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The Goods and Services Tax (GST) is what it is called. Many other indirect taxes, such as excise duty, VAT, and the service tax, have been replaced by it. Parliament passed the Goods and Services Tax Act on Marchand it took effect July 

In other words, the provision of goods and services is subject to GST. It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition in India’s Goods and Services Tax Law All  is subject to the same domestic indirect .

Every time a product is sold, the tax is collected. Within-state sales are subject to both the Central GST and the State GST. The Integrated GST applies to all interstate sales.

  • Let’s take a closer look at the aforementioned Goods and Services Tax definition.
  • Multi-stage
  • From the point of production all the way to the point of sale, an item goes through a number of hands.
  • Supply chain management
  • The act of producing or creating something.
  • Finished-goods storage facilities
  • Making a sale to a distributor
  • The product is sold to retail stores.
  • To sell to the end user.

In order to make biscuits, a biscuit maker must purchase ingredients like flour and sugar. When sugar and flour are combined and baked into biscuits, their value rises.

They then sell them to a warehouse agent, who packs and labels large batches of biscuits in boxes. In this way, the biscuits have been enhanced in terms of their value. The retailer buys it from the warehousing agent.

The retailer increases the value of the biscuits by packaging them in smaller quantities and investing in their marketing. To get to the final sale to the end customer, the monetary value added at each stage is taxed.

Goals of the Goods and Services Tax

In order to realise the ‘One Nation, One Tax’ ideology

Many of the previous tax regime’s indirect levies have been eliminated or replaced by the GST. With a single tax, every state follows the same rate for a given product or service. It is easier to administer taxes when the rates and policies are set by the federal government. E-way bills for goods transport and e-invoicing for transaction reporting are two examples of common laws that could be introduced. Taxpayers are less likely to miss deadlines because they don’t have to deal with as many different forms. Indirect tax compliance is now managed through a single system.

Several formerly indirect taxes, like service tax, value-added tax (VAT), central excise, and others, were rolled into one to cover most of India’s indirect taxes. States had some control over taxes, while the federal government had others. As far as goods and services were concerned, there was no solitary tax that applied to all transactions. As a result, the GST was implemented. All of the major indirect taxes were combined under the GST regime. It has made tax administration easier for the government and made it easier for taxpayers to comply with the law.

In order to prevent the tax cascade from occurring, With GST, we hoped to stop taxes from piling up and causing inflation. Previously, taxpayers couldn’t use one tax credit to offset another due to different indirect tax laws. For example, VAT paid on the sale of a product cannot be deducted from the excise taxes paid on the production of that product. As a result, taxes began to rise in a chain reaction.  Cascading effects of taxes have been eliminated, and input tax credits have flowed more smoothly across both goods and services.

In order to curtail tax avoidance

In comparison to previous indirect tax regimes, India’s GST legislation is far stricter. Only invoices uploaded by the taxpayer’s respective suppliers are eligible for an input tax credit under GST. As a result, the likelihood of fraudulently claiming input tax credits on fake invoices is greatly reduced. Electronic invoicing has added weight to this goal. Because GST is a national tax and has a central surveillance system, the process of catching and punishing tax evaders is much faster and more effective. As a result, GST has significantly reduced tax evasion and tax fraud.

In order to broaden the tax base

New taxes have helped to broaden India’s tax base, thanks to GST. Previously, the registration threshold for each tax law was based on a different turnover threshold. Since GST is a unified tax that applies to both goods and services, the number of tax-registered businesses has grown. In addition, more stringent laws governing input tax credits have made it possible for previously untaxed sectors to be included. As an example, consider the construction sector in India.