1. What is GST?
Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition.
In simple words, GST is an indirect tax levied on the supply of goods and services. GST Law has replaced many indirect tax laws that previously existed in India.
So, before Goods and Service Tax, the pattern of tax levy was as follows:
Under the GST regime, tax will be levied at every point of sale.
Now let us try to understand “GST is a comprehensive, multi-stage, destination-based tax that will be levied on every value addition.”
Multi-stage
There are multiple change-of-hands an item goes through along its supply chain : from manufacture to final sale to consumer.
Let us consider the following case:
- Purchase of raw materials
- Production or manufacture
- Warehousing of finished goods
- Sale of the product to the retailer
- Sale to the end consumer
Goods and Services Tax will be levied on each of these stages, which makes it a multi-stage tax.
2. History of GST in India
What are the components of GST?
There are 3 applicable taxes under GST: CGST, SGST & IGST.
- CGST: Collected by the Central Government on an intra-state sale (Eg: Within Karnataka)
- SGST: Collected by the State Government on an intra-state sale (Eg: Within Karnataka)
- IGST: Collected by the Central Government for inter-state sale (Eg: Karnataka to Tamil Nadu)
In most cases, the tax structure under the new regime will be as follows:
| Transaction | New Regime | Old Regime | |
| Sale within the State | CGST + SGST | VAT + Central Excise/Service tax | Revenue will be shared equally between the Centre and the State |
| Sale to another State | IGST | Central Sales Tax + Excise/Service Tax | There will only be one type of tax (central) in case of inter-state sales. The Center will then share the IGST revenue based on the destination of goods. |
