GST or Goods and Service Tax is a tax reform that changed the taxing reform of the country. The main motive of this tax is to make sure that there is a uniform taxing structure in the country. GST has combined all the indirect taxes of the country into one. The introduction of GST has allowed a flow of input credit.
However, GST could not be introduced in a country like India without dividing it into various components. India is a quasi-federal country, gives power to both the center and the state. Therefore, both of them have the power to levy GST and collect taxes from the people. This is what we call the dual model.
Components Of GST
The components of the GST are as follows:
CGST ( Central GST)
SGST ( State GST)
Integrated GST ( IGST)
Union Territory GST ( UTGST)
Under this regime, the center and the state have different functions and responsibilities. This feature makes the regime very different from all the other indirect tax regimes. Under the previous taxing regime, both the center and the state levied taxes independently.
Central Goods And Services Tax
This indirect tax is levied by the Central Government on all the supplies. These supplies do not include any alcoholic supplies. The GST invoice is made by the Central Government. Such a tax is levied on goods and services as per section 15 of the CGST Act.
The various sections under the CGST Act talk about the implementation of the taxes on goods and services.
State Goods And Services Tax
This is an indirect tax that is levied by the state government. Just like CGST, these too do not include alcoholic liquor. In this case, the GST invoice is made by the state government. As per the SGST Act, section 15 levies this act on the value of the goods and services that have been supplied.
The liability to pay this tax arises at the time of the supply of goods and services. This is mentioned in sections 12 and 13 of the act.
Integrated Goods And Service Tax
This tax is levied and collected by the Central Government on inter-state supply of goods and services. The supplies do not include alcoholic production of any kind. The Integrated Goods and Service Tax Act makes sure all the regulations are complied with. The GST Invoice is made by the Central Government.
However, this tax is divided between the Centre and State.
Union Territory Goods And Service Tax
This is a tax that is levied on all the Union Territories. The union territories that come under the ambit of this tax are :
Daman and Diu
Andaman and Nicobar
Dadra and Nagar Haveli
This tax is not applicable to Delhi and Pondicherry even though they are union territories. Delhi and Pondicherry are governed by the State GST. The state GST takes care of the taxes that need to be collected from Delhi and Pondicherry. Their taxes come under the GST Invoice of the State Government.
Types Of Supply
The two types of supply are as follows:
1. Intra-state supply
When the location of the supplier and the place where the supply needs to be made are in the same state, it refers to intra-state supply. When such a supply is in question the seller will have to collect both the central tax as well as the state tax. The CGST gets deposited with the central government and SGST gets deposited with the state government.
Both the taxes are allotted to the respective governments in question.
2. Inter-State Supply
Whenever the location of the supplier and the place of supply are in two different states or in a state and union territory or in two different union territories altogether, it is said to be inter-state supply.
The following are also regarded s inter-state supplies:
Goods and services that have been imported to India.
Goods and services that have been exported out of India.
Any supplies by or to Special Economic Zones.
Any supply that is made to an international tourist.
Input Tax Credit
Input Tax Credit is beneficial to a taxpayer as he can pay off his output tax liability immediately. The CGST Act talks about the utilization of ITC. Both CGST and SGST can utilize their ITC in the manner that is prescribed in their act.
Under the earlier tax regime, the center and the state had their powers and functions. They collected taxes differently and had their own procedures and implementation method. Sometimes, the same goods and services were taxed more than once which burnt a hole in the pocket of the taxpayer.
Under GST, this no longer happens. There is a uniform method as GST has various components to ensure the proper implementation of taxes on goods and services.