What is GST Full Form – Definition and Meaning Explained

The full form of GST is Goods and Services Tax. It is an indirect tax reform implemented in India to replace multiple taxes like VAT, service tax, etc., with a single tax structure.

What does GST mean?

The GST corporation aims to simplify the tax system, reduce tax evasion, and create a common market by eliminating the cascading effect of taxes. It is levied at each stage of the supply chain, from the manufacturer to the consumer, based on the value addition at each stage. This article discusses GST and when GST started in India.

Understanding The Journey And Full Form

Understanding the journey and full form of GST is essential for comprehending its impact and significance. GST, or Goods and Services Tax, represents a significant shift in India’s indirect tax system. It was introduced to streamline taxation, replacing a complex web of central and state taxes with a single, unified tax. The journey of GST in India began with the passage of the 101st Constitutional Amendment Act, which paved the way for its implementation. The journey started in 2000 when then-Prime Minister Atal Bihari Vajpayee established a committee to explore its potential. This task force, led by Vijay L. Kelkar, an advisor to the finance ministry, recommended GST to enhance the country’s tax structure. The Union Ministry of Finance proposed introducing GST by April 1, 2010. However, the process faced several delays, and it was not until 2011 that the Constitution Amendment Bill to enable GST was introduced.

The implementation of GST replaced several central taxes, including:

• Service tax
• Central excise duties
• Duties of excise
• Cess and surcharge
• Additional duties of customs
• Additional duties of excise 

Similarly, GST subsumed various state taxes, such as:

• Entry tax
• State VAT
• Luxury tax
• Entertainment tax
• Purchase tax
• Central sales tax
• Taxes on advertisements
• State cess and surcharges
• Taxes on gambling and lottery

This tax reform aimed to create a common national market, reduce tax evasion, and simplify compliance for businesses by providing them with a single registration under a GSTIN (Goods and Services Tax Identification Number). Ensure your online business loan processes are GST-compliant by accurately documenting GST payments and credits.

What is meant by direct tax?

Direct tax is a tax levied directly on individuals and organizations by the government. It is based on the income or profits earned by the taxpayer, and the liability to pay the tax cannot be shifted to others. For Mudra loan applications, detailed GST records can strengthen your case by reflecting a well-documented trail of business transactions. Here are some key points about direct taxes:

1. Income Tax: The most common form of direct tax is income tax, which is levied on the income earned by individuals and businesses.
2. Corporate Tax: Corporations are subject to corporate tax, which is levied on the profits earned by the company.
3. Capital Gains Tax: This tax is levied on the profit from the sale of assets such as property, stocks, or bonds.
4. Wealth Tax: Although no longer applicable in India, wealth tax was a direct tax levied on the net wealth of individuals and HUFs (Hindu Undivided Families).
5. Inheritance Tax: Also not applicable in India currently, inheritance tax is levied on the transfer of assets from one individual to another through inheritance.
6. Property Tax: Levied by local governments, property tax is a direct tax on the value of a property owned by an individual or organization.
7. Progressive Taxation: Direct taxes are often progressive, meaning that the tax rate increases as the taxable amount increases. This is aimed at distributing the tax burden more fairly based on the taxpayer’s ability to pay.
8. Tax Deductions and Exemptions: Direct taxes often allow for deductions and exemptions based on certain criteria, such as investments in specified instruments or expenses incurred for specified purposes.

Include your GST returns in your msme business loan application to showcase business turnover and financial health.

GST Meaning in Various Indian Languages

Language	Meaning
Hindi	वस्तु एवं सेवा कर (Vastu evam Seva Kar)
Bengali	মাল ও পরিষেবা কর (Mal o Porishewa Kor)
Tamil	பொருள் மற்றும் சேவை வரி (Porul Matrum Sevai Vari)
Telugu	వస్తువు మరియు సేవల పన్ను (Vastu Mariyu Sevala Panu)
Kannada	ವಸ್ತು ಮತ್ತು ಸೇವಾ ತೆರಿಗೆ (Vastu Mattu Seva Terege)
Malayalam	സാമഗ്രികമായി അടച്ചിടുന്നത് (Samagrikamayi adachittunnathu)
Marathi	वस्तु आणि सेवा कर (Vastu Aani Seva Kar)
Gujarati	માલ અને સેવા કર (Mal ane Seva Kar)
Punjabi	ਮਾਲ ਅਤੇ ਸੇਵਾ ਟੈਕਸ (Mal te Seva Tax)
Urdu	مال اور خدمات ٹیکس (Mal aur Khidmat Tax)

