GST that are CGST and SGST. Both the systems were applicable during the time of the exchange of goods and services within the state that is intrastate.

Whereas, IGST comes in the scene at the time, when the transaction of Goods and Services happens in between two different states.

Under this type of GST, all the revenue that is generated by the transaction will be collected by the Central Government. The central government then distributes the revenue being collected among the respective states accordingly.

Since GST is the consumption tax, therefore, the state where the products or services will be consumed will get benefited no matter where the product was manufactured or which state is the service provider.

Bonus

Broadly the eco-system of GST is classified into three parts, CGST, SGST and IGST. But there’s one more kind of GST in India. It is UTGST.

Union Territory Goods and Services Tax (UTGST) is one of the GST taxation types. It is applicable to all the 7 Union Territories of the country. These Union Territories are Chandigarh, Dadra and Nagar Haveli, Chandigarh, Lakshadweep, Daman and Diu, Puducherry, Andaman and Nicobar Islands and National Capital Territory of Delhi.

Apart from Delhi and Puducherry, all other Union territories have their own legislature that’s why UTGST is especially being introduced into the eco-system of GST.

The Last Words

There’s no doubt that GST has made the taxation system not only smooth but also very easy. The dream that former Prime Minister Atal Bihari Vajpayee has seen 20 years back finally turned into reality in 2017.

With the implementation of one nation one tax system, GST tax rates in India are also simplified. The final consumer definitely gets benefited as now they do not have to pay tax on tax. There is only one tax, and it is imposed only once.

The present mechanism of tax collection has started a new phase in Indian economy which will make India stands among the superpowers in the world in the near future.

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