GST, or the Goods and Services Tax, is the new, unified, multi-tiered, multi-stage and consumption based tax levied on manufacture, sale and consumption of Goods and Services. GST is levied at the national level and will replace the existing national and state level taxation systems including VAT or Value Added Tax, Service Tax, and Excise Duty.
In India, Taxation, is the subject of concurrent list in the Constution. What this means is that both the Centre (Parliament) and the States (Legislative Assembly) have powers to enact laws governing them. Another example of a matter in the concurrent list is stamp duty, with both the Centre and the States passing laws on the rates of stamp duty to be collected.
Taxation too is thus subject to State level and National level legislation, thereby bringing into force multiple taxation systems such as the value added tax being levied by the State, Service Tax being levied by the centre. Further, while states could collect tax on activities within its borders, the transport of goods across state borders was subject to taxation by centre. The end result was that the same good was taxed multiple times, from the stage of sale of raw materials through the purchase of the good by the end-customer. This made the good / commodity more expensive, as the tax was paid on the tax already paid at an earlier stage / level.
Given that it is levied at the national level, and does away with the multiple taxation systems, GST is expected to remove the cascading effect of tax-on-tax which is presently prevalent.
To reduce such a cascading effect of tax on tax, GST contains clear provisions on what areas the centre and the state are allowed to collect revenue from, so as to prevent an overlapping.
The Central GST or CGST is the areas over which the Centre has powers to collect tax, and State GST, or SGST, are areas where the State has right to the revenues from the taxation.
The IGST or Integrated GST is applicable for movement of goods between the different states. This will be collected by the centre and will be transferred over to the states.
GST Compliance Rating is a numerical rating given to businesses depending on their level of compliance with Goods and Services Tax rules. Refund claims under the GST regime will also be processed on merit basis, i.e on the GST compliance rating of the registered taxpayer.
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