What is tax?
- Tax defines as expenditure burden for individual or property owners to which help indirectly support the business environment and economy, to support government in legislative way.
- Tax is not voluntary system or donation but an enforced contribution, for economy in lawful way.
Type of tax:
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As government receive public expenditure the way to receive is taxation system which differentiate in two ways or type :-
Direct tax:
- A tax which levied directly to taxpayer and paid directly to government by the person (individual or business owner) charge directly on source of income of individual or business, Direct tax does not shifted by taxpayer to someone else.
Indirect tax:
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Indirect tax which also known as consumption tax, they are regressive in nature because they are not based on principal or charge on individual source of income but charge on consume and use goods or services.
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Earlier on India or before July 1st, 2017 indirect tax charge in India namely as excise duty, custom duty, service tax, sales tax, vat, entry tax and more so on, which is problematic on accounting system for errors or manipulation of tax of its different tax which some time charge duel time on same product.
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However after July 1st , 2017 India witness an lighting type of tax which is unified type of tax of mostly use taxes before and its replace most of them which help taxation system to error and manipulation free, Custom duty use as in post GST regime way.
GST: An Introduction
The regime of GST and its implementation has improved the relationship of central and state government financially and make it error free.
GST is a unified tax system that merges all indirect tax earlier then GST levied by both the central and state governments. Under these tax system both central and state government have the authority to levied and collected tax on goods and services. This uniformity promotes error free tax system for economic integration.
Salient Features of Indirect tax:
Source of Revenue :-
Before GST Indirect tax is not Unified and its source of collection of different type of source that some time for most sources it could generate error, but after GST Unified all major taxes except Custom Duty.
As GST is major source of revenue for government worldwide and continue to grow with System development. In India Indirect tax contribute more than 50% of the total tax revenue of central and state governments.
One nation, One Tax:
GST replaced multiple indirect taxes in India and created unified tax system for indirect tax which help the business system more improved and eliminate double charge on same product.
Destination based tax:
GST is destination based tax, levied as each stage of processing supply for a manufacturer to consumer, value addition in each stage allowing simple and systematic flow of credit and error free and help to reduce the burden of end customer.
TAX on goods and services:
It is levied on goods and services at time of manufacture or purchase or sales or import/export of service
Less thought of direct burden:
Since tax amount already included in product price therefore taxpayer pay the tax without knowing that he is paying taxes to government. Then taxpayer less thought of direct burden.
Input tax credit (ITC):
Since GST allow direct utilization of input tax credit where business can claim previous recorded credit for the tax paid on inputs used in production of goods and services.
Wider tax base:
Since indirect tax has wide range of base tax compared to direct tax. Majorities of goods and services are liable to indirect taxes.
Composition scheme:
These Scheme available for small business with specified turnover limit (Currently for Rs.1,50,00,000 for Normal category state and Rs.75,00,000 for special category state).
Under this scheme small business have paid a fixed percentage of their turnover as GST and required simplified compliances.
Online Compliances:
GST Introduced an online portal for systematic compliances, the identification no [goods and services tax network (GSTN)], for registration, filling of returns, payment of taxes and other compliances related activities, create online platform for taxpayer fulfill their obligation.
GST is a tax levied on goods and services:
Condition for apply of GST:
- Supply of goods and services is must.
The GST system follows a dual form of structure, which as supply can be two types-
- Interstate supply:
where origin and destination of supply of goods and services between 2 states/Union territory and supply will interstate.
-(IGST:
IGST stands for integrated goods and services tax, collected by central government o transaction between two state/Union territory and shared equally between central and state/union territory fund.
At the same time IGST collected with customs which levied on import and export transaction between international states.)
- Intrastate supply:
where origin and destination of supply of goods and services fall under same states and union territory then supply will intra state.
-CGST:
- CGST stands for Central goods and services tax, which collected by central government of India through state government and union territory at transaction of supply of goods and services consume by state and Union territory.
- It’s collected with SGST or UTGST.
- It shared between state and central government equally. Earlier taxes its replace central excise duty, additional duties on custom and central service taxes.
SGST:
SGST stand for state Goods and services Tax which collected by state by state government at transaction of supply of goods and services Consume by state. Earlier its replace Vat, Purchase tax, luxury tax.
UTGST:
UT GST stand for Union territory goods and service tax, which collected by Union government at transaction of supply of goods and service consume by Union territory)
The taxation system in India comprises direct and indirect taxes, including GST, aiming to generate revenue and promote economic growth.