GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India.
2. Multi-Stage
There are multiple change-of-hands an item goes through along its supply chain: from manufacture to final sale to the buyer.
3. Value Addition
GST is levied on these value additions i.e. the economic value added at each stage to achieve the final sale to the end customer.
4. What are the components of GST?
There are 3 taxes applicable under this system: CGST, SGST & IGST.
- CGST: Collected by the Central Government on an intra-state sale (Eg: transaction happening within Maharashtra)
- SGST: Collected by the State Government on an intra-state sale (Eg: transaction happening within Maharashtra)
- IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to Tamil Nadu)