Goals behind GST full form

The full form of GST is Goods and Services Tax. The implementation of GST in India was driven by several key goals aimed at transforming the indirect tax system. Some of the main goals behind GST are:

1. Simplification: GST aimed to simplify the tax structure by subsuming multiple indirect taxes into a single tax, reducing the compliance burden for taxpayers.
2. Uniformity: It aimed to create a uniform tax structure across the country, replacing the fragmented tax system that existed with different tax rates and rules in different states.
3. Elimination of Cascading Effect: GST was designed to eliminate the cascading effect of taxes, where tax is levied on tax, by allowing for input tax credit across the value chain.
4. Boost to Economy: GST aimed to boost economic growth by making goods and services more competitive, reducing the cost of production and distribution.
5. Transparency and Compliance: It aimed to bring transparency in the tax system and improve tax compliance by leveraging technology for easier tax filing and administration.
6. Wider Tax Base: GST was expected to widen the tax base by bringing more businesses into the tax net, leading to increased tax revenues for the government.
7. Harmonization of Laws: It aimed to harmonize tax laws and procedures across states, promoting ease of doing business and interstate trade.

Leverage your GST filings to provide proof of revenue and enhance your eligibility for a working capital loan at Lendingkart.

How is GST Calculated?

In India, calculating GST involves summing up the GST payable on reverse charge, inward supplies, and output supplies for each month. When filing monthly GST returns, this total amount must be accurately reported and paid.

As a taxpayer, consider all relevant factors such as reverse charges, exempted supplies, interstate sales, and both eligible and ineligible Input Tax Credit (ITC). Accurately calculating the GST ensures you avoid a penalty, which is 18% interest on any shortfall. 

Let’s understand how you can calculate GST with an example.

GST Calculation Formula

• GST Amount: (Original Price x GST Rate) x 100
• Net Price: Original Price + GST Amount

For example, imagine you are selling a gadget from Delhi to Bangalore for Rs. 15,000 with a GST rate of 18%.

• GST Amount: (15,000 x 18) x 100 = Rs. 2,700
• Net Price: 15,000 + Rs. 2,700 = Rs. 17,700

This approach ensures you correctly compute the GST and meet your tax obligations efficiently. 

Advantages of GST

The introduction of the GST Goods and Services Tax stands as a significant milestone in India’s tax reforms. Understanding its impact requires a look at both its advantages and disadvantages. Let’s understand GST’s key benefits:

• Uniform Tax Structure: GST creates a unified tax regime across India. It ensures consistency in tax laws, processes, and rates throughout the country. This uniformity helps businesses operate more smoothly across state borders. 
• Elimination of the Cascading Effect of Taxes: GST consolidates various indirect taxes under one umbrella. It removes the previous cascading tax effect where taxes were levied on top of other taxes. For instance, earlier businesses had to deal with separate returns and compliance for service tax and Value Added Tax (VAT). With GST, they only need to file a single return. It simplifies the process of claiming input tax credits. 
• Regulation of the Unorganized Sector: GST brings the unorganized sector into the formal economy by streamlining compliance, payment, and claim processes. This regulatory framework ensures that even small and medium enterprises (SMEs) adhere to GST norms. It fosters a more organized and transparent business environment. 
• Composition Scheme for Small Businesses: GST extends a composition scheme for small businesses with an annual turnover of Rs. 1.5 crore (Rs. 75 lakh for special category states). This scheme allows eligible businesses to pay a lower tax rate, thereby reducing their tax burden and encouraging compliance. 
• Simplified Online Process: All GST-related activities, such as registration and return filing, can be done online. This digital approach has significantly simplified the compliance process. It makes it easier for startups and small businesses to register and manage their GST obligations without unnecessary hassles. 

Additionally, GST has replaced 17 different indirect taxes with a single uniform tax. This change has reduced the cost of goods, increased demand, and generated more revenue for both central and state governments. 

Types of GST

There are four primary types of Goods and Services Tax in India. Each of these serves a specific purpose in the tax structure:

• State Goods and Services Tax (SGST): This tax is levied by the state government on transactions of goods and services within the state. The revenue generated from SGST is collected by the state where the transaction takes place. 
• Central Goods and Services Tax (CGST): Imposed by the central government, CGST applies to intrastate transactions of goods and services. The central government is responsible for collecting the revenue from this tax. 
• Integrated Goods and Services Tax (IGST): ICST is charged on inter-state transactions of goods and services, as well as on imports and exports. The revenue from IGST is shared between the central and state governments according to the GST guidelines. The state’s portion is collected by the state where the goods or services are ultimately consumed. 
• Union Territory Goods and Services Tax (UGST): This tax is applicable in Union Territories (UTs) and is similar to SGST. UGST is levied on transactions within the UTs, and the revenue is collected by the respective UT administration. 

