What is Goods and Service Tax (GST)? Let’s Simplify GST with SSB. Post–1

What is Goods and Service Tax (GST)?

Ans: It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

Explanations:

1. It is destination based Tax can be charged based either on Origin/Production or Destination/Consumption. GST is decided to be destination based tax that means tax will be levied where goods or services would get consumed. E.g.  If ABC Limited produces the goods in Haryana and sells them to XYZ Limited in Gujrat. Here Gujrat will get the share of tax and not Haryana, as goods are being consumed in Gujrat.

2. Tax on Consumption. It is notable that under Model GST Provision of tax is based on consumption and not just on sale of goods and services. It will include:

Supply of goods or/and services without any consideration e.g. to contractor for job work/supply to related party/Branch Transfers etc.

Free Samples e.g. distribution of samples for promotion of product or medical items to medical practitioners, educational cds to schools/educational institutes etc.

Free Goods or Services e.g. goods given free of cost under some discount scheme, free services for goods sold etc.

3. Tax would be levied at all stages from production to consumption by end user, good part is credit of the tax paid would be available to set-off.

–Sukhvinder Singh Bhatia
#SukhF_GST