The introduction of GST (Goods and Services Tax) has changed the face of the Indian tax system by bringing in uniformity and transparency. It is one of the most significant tax reforms introduced to eliminate the cascading effect of the earlier tax system.
GST is collected at each level of the supply chain, thus eliminating the cascading effect of tax. This game-changer tax reform has helped businesses in various ways to boost the company and the economy as a whole.
Small and medium enterprises can benefit from the more competitive space due to introducing the Goods and Services Tax. GST has reduced logistics costs and made the nationwide market easily accessible for SMEs for the future expansion of business.
In India, there are four types of Goods and Services Tax (GST) levied.
SGST – State Goods and Service Tax
SGST or State Goods and Services Tax is the percentage of GST (GST rates) levied by the state government for intra-state transactions. State governments earn revenues through this collection. SGST incorporates taxes imposed by the state government, such as purchase tax, luxury tax, value-added tax (VAT), octroi and entertainment tax, etc.
UGST -Union Territory Goods and Services Tax
UGST or Union Territory Goods and Services Tax is the percentage of GST (GST rates) levied by the Union Territories for the transactions made within the territory. That Union Territory earns revenue collected through UGST. UGST incorporates taxes imposed by them such as purchase tax, luxury tax, value-added tax (VAT), octroi and entertainment tax, etc.
CGST – Central Goods and Services Tax
CGST or Central Goods and Services Tax is the percentage of GST (GST rates) levied by the central government for intra-state transactions. Central governments earn revenue through the collected CGST. Central Goods and Services Tax is collected along with the State Goods and Service Tax / Union Territory Goods and Services Tax as the GST is shared between the centre and the state/union territory. For example, let’s say you own a Mumbai-based business that sells goods within Maharashtra. Let’s assume the GST rate applicable for your goods is 12%, then for each transaction, 6% of the tax collected (SGST) is collected by the state government and 6% by the central government (CGST).
IGST – Integrated Goods and Services Tax
IGST or Integrated Goods and Services Tax is applicable for intra-state, inter-state and export, import transactions. IGST is the total GST rate applicable to any transaction shared between the central government and state government/union territories. IGST helps business owners save at each level of the supply chain by checking the cascading effect of tax.
In addition, Razorpay can help you grow your business through an automated payment system with GST-compliant tariffs.
Let’s look at GST rates or GST tax slab rates for India’s various popular goods and services.
These GST rates are subject to revision from time to time. There have been 42 GST council meetings held, and the council recommended various changes and measures related to the GST rates on various goods and services.
The 42nd GST Council meeting was held on 12th October 2020, which focused on compensation cess issues and the other concerns regarding GST rate reduction and ease of return filing. Over the long run, GST will boost competitiveness and growth in each sector of the Indian economy.