GST stands for Goods and Services Tax. It is an indirect tax system introduced by the government of India. GST comprises of most of the existing indirect taxes such as VAT, Service Tax, etc. The GST bill was passed in the Lok Sabha in 2017.
Types of GST:
There are 3 types of GST:
- CGST – It is short for Central GST.
- SGST – It is short for State GST.
- IGST – It is short for Integrated GST.
CGST – Here, the tax will be imposed by the central government of India. It will replace excise duty, service tax, SAD (Special Additional Duty), CVD (Countervailing Duty), ADE (Additional Duties of Excise) and other indirect taxes levied by the central government. CGST will be applicable on supplies within a state and the tax revenue will go only to the central government.
SGST – Here, tax will be imposed by the state government. It will replace sales tax, VAT, entertainment tax, entry tax, luxury tax, Octroi, purchase tax and taxes on lottery. SGST will be applicable on supplies within a state and the tax revenue will go only to the state government.
Both CGST and SGST will be levied only if the annual turnover is more than Rs.20 lakhs. They both are applicable on free supplies. Registration for both is required only if the turnover is more than Rs.20 lakhs. Dealers can use the Composition Scheme to avail benefits, if the turnover is Rs.50 lakhs.
IGST – It will be imposed by state and central government together, but is collected by the central government. The revenue is shared by both central and state governments. It will replace Central Sales Tax (CST). It will be applicable on interstate import and supplies. No exemption limit has been defined by the government for this type of GST. If dealers supply in different states, then they have to register for this GST. It will also be applicable on free supplies. For this type of GST, the composition scheme is not available.