GST has helped to replace the excess of indirect taxes with a single central tax plan applicable uniformly on all goods and services.
Masses in India are subjected to pay taxes whether be it directly or indirectly, for a resident or non-resident or be a breadwinner or not. These taxes are levied by the Central Government, State Governments including the local authorities such as the Municipality and the local governments. The tax structure is divided into direct and indirect taxes and it yet remains one of the most complex topics in the Indian fiscal system where the major role is played by the Central Government of these taxation policies.
The Government of India’s total receipts during the April-January period of the current fiscal stood at Rs 12.82 lakh crore from which the tax revenue stood at Rs. 9,98,037 crore and non-tax revenue stood at Rs 2,52,083 crore including the Non-debt capital receipts stood at Rs. 32,737 crore, while total expenditure for the said period was Rs 22.68 lakh crore, the statement read. Accordingly, the major tax revenue for the central government comes from:
- Central Goods & Services Tax (CGST)
- Integrated Goods & Services Tax (IGST)
- Income Tax
- Customs Duty
What is CGST?
CGST and IGST are part of GST, one of the biggest reform of Indirect taxes, i.e., not directly paid to the government which was launched on 1 July 2017 by the Prime Minister of India, Narendra Modi. Goods and Services Tax, is a tax imposed on the customers when they buy any goods or services, such as food, clothes, electronics, items of daily needs, transportation, travel, etc., by the manufacturer or seller of goods and the provider of services.
The sellers charge the tax expense into their costs, and the price paid by customers is inclusive of GST. Hence, the customer ends up paying even if one is not an income taxpayer. GST is divided into five different tax slabs, i.e., 0%, 5%, 12%, 18% and 28% including an added tariff that is applicable on certain products which still makes this indirect tax a complicated subject.
Categories Of GST
Furthermore, GST is divided mainly into four categories for its understanding:
- CGST– It is levied on intra-state goods and services transactions by the Central Government and collected as revenue generated by CGST which is then shared between the State or Union Territory. Hence CGST is levied along SGST or UGST.
- SGST– Tax which is reserved for the State Government along with CGST.
- UGST– The transaction which takes place within the Union Territory (UT) is charged with the UT along with CGST
- IGST– Integrated goods and services tax are levied on inter-state and union territory or between a state and union territory goods and services transaction, besides being applicable to imports and exports. Under IGST the revenue is shared by both the center and the state government, although the taxes charged goes to the state wherein the goods or services are consumed. Moreover, under IGST, businesses can claim Input Tax Credit (ITC).
Although GST is not applicable on petroleum products (i.e., crude oil, diesel, petrol, natural gas and automatic transmission fluid), alcoholic drinks, entertainment and electricity, which could be yet taxed separately by the individual state governments, as under the previous tax system.
GST has helped to replace the excess of indirect taxes equally to Central excise duty, Central sales tax, Service tax, Value added tax, etc., with a single central tax plan applicable uniformly on all goods and services. Though the biggest benefit of GST that is has made ease in the movement of goods across states’ borders, as opposed to the earlier system where state borders became a barrier and hence have made entire India now into one unified market.
Furthermore, allowing for faster movement of trucks and leading to fewer warehouses across several states. While one wonders about their travel with Indian Railways, there is a 5% GST on the ticket price, where CGST and SGST are levied at the place from where the journey originates and IGST is applicable at the destination. Nevertheless, if one travels by Indian Rails for business purposes is eligible to file and claim an input tax credit (ITC) on ticket price.
While this indirect tax plan is equally applicable to the whole of India but yet remains complicated and strange for the masses.