Examples of Transactions

• Intra-State Sales (e.g., within Delhi): Under the old regime, these transactions were subject to VAT, excise duty, or service tax. In the new regime, they are subject to CGST and SGST, while the revenue is shared between the state and the center.
• Inter-State Sales (e.g., from Mumbai to Delhi): Previously, these transactions involved excise duty, service tax, and central sales tax. Now, they are covered under IGST, with the center sharing the revenue based on the destination of the goods. 

How to Register for GST

Procedure for GST Registration

Under the GST system, all businesses previously liable to pay service tax, VAT, or central excise must register for GST. The registration process begins on the GST portal, where applicants can submit their details. Upon submission, the portal generates an Application Reference Number (ARN) immediately. 

The ARN allows applicants to track the status of their registration application. If there are any queries or issues, they can be addressed through the portal. Generally, the GST registration certificate and the 15-digit GST Identification Number (GSTIN) are issued within a week of ARN generation. The GSTIN is mandatory for businesses with an annual turnover exceeding Rs. 20 lakh. 

Documents Required for GST Registration

Here is a list of essential documents needed for GST registration:

1. Proprietorship:

• PAN card and photograph of the proprietor
• Address proof of the business place

2. Partnership and LLP:

• PAN cards of all partners
• Photograph of all partners
• Partnership deed
• Address proof of the business place

3. Private Limited Company:

• PAN card of the company
• PAN cards and photographs of all directors 
• Certificate of incorporation
• Address proof of the business place
• Memorandum and Articles of Association

4. Society of Trust:

• Registration certificate
• PAN card of the Society of Trust
• PAN cards and photographs of trustees
• Address proof of the business place

5. Hindu Undivided Family (HUF):

• PAN card of the HUF
• PAN card and photograph of the Karta
• Address proof of the business place

6. Others (E.g., Public Limited Companies, Government Departments):

• Relevant proof of identity
• Address proof of the business place

By ensuring all necessary documents are ready, businesses can streamline their GST registration process and avoid delays. 

Different GST Rate Slabs 

India’s GST system features four main tax slabs designed to categorize various goods and services based on their nature and necessity. This structure aims to keep essential items affordable while imposing higher taxes on luxury products. Here’s a breakdown of the GST rate slabs:

• 5% GST: This lowest stab includes essential goods and services. It ensures that basic necessities remain affordable for everyone. Items like food grains, certain medicines, and other daily essentials fall under this category.
• 12% GST: This middle slab covers a broader range of products and services that are neither basic necessities nor luxury items. This includes processed foods, some healthcare items, and intermediate goods. 
• 18% GST: Positioned as the standard rate, this slab encompasses a large portion of goods and services, including most consumer goods, restaurant services, and financial services. 
• 28% GST: The highest slab is reserved for luxury items and non-essential services. Products like high-end cars, premium electronic goods, and luxury hotels fall into this category. 

Special Rates

• Gold and Jewellery: Unlike other goods, gold is taxed at a separate rate of 3%, reflecting its unique market. 
• Precious Stones: Semi-precious and rough precious stones are taxed at a minimal rate of 0.25%, acknowledging their distinct value and market dynamics. 

By structuring GST rates this way, the government aims to balance revenue generation with affordability. It ensures the basic necessities remain accessible while luxury items contribute more significantly to the tax pool. 

Make your journey with GST easy with Lendingkart!

Frequently Asked Questions

What are the 4 types of GST?

The four types of GST are CGST (Central Goods and Services Tax), SGST (State Goods and Services Tax), IGST (Integrated Goods and Services Tax), and UTGST (Union Territory Goods and Services Tax). These taxes are levied at different stages of the supply chain.

How is GST calculated?

GST is calculated on the value of the goods or services being sold or supplied. The GST amount is calculated by multiplying the GST rate (as applicable) by the taxable value of the goods or services. The formula for calculating GST is GST Amount = (Taxable Value × GST Rate) / 100.

What is the GST percentage?

The GST percentage varies depending on the type of goods or services. In India, the GST rates are 0%, 5%, 12%, 18%, and 28%. Certain goods and services may also be exempted from GST. The applicable GST rate for a particular good or service is determined by the GST Council.