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GST Full Form and GST Meaning

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GST Full Form & Meaning

Every country’s government needs a steady flow of income to be able to run the country to its truest function and taxes are the major source of this revenue. The taxes that the government collects, ends up being spent on the general public of the nation. There are mainly two types of taxes in India, namely, direct tax and indirect tax. Direct tax is basically the income tax that is levied upon a person’s income that is derived from various sources such as house rent, salaries, etc.

Indirect tax, on the other hand, is applied on goods and services instead of the income which ends up increasing the overall marked-up price for the good or service in question. In India, this is called GST (goods and services tax). It is levied on the supply of goods and services in India.

What is GST?

The full form of GST is good and service tax and is a multi-stage destination-oriented tax that is imposed on every value addition. This has come as a relief to most people as it has completely replaced multiple indirect taxes that used to come into play such as excise duty, VAT, service tax, goods tax, etc. Seventeen such taxes have been eradicated with the introduction of GST, simplifying the taxation process for the government. GST is a consumable tax for those who have a yearly turnover of Rs. 40 lakhs and above. These people need to register as ordinary taxable people. This option is now open to everyone who buys goods and services across the country. 

History of GST 

GST has been implemented in many countries since its inception in France in 1954. In India, this tax regime was introduced in 2000 after the Prime Minister at the time Shri Atal Bihari Vajpayee assembled a committee in the hopes of improving the tax structure of India.  In the year 2006, the union ministry proposed the introduction of GST in 2010 but after due diligence and amendments to be made, it was finally announced in 2011. Once this was implemented, the following mentioned taxes were replaced and subsumed respectively. 

Taxes Replaced by GST 

  • Duties of excise 
  • Service tax 
  • Central excise duties 
  • Additional duties of excise 
  • Additional duties of customs 
  • Special additional duties of customs 
  • Cesses and surcharges 

Taxes Subsumed by GST 

  • Gambling and lottery taxes
  • Entry tax
  • Purchase tax
  • State VAT 
  • Luxury tax
  • States cesses and surcharges
  • Entertainment tax 
  • Central sales tax 
  • Advertisement taxes 

Meaning of GST (Goods and Service Tax)

Basically, GST has been introduced to make the taxation process simpler for the government of India by eliminating a bevy of multi-taxes such as service tax, VAT (value-added tax), excise duty, etc. that were in play before. The main meaning of this tax can be understood better by delving deeper into its objectives, of which a few primary ones are stated below;

  • Removal of the Avalanche of Taxes – As per the GST bill, the tax is only applied to the net value added portion which gets rid of the tax-on-tax regime and in turn reduces the cost of the overall goods. 
  • Increased Tax Compliance – Small and unorganized business modules benefit heavily from GST online compliance increase because, in this, the registration processes and filing returns have been simplified. 
  • The subsumption of Indirect Taxes – Barring a few specified ones, all the other indirect taxes which fall under the Indian government have been converted to GST (goods and service tax). 
  • Increase Tax to GDP Ratio – Tax to GDP ratios are the most beneficial when on a higher side as it indicates a higher collection of tax. Through GST services, the government benefits from a wider tax base and subsequently, builds a stronger economic system. 
  • Reducing Tax Evasion and Corruption – Due to a GST bill, transparency is provided to the system, which allows the government to keep a tab on fraudulent methods such as false tax inputs or other such practices. 
  • Adding to Overall Productivity – The GST system in India is mainly aimed at eradicating logistic-based constraints along with tedious tax credit inputs. The entry tax is also subsumed. All of this and more adds to the productivity and efficiency of the system. 

What are the Different Types of GST?

To make diversification of different taxes easier, four types of GST (goods and service taxes) have been introduced, namely,

1. Central Goods & Service Tax (CGST)

Collected by the central government, Central Goods and Service Tax (CGST) is charged on the intra-state supply of products as well as services. It is supervised by the Central Goods and Service Act and has eradicated all the previous central taxes such as customs duty, service tax, CST, SAD, central excise duty, etc. The rate of CGST is the same as SGST (state goods and service tax) and the revenue goes to the central government. 

2. State Goods & Service Tax (SGST)

SGST is charged for the sales of all products and services within the specified state. In this case, the State Government collects the revenues generated by this tax. Taxes such as VAT (value-added tax), entertainment tax, entry tax, cesses, surcharges, state sales tax, etc. have been replaced by one tax, namely SGST. 

3. Integrated Goods & Service Tax (IGST)

This GST tax is imposed on the inter-state transactions of goods and services and is also levied on imports. The Central government is in charge of IGST, which means it collects this tax and then distributes it to the states as agreed upon. Both, the central as well as state governments share the revenue generated from IGST. Essentially, the Integrated Goods and service tax was introduced so that all the states would have to deal with one entity i.e the Union government, instead of all the states individually. 

4. Union Territory Goods & Services (UTGST)

Union Territory Goods and service taxes are essentially levied upon all transactions on goods and services that are carried out in any of the Union Territories of India which include Andaman & Nicobar Islands, Chandigarh, Lakshadweep, Diu, Daman, etc. This is charged along with CGST and follows similar rules and regulations of CGST. 

