GST, or Goods and Services Tax, is a value-added tax that is applied to most goods and services sold for domestic consumption. It is a single, unified tax system designed to replace various indirect taxes that were previously levied by the central and state governments in many countries (for example, sales tax, VAT, excise duty, etc.).
Key Features of GST:
1. Single Tax System: GST replaces multiple taxes like VAT, service tax, and excise duty with one single tax, simplifying the tax structure.
2. Input Tax Credit: Businesses can claim credit for the tax they have paid on inputs (goods and services used for production) against the tax they charge on outputs (the goods and services they sell).
3. Destination-Based Tax: GST is collected at the point of consumption, not the point of production. This means the tax is paid where the goods or services are consumed.
4. Tax on Value Addition: GST is applied only to the value added at each stage of production or distribution, rather than being taxed on the total price.
5. Unified Market: It helps create a single national market by eliminating state-specific tax barriers and allowing for easier interstate trade.
In countries like India, GST has been implemented in different categories:
CGST (Central GST): Collected by the central government.
SGST (State GST): Collected by the state government.
IGST (Integrated GST): Applied to interstate transactions (collected by the central government).
GST aims to streamline the tax system, reduce tax evasion, and promote economic growth by creating a more transparent
and efficient tax framework.
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