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A Brief History of GST – Goods & Services Tax in Business


— January 2, 2020

To make things easy for the manufacturer or consumer, there are multiple GST calculators available online.


Taxation refers to the collection of money from society for economic development and growth. Different countries around the world implemented different types of taxes to generate revenue. It can be locally or imposed by the federal or the central government. Retailers or manufacturers have to calculate a certain amount of percentage that an end consumer has to pay over the sales price. A GST calculator will provide proficiency and accuracy in finding that value. There are multiple types of online calculators available, and they are easy to use and helpful as well. 

Goods & Services Tax

GST (goods & services tax) is also known as value-added tax, which is imposed on the products or services produced or sold within the country. The government imposed certain percentage as a tax rate that is charged on the sale price of that product. The end consumer or customer has to pay that amount on the time of purchase. The main purpose of this indirect tax is to generate revenue, which is then used to benefit society. From that revenue, local or federal government plan different development projects like infrastructure, education, employment, health and many more.

Some countries do not have GST or any kind of indirect tax. Whereas in some regions it is considered as the authority of local or municipal government to impose or collect indirect tax, not the federal government. Every region around the world has different taxation reform that is appropriate with their system as well as the economy. 

An overview 

As we know GST is a form of indirect tax and imposed by different region to collect revenue from the public. It was firstly introduced by France in 1950s, after that more than 120 countries implemented this into their taxation system. All the member states of European Union exercised GST and considered it as a source of transparent tax collection from the economy. Basically this is applied to the difference in sales price and cost of production and the end consumer has to pay it on purchasing. This tax is considered as equal to other sales tax, which is imposed on consumer goods as well as on capital goods. Generally, there were two types of GST that were applicable, one is income type GST and the other is consumption type GST. In different countries consumption type GST is regulated that is applied to goods and services at a particular rate. Normal GST rate is started at 5% and goes up to 25%.

Two men with laptops reviewing paperwork; image by Helloquence, via Unsplash.com.
Two men with laptops reviewing paperwork; image by Helloquence, via Unsplash.com.

Categories of GST 

The taxation system is no doubt a base for any economy to stand out and survive. The most important thing that matters is the transparency of system and collection of the tax. GST considered as the most appropriate and transparent system of collection revenue that can be easily monitored. 

Here we have some of the types of goods and services tax, not every type is for every region. Its implementation and allocation depend on the requirement and economy type, respectively. 

Central goods and services tax

Central goods and services tax (CGST) is applicable to the goods and services that are directly under the supervision of the central government. This type of collection of the tax directly goes to the revenue of central or state government. It includes central excise duty, central sales tax, etc. 

State goods and services tax

State goods and services tax (SGST) is collected, governed and exercised by the state-level government. In some countries, the central government just supervise the collection matter and state government or local government has the authority to implement a certain percentage as per the rules. 

Integrated goods and services tax 

As the name shows integrated goods and services tax (IGST), associated with the tax implementation and collection between two different states, like goods or services produced in one state that are going to be sold in another state. 

Importance of sales tax in the economy 

GST is a tax reform that is followed by different countries, the ultimate objective is to improve the economic situation and put the emphasis on development and growth. It refers to a simple and transparent tax structure that is imposed over the sales of goods and services that are produced and manufactured within the country. Most importantly GST application reduces or removes the need for other indirect taxes. It helps and promotes the fair collection of revenue and distribution of prices that promote business. The money that is collected in the form of GST is reinvested on the infrastructure development, health projects, education and to create employment opportunity. By imposing this indirect tax, the need for other complex taxes is reduced. It makes recording collection easy and reduces the risk of corruption and tax leakage. 

Bottom line! 

Taxation or tax implementation and collection is the base of any country’s economy. A transparent system not only promotes the economy but also reduces tax leakage. It is calculated over the difference in sales price and production cost. The amount has to be paid by end consumers who purchase the goods or get services. To make things easy for the manufacturer or consumer, there are multiple GST calculators available online. Through this it is easy to find out the exact tax amount that has to be paid on the purchase of product. The purpose of the collection is just to get revenue that is reinvested for the society development. 

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