GST AND INDIRECT TAX-Final.pdf Introduction of GST and Indirect Tax

1. GST AND INDIRECT TAX
By Sanju Majhi

2. Meaning and Definition:
The goods and service tax (GST) id a value- added tax(VAT)
levied on most goods and services sold for domestic
consumption. The GST is paid by consumers, but it is
remitted to the government by the business selling the
goods and services.
KEY TAKEWAYS
❖ The goods and services tax(GST) is a tax on goods and services sold domestically
for consumption.
❖ The tax included in the final price and paid consumers at point of sale and
passed to the government by the seller.
❖ The GST is common tax used by the majority of countries globally.
❖ The GST is usually taxes as a single rate across a nation.
❖ Government prefer GST as it simplifies the taxation system and reduces tax
avoidance.

3. Types of GST
1. Central Goods and Services Tax: CGST is charged on the intra state
supply of products and services.
2. State Goods and Services Tax: SGST, like CGST, is charged on the sale of
products or services within a state.
3. Integrated Goods and Services Tax: IGST is charged on inter-state
transactions of products and services.
4. Union Territory Goods and Services Tax: UTGST is levied on the supply of
products and services in any of the Union Territories in the country, viz.
Andaman and Nicobar Islands, Daman and Diu, Dadra and Nagar Haveli,
Lakshadweep, and Chandigarh. UTGST is levied along with CGST.

4. Advantages of GST:
The following are the advantages of goods and services tax in
India.
1. Regulation of the unorganized sector.
2. E-commerce operators no longer suffer from differential
treatment.
3. Fewer complications.
4. Composition scheme.
5. Registration process and filing of returns are simple.
6. Higher threshold.
7. Elimination of the cascading tax effect.

5. GST is one of the biggest indirect tax reforms in the
Country.
GST is a comprehensive indirect tax levied on
manufacture, sale and consumption of goods as well as
services at the national level. It has replaced all
indirect taxes levied on goods and services by the
Central and State Governments.
GST regime was implemented from 1st July 2017, and
India has adopted the dual GST model in which both
the Centre and States levy taxes:

6. Indirect tax:
Indirect Taxes are basically the taxes which are not
directly levied on the Income of an Individual but is
indirectly levied on the Expense incurred by the
Individual. This tax is basically levied on the seller of
goods or the provider of service but in most cases, he
passes it on to the end consumer and therefore, it is the
end consumer who bears this in the form of an indirect
tax.
In other words, Indirect Tax is levied on the person who
is making the sale but he can recover the same from the
buyer. In some cases, the Indirect Tax portion is
specifically mentioned in the invoice whereas in other
cases the portion of indirect - tax is automatically
included in the transaction value and not disclosed
separately.

7. Difference Types Indirect taxes in India
➢ Service Tax: This is charged on the services availed by the customer. For
example, if the person books a hotel accommodation, service tax is charged on
the hotel booking amount.
➢ Excise Duty: This is paid for the manufacturing of goods. For example, if a
person manufactures cars, he is liable to pay excise duty on manufactured cars.
➢ Value Added Tax (VAT): This is paid on the value addition in price during the
sale of goods. For example, when the wholesaler sells goods to a retailer.
➢ Custom Duty: This is paid on the goods imported from outside India.
➢ Stamp Duty: This is paid on the sale of immovable property. In addition, stamp
duty is mandatory on all types of legal documents.•
➢ Entertainment tax: This is levied on every transaction related to
entertainment. For example, movie tickets, video game arcades, stage shows,
exhibitions, amusement parks, and sports-related activities.

9. Advantages of Indirect tax :
1. People can reduce the amount of tax they pay by altering their
consumption to those goods that carry a low rate of VAT.
2. Evasion of tax is almost impossible as everybody spends money in
shops.
3. It is a cheap form of tax to administer as producers / retailers collect
it free of charge. Thus there is economy of taxation.
4. The taxpayer often does not even realise that he / she is paying any
tax as it is included in the price of the good. Thus there is convenience
of taxation.
5. It is unlikely to act as a disincentive to work.

10. Direct Taxes vs Indirect Taxes
Direct Taxes Indirect Taxes
1. Direct taxes contributed 25% to 35% of
total revenue.
Indirect taxes contributes 65% to 75% of total
revenue.
2. They do not have any impact on costs and
price of goods.
Increase in rates of indirect taxes leads to
increase in costs and price goods.
3. Direct taxes confirm to the principle of
equity.
Indirect taxes do not discriminate between
rich and poor.The levy is against the principle
of equity.
4. Direct tax is levied on persons who posses
property or earn income.
It is levied on persons who spend their
income or incurred expenditure.
5. Incidence of tax is directly on the tax
payer.
Incidence of tax is on traders or
manufacturer, but shifted to buyers of goods
or services later on.
6. Shifting is not easy tax payer has to bear
the tax.
The tax can be Shifted to other individual
i.e.consumers
7. The rich and healthy usually bear the
burden.
Burden is propertionate relatively heavy on
the poor.