GST Understanding And Effects On Common Man

GST Understanding And Effects On Common Man

India’s biggest tax reform executed from 1st july 2017. Which will be effect in many ways to common man. Let’s understand what is GST ? Let’s understand GST here.

  1. Brief Indtroduction
  2. What is GST
  3. Objective of GST
  4. GST Components
  5. How does GST performs on good and services.
  6. How it effects to common man.

1.Brief Introduction :-
India had well-structured tax system. Money collected as tax facilitate for various projects and missions for the development of the nation.This is biggest source of income for the government.The Goods and Services Tax (GST), was launched on the midnight of 30 June 2017 by our honorable Prime Minister Mr. Narendra Modi and President Pranab Mukherjee .

2.What is GST :-
GST – Goods and Service Tax. GST is indirect tax as the name implies it impose on goods and services.
Goods => Raw Material => Manufacture Product
Services=>
Sale Product from => Wholesaler to retailer
Retailer to consumer

So this tax manage the above chain i.e. manufacture, sale and utilization of goods and services at national level and enterprises by the Central and State governments in India. Now each individual is liable to pay tax on his output and is qualified for get input tax credit (ITC) on the tax paid on its inputs.

3.Objective of GST :-
The Primary Goal of GST is to wipe out the cascading effect of taxes impose on goods and services.
The final cost to the buyer will be lesser on the elimination of double taxation in the system.
Begining of GST override the current multi stage tax structure and which leads to profitable effects for the country in the form of GDP Growth.

4.GST Components :-
CGST (Central Goods and Service Tax)
=> Central government will accumulate the revenue

SGST (Sate Goods and Service Tax)
=> State governments will accumulate the revenue for sale inside the state.

IGST (Inter State Goods and Service Tax)
=> Central government will accumulate the revenue for inter-state sales

We will understand this components by two example cases.
Case 1 :
Madhya Pradesh merchant => Sold Goods(Valued at Rs. 20,000) => Madhya Pradesh buyer .
Now the GST rate is 18% => CGST 9% + SGST 9%
In our example merchant collects 18% of this amount i.e Rs.3600.
Now Central Govt. got Rs.1800 as CGST and State Govt. got Rs.1800 as SGST.

Case 2 :
Madhya Pradesh merchant => Sold Goods(Valued at Rs. 20,000) => Gujarat buyer .
Now the GST rate is 18% => CGST 9% + SGST 9%
In this example merchant need to charge 18% of this amount i.e Rs.3600 as IGST.
This IGST will go to the central government now no need to pay CGST and SGST differently.

GST Componenets

5.How does GST impose on good and services :-

To clear this concept we need to understand the full process with an example.
We previously explain this chain in brief now let us discuss the chain (manufacture to buyer) in details .

Case – No Profit no loss condition
Old Process Before GST =>
Actual Product Price = Rs. 100 + Merchant GST 10% = Rs.110
Wholesaler => Buy Product => Merchant (Rs 110) + Self Value added (Rs.40) = (Rs.110+Rs.40=) Rs.150 + 10% tax = Rs. 165
Now wholesaler pass on this liability tax to retailer and added own value Rs. 30
New Product Price = Rs. 165 + Value add = Rs. 30 + 10% tax = Rs. 195 + Rs. 19.5 = Rs. 214.5
So, the buyer pays Rs. 214.5 for a product the cost price of which was only Rs. 170 (Rs 110 + Rs. 40 + Rs. 30) with tax liability was passed on at every stage of product transaction and the last liability comes with the customer. This is called the Cascading Effect of Taxes where a tax is paid on tax and the Product value always increasing each time.

Actual Product Price = Rs. 100 + Merchant GST 10% = Rs.110
Wholesaler => Buy Product => Merchant (Rs 110) + Self Value added (Rs.40) = Rs.140 + Rs.10 GST = Rs.140 + Rs.14 =154
As Wholesaler already paid Rs.10 (10% GST on product) to Merchant. Input Credit Rs. 10
, now he had to pay only difference amount to government as tax that is (10% ofProduct Price )Rs.14-Rs.10(Tax already Paid)=Rs.4
Now wholesaler pass on this liability tax to retailer and added own value Rs. 30
New Product Price = Rs.140 + Rs.30 = Rs.170 + (10% GST) Rs. 17
but retailer already paid to Rs.14 to wholesaler so they need to pay only difference to govt.
thatis Rs. 17-14 = Rs.3
Now the retailer set the product Price 140+30+17= 187 to consumer.

6.How it effects to common man or benifits :-

a. Wiped out double taxation.
b. Less corruption as more transperancy develop in system and multiple tax ends so number of tax officer visits to multiple department are very less.
c. Clean Process so no messup.
Reduces the corruption:-As the no. of taxes reduces so does the no of visits to multiple department reducesand hence the reduction in corruption.
d. Now common man doesnot need to bear the all taxes with product price.
e. Prices fall down as consumption raises so good benifits for company.
7. Now all tax are integrated so eqality managed as national leavel.

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