Every year India celebrates GST Day on July 1. The idea of GST in the country was first introduced by the Kelkar Task Force in 2000 to eliminate Indirect taxes.
Earlier the tax structure in the country was fragmented and complex. That is why the Kelkar Task Force proposed that GST should be introduced in India to bring a reduction in tax cascading, unify the overall tax system for simplified compliance and promote economic integration.
After much deliberation and debate in both assemblies, the bill for the implementation of GST was passed in 2016 and introduced into functioning in 2017.
Things to know about GST Day
GST introduced One Tax for One Nation policy
Earlier multiple taxes in different forms were levied by the central and the state governments such as service tax, excise duty, value-added tax (VAT), and many others. All these taxes now has been brought under one canopy across the country. As a result, the cascading effects of taxes have been eliminated.
Dual structure
GST is divided into two structures that include the Central GST (CGST) and State GST (SGST) governed by the respective bodies. In the case the dealing is between two states then the transactions come under Integrated GST (IGST).
Tax based on destination
The destination-based tax is the type of tax that has to be paid at each stage of the supply chain starting from the manufacturer to the final destination that is the consumer. The value is added at every stage so that the credits flow seamlessly and the burden of tax on the end consumer is reduced.
Input Tax Credit (ITC)
Input tax credit under GST is applicable to businesses and allows business people to claim credit for the tax they have paid on the inputs that are used for providing or producing goods and services. Thus by implementing GST, double taxation can be avoided and the overall tax liability is reduced.
Threshold exemption
Small businesses that have a turnover below INR 20 lakhs as suppliers of goods and services and a turnover below INR 40 lakhs as suppliers can get an exemption under GST. The threshold varies for certain special category states like Himachal Pradesh, Jammu & Kashmir, and Assam.