TAX SYSTEM IN INDIA
There are 2 types of Tax System in India
- Direct Tax - The tax that are directly paid by the Tax Payer to the govt. of India are Direct Tax. It is charged on the basis of Income and activities Conducted. These type of Tax are Non- Transferable, that means the burden of the Tax can not be shifted to other person. This tax is paid after an individual receives the money in his/her hand or we can say that once a person annual income Falls under the Income Tax Slab , then He/She must have to pay the Tax. Ex- Income Tax , Wealth Tax, etc
- Indirect Tax - The tax that are indirectly paid by the Tax Payer to the govt. of India are Indirect Tax. It is charged on different Products & Services availed. These type of Tax are Transferable, that means the burden of the Tax can be shifted to other person unless and until the product reaches to his final user . Ex- GST, Excise Duty, etc
GOODS & SERVICE TAX (GST)
GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India.
COMPONENTS OF GST
- CGST (CENTRAL GOODS & SERVICE TAX) - Tax Collected by the Central govt. for the sale made within the state or also known as Intra-State Sale.
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SGST (STATE GOODS & SERVICE TAX) - Tax Collected by the State govt. for the sale made within the state or also known as Intra-State Sale.
- IGST (INTEGRATED GOODS & SERVICE TAX) - Tax Collected by the Central govt. for the sale made outside the state or also known as Inter-State Sale.
REGIME UNDER GST
CGST + SGST = IGST
EXAMPLE - If u live in state of Odisha , and you Purchase a Bike from Bhubhaneswar , then the amount of tax will be charged on 2 different components i.e, CGST & SGST. If the total tax amounts to Rs.3200 then Rs. 1600 will be paid to Central Govt. and Rs. 1600 will be paid to State Govt.
But if u purchase the Bike from Kolkata( State- West Bengal), i.e, outside the state then u have to pay all ur tax as IGST . That means the whole amount Rs. 3200 will be paid to Central Govt.
State Govt. will have no rights to avail any part of this tax amount.
TAXABLE VALUE & MARGINAL VALUE
Taxable Value is that value of a Good /Service which doesn't include the Tax Amount.
Whereas Marginal Value is that Value of Good/Service which include Tax Amount.
In Simple , TAXABLE VALUE+TAX AMOUNT = MARGINAL VALUE
How to compute Taxable Value , if Marginal Value is given -
TAXABLE VALUE = (MV/100+TAX%) *100
