Goods and Services Tax (GST) is one of the greatest indirect tax reforms of India. Before leaping into the concept of GST, let’s first understand the
- Indian taxation framework and
- The underlying reasons that mandated the implementation of a single, unified tax.
Indian Tax Structure primarily consists of two types of taxes: ‘Direct Tax’ and ‘Indirect Tax’. Direct Tax is a tax levied directly on the income, wealth, and profession of an individual. Income Tax and Corporation Tax are the major direct taxes.
Indirect Tax, on the other hand, is not chargeable on the direct income of an individual. It is rather levied on the goods and services consumed by the ultimate consumer. Customs and GST are the major indirect taxes in India.
Now, the previous indirect tax system comprised of separate Centre and State laws. Such a tax structure not only increased the cost of goods but also made the taxation system more complex. Therefore, to bring in simplicity and reduce ‘cascading tax effect’, a single, unified tax in the form of GST was introduced. Such a tax system involves levy on the supply of goods or services or both with concurrent jurisdiction of Centre and States.
So, let’s try to understand as to ‘What Is GST’, ‘Why It Was Introduced’ and ‘Its Impact on you’ after implementation.