In our previous blog post we briefly covered a quick introduction to GST. Today, we will talk about how the proposed Goods and Services Tax is expected to work with Flowchart image references for your understanding.
Under the GST system of taxation, you will need to keep in mind the following:
- The taxes paid at each stage (e.g. Manufacturer > Distributor > Retailer) will be available in the next stage of value addition. This makes GST, a tax which is levied only on the value addition at each stage)
- The final consumer will only have to pay the tax/GST charged by the last dealer in the supply chain with the set of benefits at all the previous stages
- GST is proposed to be implemented as a dual GST with the Centre and State governments simultaneously levying GST across the value chain.
GST for transactions within a State.
For all transactions within a state (goods or services), there will be 2 components of GST:
- CGST (Central GST) which will be levied by the Central Government
- SGST (State GST) which will be levied by the State Government
Below is an example of how both the above taxes will work. The below table also explains how the credit of input taxes is available from one stage in the next stage.