Basic concept of GST | Indirect taxes | Types of taxes in india

Taxes are classified into two categories
   1. Direct Taxes (Income Tax)
   2. Indirect Taxes (GST & Customs Duty)

1. DIRECT TAX (Income tax)

in case of direct tax the person paying taxes to the government and bears the incidence of tax that means tax is imposed directly on the taxpayer.
The burden of tax borne by the person himself.

2. INDIRECT TAX (GST & Customs Duty)

in case of the indirect tax, the person paying the tax to the government and collect the same from ultimate consumer and therefore the incidence of the tax is shifted to the other person.
The burden of tax shifted to another person.

In the indirect tax, many taxes existed in the past like excise duty, service tax, central sales tax (CST), VAT, Luxury tax, Entertainment tax, Entry tax, Taxes on the advertisement, Tax on lottery, betting, gambling,  but now all the taxes have been merged in one and that is GST.

GST is an Indirect Tax and indirect taxes are the main source of tax revenue for the government. In India indirect taxes contributes more than 50% of the total tax revenues of central and state governments. It is levied on commodities at the time of manufacture or purchase or sale or import-export thereof.

Most of the time person i.e taxpayer does not know that he is paying the tax to the government. Because it is included in the price of the goods and services. It also increases the price of goods and services.

Indirect taxes are regressive in nature. the rich and poor have to pay the same rate of tax on certain goods and services.

There are three types of GST:-

1. IGST (Integrated Goods and Services)
  • When supply is made between two or more states (i.e. interstate supply) like Gujarat to Maharashtra then IGST is applicable and it is a central levy.
2. CGST (Central Goods and Services)
  • When supply is made within a state like within Rajasthan, within Tamilnadu then CGST is applicable and it is also a central levy.
3. SGST/UTGST (State Goods and Services/Union territory Goods and Services)
  • When supply is made within a state like within Rajasthan, within Tamilnadu then SGST is applicable and it is a state levy.
From the above, we can understand that if supply is made within the same state then CGST and SGST / UTGST are applicable. and if supply is made between two different states then IGST is applicable.

States where UTGST is applicable instead of SGST :

Union Territories without the state legislature
1. Andaman and Nicobar Islands
2. Lakshadweep
3. Dadra and Nagar Haveli
4. Daman and Diu
5. Chandigarh

There are two more union territories in which SGST is applicable instead of  UTGST
1. Delhi
2. Pondicherry
because they have their own legislature.

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