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What Is GST?


In the monsoon session of parliament the Goods and Service Tax (GST) bill is a major sticking point between the congress and the BJP.

But politics aside, what does the GST do for the consumer?

It's an indirect tax that consolidates several individual levies. And while it pinches the rich and poor alike. It aims to improve tax compliances.

How does the GST work?

When a product steps out of the factory the state imposes Value Added Tax (VAT). VAT percentage differs from state to state. Then, centre imposes service tax and excise duty. But with GST in place, these levies will be brought under one tax. The GST is a consumption based tax which will be applied at the destination. So consumer heavy states will benefit from it and manufacturing states fear losses. But the centre has promised to compensate. Manufacturers, Wholesalers or Retailers can claim the tax back through a tax credit incentive which means, the end consumer will have to pay up. But with GST in place Service Tax, Excise Duty and Value Added tax will be removed and replaced with only one GST. GST is considered the most important development in taxation and has been adopted in over 150 countries.