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What is the full form of CGST

CGST: Central Goods and Services Tax

CGST full form

CGST stands for Central Goods and Service Tax. It is a term assigned by the government under the GST law in 2017, more specifically referred to as the CGST Act. The CGST act was passed to provide for the Central Government's imposition of tax on intra-state sale of goods or services, or both, as well as the matters related to or incidental to such activity.

Origin and Inception of the CGST Act

  • The CGST Act covers the whole of India except Jammu and Kashmir.
  • Due to the specific taxing authority granted to Jammu and Kashmir by the Constitution, the State assembly must approve the levy of the GST before it may take effect. Once this is finished, the State will implement GST.
  • Any change in the CGST Act will be effective from the due date, which is announced by the Central Government in the Official Gazette.
  • As may be announced, various clauses may be applied on multiple dates.

The Objective of CGST Act 2017

In accordance with former tax legislation, the Central Government assessed taxes on the manufacture of specific commodities through the Central Excise Duty, the provision of specific services through the Service Tax, and the interstate sale of goods through the Central Sales Tax.

In a similar manner, the state governments imposed taxes on retail trade in the form of value-added tax, entry taxes on goods entering the state, luxury taxes, purchase taxes, etc. This results in a variety of taxes being imposed on the same supply chain. The following is a list of challenges posed by former tax laws:

  • Taxation in a cascading fashion because of the state and local government taxes cannot be offset by central government taxes.
  • Some taxes collected by state governments cannot be used as a credit against other taxes they are collecting.
  • The country is divided into distinct economic realms due to the wide variety of value-added tax legislation in the nation, each having a different tax rate and set of tax laws.
  • Trade in the nation is hampered by the construction of tariff and non-tariff obstacles such octroi, entry taxes, checkpoints, etc. Additionally, the numerous taxes result in substantial compliance costs for the taxpayers as a number of payments, returns, etc.

Nowadays, a single tax, known as the goods and services tax (GST), is imposed on supplies that comprise goods and services at each point of the supply chain, beginning from production or import and continuing to the final retail level, in response to the aforementioned challenges.

Therefore, any taxes imposed by the federal government or state governments on the provision of goods or services have now been consolidated into the goods and services tax, which are dual levy where the federal government will impose and collect taxes in the form of the central goods and services tax (CGST Act 2017) as well as the state government would then impose and collect taxes in the form of the state goods and services tax (SGST).

Important Elements of the 2017 CGST Act

The "Central Goods and Services Tax" Act of 2017 has several essential objectives or elements. It is primarily imposed:

  • To tax all intra-State transfers of goods, services, or both;
  • To expand the basis of the input tax credit by allowing it to be used for taxes paid on the supply of products or services, or both, that are used or planned to be used in the course of conducting business;
  • Requiring electronic commerce providers to withhold tax at source from payments made to suppliers that provide products or services using their portals at a rate that does not exceed 1% of the number of taxable supplies (net);
  • To establish a system for the registered individual to self-assess their tax obligations;
  • To give the officers the authority to inspect, search, seize, and arrest people;
  • For the purpose of hearing appeals against decisions made by the Appellate Authority or the Revisional Authority, the Central Government established the Goods and Services Tax Appellate Tribunal;
  • To provide punishments for violating the proposed legislation's requirements;
  • To include a provision against profiteering to ensure that companies pass on the advantages of lower tax incidence on goods, services, or both to consumers;
  • To include comprehensive transitional provisions to ensure a seamless transition of current taxpayers to the goods and services tax system, etc.

CGST Law Taxonomy

  • The CGST Act of 2017 consists of 174 Sections divided into 21 Chapters with three Schedules, which address supply made without consideration, the classification of certain activities as either products or services, or activities that are to be treated as neither commodities nor services.
  • The following are the schedules:
    • Actions to be considered supplies, even if they are made without thought, are included in Schedule I.
    • Activities to be considered a provision of commodities or a supply of services are listed in Schedule II.
    • Activities or transactions that are to be classified as neither a provision of goods nor even a supply of services are included in Schedule III.

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