The implementation of the GST aims to make the following changes: to reduce the tax on several products, and make more products taxable, thus widening the tax base and increasing revenue for the State and Central Government; to harmonize tax structure among different states; to eliminate the ill effects of cascading and reduce the overall tax burden of goods and to subsume many central and state taxes into one.
There are 5 different major tax constituents levied at the various stages.
In the first stage (Manufacture), Excise Duty and Central Excise Duty are levied on the manufacturer, by the Central Government.
In the second stage (Sale to the Intermediate Parties), which will include services, intra-state and inter-state exchange of goods, there are: Service Tax, Sales Tax, VAT (Value Added Tax) and CST (Central State Tax).
The Service Tax and Sales Tax are levied by the Central Government, the VAT is levied by the State for sales within a state, while the CST is levied by the Central Government for inter-state sale of goods.
In the third and last stage (Sale to the Consumer), which includes Import and Export of goods, the Central Government levies Custom Duty and Entry Tax/Entertainment Taxes, specifically: CVD under custom(Countervailing duty), Central Additional import duty (Compensating excise), SAD under custom (Special additional duty), Central Additional import duty (Compensating excise).
Under GST, there will be 3 kinds of applicable Goods and Services Taxes: CGST (CENTRAL GST), where the revenue will be collected by the central government; SGST (STATE GST), where the revenue will be collected by the state governments for intra-state sales; IGST, where the revenue will be collected by the central government for inter-state sales.
Which are the benefits of GST? Reduction in multiplicity of taxes; uniformity in Tax rates and structure; business in the entire country is tax neutral, irrespective of place; mitigation of Cascading/Double taxation; procurement from non-excise dealers; eligibility of credit on inter-state purchases; credits of GST paid to all manufacturers, traders, and service providers.
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