Advantages of GST (Goods and Service Tax)

Reputed to be the biggest tax reform within the country, the introduction of GST has a plethora of benefits associated with it. To be able to get a further deep dive into the pros of this tax, have a look at its key benefits listed below;

  • The introduction of GST has managed to bring many taxes under one section, simplifying the tax collection process for the goods and services related businesses as well as individual people
  • The entire country has been brought under one regime with the entry of GST which facilitates a uniformity in terms of laws, processes, tax rates, etc. 
  • In the long run, the cost of products and services is actually reduced due to the removal of cascading taxes 
  • Service providers and business owners who have a turnover of Rs. 20 lakhs and below are exempted from paying GST as per the Indian government, which is a huge benefit to such companies. In North Indian states, this cut off is at Rs. 10 lakhs
  • GST is aimed at reducing and eventually eradicating fraudulent methods of making sales without receipts, eventually eliminating corruption
  • Tax evasion of any sort is largely minimized by the introduction of GST 
  • Tax filing has become very simple with online options for the processes of registration, filing returns, and other due procedures 
  • Pointing towards a rather positive impact on the GDP in India, GST will actually help increase it by 80% in the next few years 
  • All companies that do business with a turnover of up to Rs. 75 lakhs can actually benefit from GST by engaging in composition schemes and paying only 1% on this turnover amount. This is also expected to have a simple taxation process. 
  • Small companies benefit from GST as their need to comply with taxes such as service tax, excise, VAT, etc. is reduced to quite an extent
  • Unorganized sectors are made accountable and regularised with the implementation of GST
  • With tax being collected all over the country in a proper method, the funds are collected and then used to help develop the country, especially in rural areas that need it the most
  • On several goods such as cars, smartphones, etc. a reduced GST is levied such as 7.5% and 2% respectively
  • Small business can file their returns every quarter through an easy-to-use online portal
  • Logistics costs are reduced by the elimination of border taxes along with the resolution of check-post discrepancies
  • Seventeen indirect taxes have been replaced by one tax and that is GST. This greatly helps to organize haphazard practices of tax collection in the past
  • Any future taxes (indirect taxes) shall also be included in the GST

Disadvantages of GST (Goods and Service tax)

Where there are so many advantages to GST, also have a look at a few of the disadvantages of the same;

  • The software required to file the GST can be an added expense and add to operational expenses of companies, which can substantially hurt smaller businesses
  • While business owners across the nation (up to Rs. 75 lakhs turnover) can benefit from the composition schemes and only pay 1% of GST on turnover, they, in turn, cannot claim any tax credits either
  • GST has earned the name ‘disability tax’ because it now taxes articles namely, wheelchairs, hearing aids, Braille paper, etc. 
  • The financial sector is facing the brunt of tax expenses as it has gone further up from 15% to 18% which is a huge cost 
  • Insurance premiums have become costlier due to the levying of GST 
  • Mutual fund investment dividends and interests also come after the deduction of GST
  • GST has impacted the real estate sector 
  • Petrol does not come under GST which acts against the unification of commodities, which is what is the final aim of this tax

Registration Process for GST 

According to the GST payment procedure, all businesses and companies are accountable to pay service tax, VAT, central excise tax, etc. under the one-time-only GST which can be done online. Applicants can apply for a GST number along with filing on the online portal for GST on https://cbic-gst.gov.in/. Once his application is submitted, the portal instantly generates an ARN status. With this ARN status, applicants can regularly check the status of their application and also seek help on the portal regarding the same. Typically, it takes one week (7 working days) to receive their GST registration certificate as well as GSTIN once the ARN has been generated. 

Documents Required for GST Registration 

You will need a set of documents when applying for any GST-related procedures. Have a look at the documents you will need to submit mentioned below;

  • PAN card
  • Aadhar card
  • Proof of address
  • Bank account details 
  • Photograph of the owner 
  • Copy of partnership deed (for partnership firms)
  • Registration certificate (for LLP)
  • Photographs of all partners and/or signatories 
  • Proof of appointing the authorized signatory 
  • Article of association or Memorandum of association  
  • Certificate of incorporation which is provided by the Ministry of corporate affairs

All the above-mentioned documents will differ from the type of business or individual that is applying.

GST FUll Form & Meaning FAQs:

1. What does ARN stand for?

ARN stands for Application Reference Number. It is used to track the status of the application.

2. What is GSTIN?

It is required for easier identification of goods.

3. How many GST slabs are there?

There are 5 GST slabs like 0%, 5%, 12%, 18% and 28%.

4. How many digits are there in the GST HSN code?

There are 8 digits in the GST HSN code.

5. How to find HSN code?

To find HSN code, you need to follow the steps above.

6. Is HSN code necessary for companies?

Yes, HSN code is necessary for companies.

7. What is the full form of HSN?

The Harmonized System of Nomenclature is the full form of HSN.

8. What is the full form SAC?

Service Account Code is the full form of SAC.

9. What is the difference between SAC and HSN?

HSN is for goods while SAC is for services.

10. How many digits does SAC have?

SAC has 6 digits.

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