What is GST - Meaning and Full Form Explained Clearly
Now-a-days GST related news are there everywhere and especially with India's finance minister Arun Jaitely trying to iron out last remaining differences between center and state on GST finer points and implementation. But what is GST? What's its meaning and relevance to ordinary citizen (aam aadmi), to a businessman, and to a finance professional.
GST full form is Good and Services Tax and its a landmark bill in the history of taxation in India.
What is GST?
GST stands for Good and Service Tax and it is bound to become the active indirect taxation law in India starting June 2017.
Traditionally India had a fragmented taxation system with each state having their own tax rule, regulations and rates. This has been a constant pain for companies doing business in more than one state. For example, whenever the raw supplies or a finished product needed to be imported or exported out of state, it was a mess of different VAT (Value added Taxation) rules.
With GST, India Government is trying to simplify the taxation and apply consistent rules and regulation across India. As it is being said, GST will help bring One India, One Tax regime.
GST Meaning and Components
There are three main components of GST:
- CGST - Central GST
- SGST - State GST
- IGST - Integrated GST
For a transaction (e.g., sale or service) which happens inside a state (intra-state), CGST and SGST will be applicable. For inter-state transactions, IGST is applicable.
The main aspect of GST is its principle of 'applying tax only once'. For example, if a sofa manufacturer buys raw material worth Rs 1000 giving Rs 100 (10%) as GST tax. Later when he/she sells the manufactured sofa for Rs 3000 requiring Rs 300 (10%) as tax, he can adjust Rs 100 tax paid earlier and only pay Rs 200 tax.
Getting Started with GST
To get started, please follow our GST login and registration guide.Category: finance gst