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Frequently Asked Questions (FAQ): Goods And Services Tax

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Frequently Asked Questions (FAQ): Goods And Services Tax

SocialPost Bureau

The following are some of the questions usually asked related to GST.

Question 1 : What is GST?

GST is a single tax which replaces several Central and state taxes which existed earlier such as CST, GST, Sales Tax, VAT etc.

Question 2 : How is GST useful?

GST is a single Tax in the whole chain of supply of Goods and Services from the manufacturer to the end user. After a Manufacturer pays tax, the further people in the chain such as stockiest, wholesaler, retailer would get Credits of input taxes paid. Hence, they pay tax only for the value added at their level rather than paying for the whole price of the product or service. Consumers will pay the GST taxed by the last dealer in the supply chain.

Question: 3. What are the common advantages of GST?

Some of the advantages of GST are

Tax Compliance made easy : GST makes all the transactions such as registrations, returns, payments available for the tax payers online. It would be easy, transparent and effective for the tax payers.

Uniform taxes across the nation : GST rates vary according to the product but are same for each product throughout the nation. In other words, the tax on a particular product or service would remain same anywhere in the country. Doing business in India would be tax neutral, which means that business organization would pay same amount of tax wherever they do business in India.

Avoids double taxation : Input credits are given on the paid tax, which lets each businessman pay tax only applicable at his level and not for the whole chain, hence reducing hidden costs and reducing prices up to certain extent.

Cost Effective : Cost of transactions would become lesser and help in improving the competitiveness in trade and industry.
Profit to Manufacturers and exporters : Removal of Central tax such as CST will help in reduce the cost of locally manufactured goods and services. It would help the exporters sell Indian goods at competitive price in International market.

Question 4 : How GST would benefit the Government?

Some of the benefits to the Government are

Easy Administration to Government : Compared to the various taxes imposed by the Central and State Government at various levels, GST makes it simple as it is the single tax which replaces most of the earlier taxes. It would be easy for the government to administer the taxes.
Increases Tax Compliance : GST procedure and structure would ensure more compliance from traders as majority of them would enroll and register for GST. It would fetch more taxes.

Lesser Revenue Inputs : GST is supposed to decrease the cost of collection of tax revenues to the government.

Question : 5 How GST is useful to the customers?

Single Transparent Tax : Earlier, tax was levied at various stages of the supply chain and the cascading effect used to give rise to hidden charges. Customers used to end up paying more cost on the products or services. GST ensures that customers pays a single tax which is transparent and proportionate to the cost of the goods or services.

Question : 6. Which taxes would be merged in to GST?

The following Taxes would be removed and replaced by GST :

Question : 6. What are the components of GST?

GST has three main components :

CGST : refers to Central Goods and Service Tax collected by the Central Government

SGST : refers to State Goods and Service Tax collected by the state government

IGST : refers to Integrated Goods and Service Tax collected by the Centre as well.

Question 7 : How imports are taxed under GST?

IGST will be levied on the imported goods. The states would get their share of revenue from IGST.

Question 8 : Are there any disadvantages with GST?

There are certain challenges due to the implementation of GST such as registrations in multiple states for businesses which operate in more than one state or multiple states, dependency of firms and tax payers on professionals due to lack of technical knowledge on GST in the initial phases, luxury items go beyond the reach of common man or upper middle class.