Are you curious to know what is dual GST model? You have come to the right place as I am going to tell you everything about dual GST model in a very simple explanation. Without further discussion let’s begin to know what is dual GST model?
India implemented the Goods and Services Tax (GST) on July 1, 2017, with the aim of creating a unified tax structure across the country. The GST is a destination-based tax levied on the consumption of goods and services. One of the unique features of the Indian GST is the Dual GST model, which divides the GST into two components – Central GST (CGST) and State GST (SGST). In this blog post, we will discuss what the Dual GST model is, how it works, and its advantages and disadvantages.
What Is Dual GST Model?
The Dual GST model is a tax structure in which both the central and state governments levy GST on the supply of goods and services. Under this model, the central government levies CGST, and the state government levies SGST on intra-state supplies of goods and services. For inter-state supplies of goods and services, the central government levies Integrated GST (IGST), which is equal to the sum of CGST and SGST.
How Does Dual GST Model Work?
The Dual GST model is based on the concept of destination-based taxation. The tax is levied on the consumption of goods and services rather than on the production or supply of goods and services. The GST is a value-added tax, which means that it is levied on the value added at each stage of the supply chain. The supplier collects the GST from the buyer and remits it to the government.
For example, let’s say that a manufacturer in Maharashtra sells goods worth Rs. 10,000 to a dealer in the same state. The GST rate is 18%. Under the Dual GST model, the manufacturer will charge CGST of Rs. 900 and SGST of Rs. 900, making the total GST payable Rs. 1,800. The manufacturer will remit Rs. 900 to the central government as CGST and Rs. 900 to the Maharashtra government as SGST.
Advantages Of Dual GST Model
- Simplification of tax structure: The Dual GST model has simplified the tax structure by bringing together all indirect taxes under one umbrella.
- Boost to GDP: The implementation of GST has led to the formalization of the economy and has boosted the GDP.
- Reduction in tax evasion: The GST system is technology-driven, and all transactions are recorded electronically, which has reduced the scope for tax evasion.
- Uniform tax rates: The GST system has ensured that tax rates are uniform across the country, which has reduced the scope for tax arbitrage.
Disadvantages Of Dual GST Model
- Initial implementation challenges: The implementation of the Dual GST model faced several initial challenges, including technical glitches in the GSTN portal and a lack of clarity on certain provisions of the law.
- Compliance burden: The GST system requires taxpayers to file multiple returns, which has increased the compliance burden for small and medium-sized businesses.
- Impact on inflation: The implementation of GST led to an increase in the prices of certain goods and services, which had an impact on inflation.
Conclusion
The Dual GST model is a unique tax structure in which both the central and state governments levy GST on the supply of goods and services. The implementation of GST has simplified the tax structure, boosted the GDP, and reduced the scope for tax evasion. However, the GST system has also faced initial implementation challenges, increased the compliance burden for businesses, and had an impact on inflation. Overall, the Dual GST model has had a significant impact on the Indian economy and has paved the way for a unified tax structure in the country.
FAQ
What Is The Indian Dual GST Model Based On?
The Indian GST model is based on the Canadian dual GST model.
What Is The Difference Between National GST And Dual GST?
A conventional national GST cannot be implemented without the States losing their fiscal autonomy. Dual GST signifies that GST would be levied by both, the Central Government and the State, on the supply of goods or services.
Which Are The Model 2 States In GST?
Model 2 states like Odisha, Arunachal Pradesh, Mizoram, