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Meaning of GST

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The GST to be levied by the Centre on intra-State supply of goods and/or services is Central GST (CGST) and that by the States is State GST (SGST).

Meaning of GST

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WHAT IS GST

 

The GST to be levied by the Centre on the intra-State supply of goods and/or services is Central GST (CGST) and that by the States is State GST (SGST).

On inter-state supply of goods and services, Integrated GST (IGST) will be collected by Centre. IGST will also apply on imports.

 

It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as set off. In a nutshell, only value addition will be taxed and burden of the tax is to be borne by the final consumer.

 

CONCEPT OF DUAL GST

It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on the intra-State supply of goods and/or services would be called the Central GST (CGST) and that to be levied by the States would be called the State GST (SGST). Similarly, Integrated GST (IGST) will be levied and administered by Centre on every inter-state supply of goods and services.

WHAT IS CGST

CGST means Central Goods and Service Tax. For easy understanding, when CGST is being introduced, the present central taxes of Central Excise Duty, Central Sales Tax CST, Service Tax, Additional excise duties, excise duty levied under the medical and toiletries preparation Act, CVD (Additional Customs duty – Countervailing Duty), SAD (Special Additional Duty of customs) surcharges and cesses are subsumed.CGST is charged on the movement of goods and services of standard commodities and services which can be amended time to time by a separate body. The revenue collected under CGST is for Centre. However, input tax credit on CGST is given to states and such input tax could be utilized only against the payment of Central GST.

 

WHAT IS SGST

SGST stands for State Goods and Services Tax that includes all the state indirect taxes like Purchase Tax, Luxury Tax, Central Sales Tax, Value Added Tax, Entertainment Tax, Octroi and Entry Tax, Taxes on The Lottery, State and Other Cess and Surcharges, will be subsumed under the State Goods and Service Tax.

 

WHAT IS IGST

IGST means Integrated Goods and Service Tax. IGST is charged when movement of goods and services from one state to another. For example, if goods are moved from Tamil Nadu to Kerala, IGST is levied on such goods. The revenue out of IGST is shared by the state government and central government as per the rates fixed by the authorities.

 

EXAMPLE FOR UNDERSTANDING GST

A dealer in Maharashtra sold goods to the consumer worth Rs. 10,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%, in such case the dealer collects Rs. 1800 and Rs. 900 will go to the central government and Rs. 900 will go to the Maharashtra government.

Therefore if inter state sales (i.e from one state to another state) is made then the seller will charge IGST in place of CGST + SGST.

Following are the meaning of SGST, CGST, and IGST

SGST – State GST, collected by the State Govt.

CGST – Central GST, collected by the Central Govt.

IGST – Integrated GST, collected by the Central Govt.

 

 

Under the current scenario (VAT):

Product sold from Delhi to Mumbai.

Price = 1000.

Vat of 10% =100.

Total cost: 1100.

Product sold from Mumbai to Chennai.

Cost =1100.

+ Profit of 1000.

Sell price: 2100.

CST of 10% on 2100 = 210.

Total price = 2310.

 

UNDER the GST regime:

Product sold from Delhi to Mumbai.

Price =1000.

CGST of 5%=50.

SGST of 5%=50.

Total price 1100.

Product sold from Mumbai to Chennai.

Cost = 1100.

Profit =1000.

Sell price = 2100.

IGST (Interstate Goods and Services Tax) of 10%= 110.

210 – 50(CGST) +50(SGST)

Total price = 2210.

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