GST

Updates on GST (Goods & Service Tax) :

IMPORTANCE OF GST :

Posted on 28-06-2017

Right now, the taxation structure in the country is divided in two forms i.e Direct and Indirect Taxes. Direct taxes are levied where the liability cannot be passed on to someone else. For example - Income Tax, Income Tax is paid where you earn the income and you alone are liable to pay the tax on it.
However, in the case of the Indirect Taxes, the liability of the tax can be passed on to someone else. Like, when a shopkeeper pays VAT on his sale, he passes on the liability to the customer. So, in effect, the customer pays the price of the item as well as the VAT on it so the shopkeeper can deposit the VAT to the government. This means that the customer is not just paying the price of the product, but he also pays the tax liability, and therefore, he has a higher outlay when he buys an item.
This happens because the shopkeeper has already paid a tax when he had bought the item from the wholesaler. To recover that amount, as well as to make up for the VAT, he passes the liability to the customer who has to pay the additional amount. This unfair seeming situation (on the part of the customer) cannot be addressed in the current taxation system. But, under the GST a system of Input Tax Credit has been incorporated, which will allow sellers to claim the tax already paid so that the final liability on the end consumer is decreased.

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