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What is GST – Goods and Services Tax (Why 2 terms?)

Introduction

A. GST is Goods and Services Tax

Goods (and main taxes on goods subsumed in GST)

  • manufactured in one place, transported and sold elsewhere, consumed somewhere else
  • Excise Duty
    • levied at the place of manufacture
    • levied and collected by central government
    • same rate in all states for a particular product
  • Sales Tax (VAT, CenVAT)
    • at the point of sale
    • levied and collected by central and each of the state governments
    • rate varies for the same good in different states

Services (and the tax on services subsumed in GST)

  • produced, sold and consumed simultaneously
  • tax levied and collected by central government
  • same rate in all states for one service

2. GST is and indirect tax (as are Sales Tax, Excise Duty etc subsumed by GST)

  • collected by manufacturer, trader, service provider
  • paid to government
  • borne by consumer, paid to the business

as against direct tax such a income tax, property tax, professional tax, wealth tax etc

  • borne and paid by individuals and businesses to the government

3. GST is a digitally networked tax system (GSTN) to supplement Aadhar, link gas subsidy and ration card, direct cash transfers, cashless transactions, crop insurance scheme, health insurance schemes etc.

(Pay attention to each of the terms. They are all important to understand what is GST, its implications and how it affects different sections of society)

(to be continued…)

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