What is the full form of GST
GST: Goods and Service Tax
GST stands for Goods and Service Tax. It is an indirect tax which was introduced to simplify the complicated indirect tax system in India. It brings the all other indirect taxes imposed by central and state governments on the manufacture and sale of goods and services under a single domain at the national level.
So, GST is basically a consolidated tax that is supposed to replace all other indirect taxes levied on goods and services. It would be based on the uniform rate of tax and will be payable only at the final point of consumption, unlike a cascade tax that is applied at every stage in the supply chain without considering the taxes paid at earlier stages. This way of applying a tax on tax is known as the cascading effect of taxes. Let us understand it with an example;
A distributor sells a product of price Rs. 100 to a retailer after adding the indirect tax 12%, at Rs. 112. Then the retailer sells the same product of price Rs. 112 to a customer after adding the indirect tax 12% at Rs. 126. In this scenario, due to the cascading effect of taxes, the final price of the product has increased.