Page 82 - Sphurana 2020-21 (4)

Goods and Service Tax (GST)

➢ What is GST in India?

GST is known as the Goods and Service Tax. It is an indirect tax which has

replaced many other indirect taxes in India such as excise duty, VAT,

service tax etc. The Goods and Service Tax was passed in the Indian
st
th
Parliament on 29 March 2017 and came into effect on 1 July 2017. In
other words, GST is levied on the supply of goods and services. GST in

India is a comprehensive, multistage, destination – based tax that is levied

on every value addition. GST is a single domestic indirect tax law for the

entire country.

➢ How GST works in India?

GST in India is a type of VAT as it levied on different stages such as

manufacturing, sales and consumption of goods or services. It is important
to know how it works and how the older indirect taxes used to work in

India. It has been introduced in India with the motive “One Nation One

Tax” to remove all the taxation barriers between states and create a single

market that will be opened to purchase and sales within the country freely.

Hence, GST is providing the economic freedom to traders to freely trade

without many compliances.

Stage 1:- The Manufacturer → If a shirt manufacturer buys raw material

to manufacture a shirt worth ₹1000 and ₹60 tax. The manufacturer added

the value of ₹300 to manufacture the shirt. Now the total value of the shirt
became ₹1300(1000+300) summing the GST rate on shirt be 5% that will

be ₹1300. This applicable GST amount (₹65) can be set off by the

manufacturer against the tax paid by him on the raw material i.e ₹60.

Hence, the effective GST rate applicable will be only ₹5(65-60). This makes

GST as a value-added tax.

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