GST Full Form and Meaning
GST has become one of the most common terms in the taxation system since its recent release in India. The full form of GST is Goods and Services Tax. Read on to know about what GST means around the world and its implementation in India.
Goods and Services Tax commonly known as GST is an indirect federal sales tax. It is levied on the supply of goods and services which are taxable under GST. It is levied on businesses, basically. But, businesses are given the provision of adding the respective tax percentage to the price of their goods at the time of sale. The total amount is thus paid by the customer. This tax is collected by businesses to be forwarded to the government. The government then utilizes this tax for development of the nation and its citizens.
GST has been accepted by many countries around the world. The first country to implement GST was France, in 1954. Around 160 countries have accepted the idea of GST since then. These include Canada, the UK, Australia, Singapore, Vietnam, Brazil, Spain, Nigeria, Italy, and South Korea. Certain countries refer to it as the Value Added Tax (VAT).
Globally, GST has been adopted as a unified tax system. This means that there is a uniformity of the rates charged on various goods and services throughout the country. GST acts as a merger of central and state taxes, to be collected as a single tax. This avoids the problem of over-charging in some states, as well as eradicates the cascading effect of tax.
India implemented GST in the July of 2017. The taxation system in India has two types of taxes:
- Direct Tax: Tax paid directly by an individual to government where liability completely resides on the same individual and cannot be transferred.
- Indirect Tax: Tax levied on goods and services paid indirectly to the government, and the liability can be transferred from one entity to the other.
GST was introduced in India to bring uniformity of taxes across the nation. In the pre-GST era, taxes were charged at different rates in different states. This caused a lot of confusion among customers, and also gave way to corruption. GST reduced these issues to nil and brought in uniformity throughout the nation. The main motive of GST was to eliminate the cascading effect of tax which levied tax on tax paid. GST was brought in to simplify the system and make it more transparent and unified. It has replaced most of the center and state taxes in India. As opposed to the production based taxation system under the pre-GST era, GST has been introduced as a consumer based tax. There are mainly six tax slabs under GST in India: 0%, 0.25%, 5%, 12%, 18%, and 28%.
Therefore, GST implementation has proved to save a lot of money spent on taxes by consumers. The reduced tax rates will further help reduce inflation in the long run, and the system will become more transparent with increased registrations of taxpayers on the return filing portal.