Indian Government vs. Big Corporations: The Battle for Fair Markets

What is GST?

The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based tax levied on every value addition in the supply chain of goods and services. Introduced in India on July 1, 2017, GST replaced multiple indirect taxes like VAT, service tax, excise duty, and others, creating a unified tax system across the country.

GST is structured into four components:

1. CGST (Central Goods and Services Tax): Levied by the Central Government on intra-state transactions.
2. SGST (State Goods and Services Tax): Levied by the State Government on intra-state transactions.
3. IGST (Integrated Goods and Services Tax): Levied by the Central Government on inter-state transactions.
4. UTGST (Union Territory Goods and Services Tax): Applied in Union Territories in place of SGST.

Why was GST Introduced in India?

Before GST, India had a complex indirect tax system with multiple taxes imposed by both the Central and State Governments. This led to inefficiencies like:

• Tax cascading (Tax on Tax)
• Multiple tax laws leading to compliance burden
• High cost of logistics and interstate trade

Objectives of GST:

• To simplify the indirect tax structure.
• To eliminate cascading effects by providing input tax credit.
• To increase tax compliance through a unified system.
• To boost economic growth by reducing tax burdens on businesses.

How Does GST Work?

GST operates on a value addition principle, meaning tax is levied at each stage of the production and supply chain but allows input tax credit, ensuring only the final consumer bears the tax burden.

Example of GST Calculation

1. A manufacturer produces a product and sells it to a wholesaler for ₹1,000 with a 10% GST rate. The manufacturer collects ₹100 GST and pays it to the government.
2. The wholesaler adds a margin and sells it to a retailer for ₹1,200. The total GST is ₹120, but the wholesaler gets credit for the ₹100 GST already paid.
3. Finally, the retailer sells the product to a customer for ₹1,500. The GST collected is ₹150, but they get credit for the ₹120 GST paid earlier.

This way, tax is only charged on the value addition, reducing the overall tax burden.

GST Tax Slabs in India

GST in India is divided into different tax slabs based on the type of goods and services:

• 0% – Essential items like milk, fresh vegetables, books
• 5% – Basic household necessities like packaged food, medicines
• 12% – Processed food, mobile phones, financial services
• 18% – Most services, electronics, automobiles
• 28% – Luxury goods like high-end cars, tobacco products

Advantages of GST

✅ Simplified Tax System – One tax replacing multiple indirect taxes. 

✅ Reduced Tax Evasion – Online compliance system ensures transparency. 

✅ Boost to Economy – Encourages ease of doing business and interstate trade. 

✅ Lower Cost for Consumers – Eliminates double taxation, reducing price burden.

Conclusion

GST has revolutionized India's tax system by unifying indirect taxes and improving compliance. While initial implementation challenges existed, it has largely benefited businesses and consumers. With continuous updates and improvements, GST aims to become a seamless tax regime supporting India’s economic growth.

Click Here for the next article on GST Registration: Process, Eligibility, and Documentation.

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