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Understanding GST In A Simple Way


Today, there are a number of taxes, that are levied in India. First, there are a host of central taxes and than there are state related taxes. So, a manufacturer first pays taxes and than the consumer pays taxes, resulting in the prices of goods becoming expensive.


Understanding GST In A Simple Way
The GST will do away with a host of taxes, resulting in a single tax.

What are the central taxes that are paid?

Among the central taxes that are today paid, include the excise duty, central sales tax, cenvat, octroi etc. With the introduction of the GST this will be phased out.

What are the state taxes that are paid?

The states collect various taxes, to raise money for their own development. These include the value added tax, sales tax, octroi, and state excise, apart from entry tax.

These will now be subsumed with the introduction of the GST.

What are the benefits of the GST?

The GST will stop wasting time over every check post and goods and services would move faster. It would also reduce logistics and other costs for the manufacturer, who might pass on the benefit to consumer. As there is a single tax, there is unlikely to worries over corruption at every possible check post.

It would cut down paper work and improve transparency in the system. It is likely to boost exports. There are reports that it could boost GDP by as much as 2 per cent. But, such things are good to write, but, difficult to ascertain.

How the GST works?

There will be three forms of GST. The first is the central GST (CGST), the second is the State GST and the third is the integrated GST.

For intra state transactions, the seller will ensure that he collects both the CGST and SGST. On the other hand for inter state transactions, the integrated GST will come into the picture.


We can see that with these 3 levies, there would be no VAT, excise duties, sales tax, octroi and every other tax.

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