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GST (Goods and Services Tax) is a comprehensive indirect tax levied on the supply of goods and services across India. It replaced multiple taxes like VAT, Service Tax, and Excise Duty to create a single unified tax system.
| Feature | Description |
|---|---|
| One Nation One Tax | Single tax system across India |
| Destination-Based | Tax collected where goods/services are consumed |
| Input Tax Credit | Tax paid earlier can be adjusted |
| Online System | Fully digital compliance |
If a product is manufactured in one state and sold in another, GST ensures smooth taxation without multiple taxes.
GST is applied at every stage of the supply chain, from production to final sale.
| Stage | Description |
|---|---|
| Manufacturer | Produces goods |
| Wholesaler | Buys in bulk |
| Retailer | Sells to customer |
| Consumer | Final user |
At each stage, GST is charged, but businesses can claim Input Tax Credit (ITC), so tax is not charged twice.
Value addition means increasing the value of a product at each stage of production or distribution.
| Stage | Cost (₹) | Value Added (₹) | Final Price (₹) |
|---|---|---|---|
| Raw Material | 100 | - | 100 |
| Manufacturer | 100 | 50 | 150 |
| Retailer | 150 | 50 | 200 |
GST is charged only on the value added, not the full amount every time.
GST is collected by the state where goods or services are consumed, not where they are produced.
| Scenario | Tax Collection |
|---|---|
| Manufactured in Gujarat, sold in Delhi | Tax goes to Delhi |
| Manufactured and sold in same state | Shared between Central & State |
GST was introduced after years of planning to simplify India’s tax system.
| Year | Event |
|---|---|
| 2000 | GST concept introduced |
| 2016 | Constitutional Amendment passed |
| 2017 | GST implemented on 1 July |
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