GST Full Form

GST stands for Goods and Services Tax which is a single tax applicable in India on transaction of goods and services. GST relieves businesses from the struggle of handling the complexities of multiple and overlapping tax structures, levied by the central and state governments.

Implementing GST brings numerous benefits for all the stakeholders, including manufacturers and consumers. This blog explains GST’s full form, features, objectives, and advantages to keep you informed and updated on the significant role of GST in simplifying the tax structure and promoting compliance.

GST Full Form

The full form of GST is Goods and Services Tax. This uniform tax simplifies the tax structure on goods and services by replacing various indirect taxes. The GST applicable from the manufacturer’s point and continues up to the customer point. GST is the single indirect tax charged at every stage of providing goods and services within India.

GST has replaced the following indirect taxes levied by the central and state governments:

Central Taxes: Service tax, excise duties, cess and surcharge, etc.
State taxes: Entry tax, VAT, entertainment tax, purchase tax, etc.

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GST Features

It’s important to know the features of GST to understand its implications on businesses in particular and the country’s economy as a whole. Let’s look at the key GST features:

Single Indirect Tax

GST eliminates the payment of various taxes at different supply chain stages. It makes tax calculation and compliance easier for businesses.

HSN Code

GST is applied on goods and services based on their classification under the Harmonized System of Nomenclature (HSN). The GST rates vary based on the nature of the goods or services.

Four-Tier Tax Structure

The tax slabs under GST are divided into four categories as follows:

5% – For essential goods, such as food items and life-saving drugs.
12% – Certain apparel items, packaged food, nuts, medicines, etc.
18% – Electronic items, consumer durables, and most services.
28% – Luxury goods, cars, tobacco, and aerated drinks.

Certain essential items, such as food grains, animal products, etc. are exempted from GST.

Also Check: IRDA Full Form

Registration Mandate

Businesses with a total turnover of over Rs.20 lakhs per year must register under GST. Small businesses that fall under this limit need to register under GST.

Destination-Based Tax

GST is a destination-based consumption tax. It means that for the goods manufactured in one state and sold in another, GST is collected where the goods are sold and consumed, not in the manufacturer’s state.

Input Tax Credit (ITC)

GST taxpayers can claim a credit for the GST paid on inputs, which include raw materials, capital goods, and services used to manufacture goods.

Customer Point Tax

GST is charged on the final market price of goods and services and is to be paid by the customers, reflecting the maximum retail price.

Digital Compliance

The GST portal offers convenience due to digital compliance. From registration to return filings to payments, taxpayers can complete every formality online.

The Journey of GST in India

The GST concept was first introduced in 2000 when a committee was set up to draft a law regarding India’s Goods and Services Tax. After that, it took almost 17 years to finalize the law. In 2016, the amended version of GST was passed in both the Lok Sabha and the Rajya Sabha. In 2017, the Cabinet approved the GST bills.

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GST Objectives

GST came into practice by replacing a range of indirect taxes. It aimed to bring uniformity and consistency in the taxation structure. Here is a highlight of GST objectives:

One Nation, One Tax

The core motive of GST is to implement the ‘One Nation, One Tax’ policy. It introduced fixed tax rates for specific services and products applicable in any part of India. It simplifies tax collections and compliance across all states and union territories.

Consolidate Multiple Indirect Taxes

GST introduces a centralised and unified tax system on goods and services. Under its laws, most indirect taxes were consolidated into one tax to simplify administration.

Restrains Tax Evasion

GST aims to reduce the tax evasion rate by providing a simpler and more transparent structure for tax compliance, especially for businesses in small and unorganized sectors.

Increase in Efficiency and Productivity

The objective of GST is to remove constraints involving the entry and claim process so that overall efficiency and productivity can be enhanced.

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GST Components

Three types of taxes are charged as GST based on the tax collection authorities. These GST components are as follows:

CGST is the goods and services tax collected by the central government for a sale within a state.
SGST/UTGST: The GST collected by the state government or union territories for a transaction happening within the state.
IGST: This tax is collected by the central government for sales between two states.

When the transaction occurs within the state, 50% of the tax revenue will go to the state government and the central government gets the remaining 50%.

For example, if a dealer sells goods worth Rs. 10000 within its state, with an applicable GST of 12%, then the CGST will be 6% (Rs. 6000) and SGST will be 6% (Rs .6000).

GST Digital Advantages

India’s Goods and Services Tax (GST) system also introduces new digital features to make the process more transparent and convenient. Let’s find out what the GST digital advantages are:

e-Way Bills

GST introduced a centralised system of waybills for manufacturers, traders, and transporters. The e-way bills can be generated for the goods transported from the place of their origin to their destination on a common portal. This system allows authorities to quickly check the waybills at check posts, which saves time and also helps reduce tax evasion.

Invoice Management System (IMS)

It is a system in the GST portal that allows the recipient taxpayer to match the invoice against the supplier taxpayer for claiming input tax credits. The invoices will appear on the IMS dashboard, and businesses can match the invoices issued by their suppliers. Businesses can accept or reject the invoices after verifying them, or keep them pending to avail the input tax credit later.

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GST Benefits

GST offers many benefits to businesses, industries, tax authorities, and consumers. Here are the major GST benefits:

Remove Cascading effects

The GST system removes the cascading effect of overlapping taxes on the same product. For businesses, it means more clarity and convenience.

Uniformity of Tax Structure

GST makes the tax structure uniform across all places within the country, thereby increasing the ease of calculations and compliance.

Gain for Manufacturers and Exporters

It takes care of major product price variations by abolishing multiple levels of taxes and allowing local manufacturers and exporters to maintain competitive pricing.

Easy to Administer and Control

GST is simpler and easier to administer, and the in-built input tax credit mechanism encourages businesses to comply with the system.

Conclusion

GST aims to simplify the indirect tax structure in the country by introducing a ‘one nation-one tax’ system. It helps the Indian trade and industry become more competitive, domestically and internationally. Introduction of GST will offer more transparency and consistency, and result in better tax compliance.

FAQs on GST Full Form

When was GST implemented in India?

The GST was officially implemented in India on 1st July 2017.

When was the e-waybill system implemented in India?

The e-waybill system was launched on 1st April 2018 for inter-state movement of goods and on 15th April 2018 for intra-state movement of goods.

What services are exempted from GST?

Services exempted from GST include healthcare services, agriculture services, judicial services, educational services, etc.

What is a Unique Identification Number (UIN)?

Entities that are exempted from GST must obtain the UIN.