GST and Its Accounting Purpose

The Goods and Services Tax (GST) is the product of an indirect tax reform aimed at creating a unified national market. The government achieved this by combining several taxes under GST. It combines various indirect taxes such as service tax, luxury tax, entry tax, entertainment tax, CST, VAT, and excise duty, among others.

GST and its Accounting Purpose

Accounting

Accounting is the practice of keeping track of a company’s financial activities. Summarizing, analysing, and reporting these transactions to oversight authorities, regulators, and tax collection entities are all part of the accounting process. Accounting financial statements are a brief overview of financial transactions over a period of time that summarise a company’s operations, financial status, and cash flows.

GST

GST is a single value-added tax that applies to the supply of goods and services from the producer to the customer. GST is basically a tax on value addition at each level since credits for input taxes paid at each stage will be available in the subsequent stage of value addition. With set-off benefits at all earlier levels, the ultimate customer will only be responsible for the GST charged by the last dealer in supply chain. GST is collected from buyers during the purchase of a product and then passed to the government. It is a significant source of revenue for both the state and the federal government. GST is known as the “one nation, one tax” since it unifies the whole taxing structure.

Objectives of GST

1. To Eliminate the Cascading Effect
2. Uniform Tax Structure
3. Ease Of Doing Business
4. Regulation Of Unorganized Sector
5. Increase In Revenue
6. Online Procedure
7. Product Competitiveness

To Eliminate the Cascading Effect

The tax on tax paid on a product at every phase of the sale until it is sold to the end consumer is known as the cascading impact. Only the net value added to the product would be subject to GST, not the whole value of the product.

Uniform Tax Structure

Before the GST, the tax rate on certain goods and services varied depending on where you lived in the country. People used to come to Delhi and buy electronics since the rate of tax on electronics in Delhi is lower than in other Indian states. Every state now has the same tax rate.

Ease Of Doing Business

Indirect tax issues have been alleviated since the implementation of GST. Previously, enterprises had a lot of issues with excise customs registration, VAT, dealing with tax officials, and so forth. The advantages of GST have made it easier for businesses to conduct their operations.

Regulation Of Unorganized Sector

There are many sectors in India that are currently unorganised. The government is attempting to integrate those businesses into the mainstream. This company could be a bakery in your neighbourhood or a tiny industry. These companies/factories/businesses are now required to pay GST, which enhances the Indian government’s revenue.

Nature of GST

Multi-stage

GST is a multi-stage tax that is imposed at every point where goods or services are sold. Before reaching the end consumer, a product goes through a number of steps. This tax is collected at each stage.

Destination based

Destination based is a tax that is levied on consumer purchases of goods and services.

Value Addition

GST is collected at each value addition stage throughout the manufacturing of a completed product. From the time raw materials are purchased to the time the product is ready for sale, there are several processes. Every time GST is applied, an additional monetary value is added.

Types of GST

CGST

The CGST rate, often known as the Central GST rate, is applied to intrastate supplies of goods and services. According to the CGST Act, the earnings would be attributed to the Centre.

SGST

The intrastate supply of goods and services is subject to the SGST rate, or State GST rate. According to the SGST Act, which is passed and recognised by the assemblies of respective States, the revenues will be attributed to the States.

UGST

The GST is collected by Central administration in Union territories such as Chandigarh, rather than by the State government, and is referred to as UGST.

IGST

The central government would collect IGST on inter-state goods and services transactions. All the inter-state transactions of taxable goods and services would be subject to the IGST (CGST plus SGST) imposed by the Centre.

Conclusion

The Goods and Services Tax (GST) is the product of an indirect tax reform aimed at creating a unified national market. GST is a single value-added tax that applies to the supply of goods and services from the producer to the customer.  Destination based is a tax that is levied on consumer purchases of goods and services. The CGST rate, often known as the Central GST rate, is applied to intrastate supplies of goods and services.