Dear Readers,
As we all know that the Goods and Services Tax is implemented in India from July 2017. The new taxation system is applicable to all Indian states and Union territories of the Republic of India. The new tax system is an amalgamation of all taxes which bring the nation under single taxation rules and similar tax rates.
GST is known as the Goods and Services Tax. It is an indirect taxation system which has replaced many indirect taxes in India such as the octroi, mandi tax, excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017. In other words, the Goods and Service Tax (GST) is levied on all transactions involving the supply of goods and services.
The Goods and Services Tax Law 2017, in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition during sales or transfer of the goods and services. GST is a single domestic indirect tax law for the entire country. With the sole motive of One Nation One Tax System. Under the GST Taxation regime, the tax is levied at every point of sale of goods and services. In the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST Tax.
Now, let us understand the definition of Goods and Service Tax, as mentioned above, in detail. Be it Multi-stage Purchase of raw materials, Production or manufacture, Warehousing of finished goods, Selling to Wholesalers, Sale of the product to the retailers, Selling to the end consumers. GST could be classified into the following as per the Value Addition to the Goods and Service.
An item goes through multiple change-of-hands along its supply chain: Starting from manufacture until the final sale to the consumer. Let us consider the following stages: The Goods and Services Tax is levied on each of these stages making it a multi-stage tax. A manufacturer who makes biscuits buys flour, sugar and other material. The value of the inputs increases when the sugar and flour are mixed and baked into biscuits. The manufacturer then sells these biscuits to the warehousing agent who packs large quantities of biscuits in cartons and labels it. This is another addition of value to the biscuits. After this, the warehousing agent sells it to the retailer. The retailer packages the biscuits in smaller quantities and invests in the marketing of the biscuits, thus increasing its value.
GST is levied on these value additions, i.e. the monetary value added at each stage to achieve the final sale to the end customer. Consider goods manufactured in Maharashtra and sold to the final consumer in Karnataka. Since the Goods and Service Tax is levied at the point of consumption, the entire tax revenue will go to Karnataka and not Maharashtra.
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