September 21, 2023

Types of GST and its Benefits

Goods and Services Tax, GST is an indirect tax for the entire nation, which makes India a common united market by making sure that indirect taxes are replaced in the country. The Goods and Services Tax Act passed in the Parliament on March 29, 2017, is a complete and multi-stage tax imposed on every value addition. The GST Registration Act came into order on 1st July 2017 and has a great significance as both the Central and State governments depend on the GST for their indirect tax revenue.

Types of GST

There are four different types of GST which are listed below:

  • The Central Goods and Services Tax (CGST)
  • The State Goods and Services Tax (SGST)
  • The Union Territory Goods and Services Tax (UTGST)
  • The Integrated Goods and Services Tax (IGST)

1. The State Goods and Services Tax (SGST)

SGST is referred to as one of the two taxes levied on transactions of goods and services of every state. Imposed by the State Government of every state, SGST has replaced every kind of existing state tax that involves Sales Tax, Entertainment Tax, VAT, Entry Tax, etc. Under SGST, the State Government can allege the earned revenue.

2. The Central Goods and Services Tax (CGST)

CGST is defined as the Central Tax imposed on transactions of goods and services that take place within a state. Levied by the Central Government, CGST has replaced all other Central taxes inclusive of State Tax, CST, SAD, etc. Prices of goods and services under CGST are charged according to the basic market price.

3. The Integrated Goods and Services Tax (IGST)

IGST is applicable to the interstate transactions of goods and services. IGST is also applied to the goods which are being imported to distribute among the respective states. The IGST is imposed when the movement of products and services happens from one state to another.

4. The Union Territory Goods and Services Tax (UTGST)

The purpose to impose UTGST is to apply a collection of the tax to provide advantages as same as SGST. It is Applied to the Intra UT supply of goods and services. The UTGST is applicable to five Union Territories namely Lakshadweep, Daman and Diu, Andaman and Nicobar Islands, Dadra and Nagar Haveli, and Chandigarh.

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Benefits of GST

GST provides a transparent tax system levied on the supply of goods and services. When an item is bought, an individual sees only the state taxes applied to the product label and not the various tax components associated with the product.

The aim of levying GST is to enhance the ease of business operations by improving tax compliance, accelerating economic growth, and boosting revenue receipts of both central and state governments. Removal of a series of taxes results in the lowered tax burden on many products.

Few benefits of GST mentioned below:

  • Eradicates the cascading tax effect
  • Allows higher threshold to businesses for registration
  • Composition scheme for small business operations
  • Easy and Convenient online processes
  • Lesser Tax Compliance
  • Enhanced Efficiency of logistics

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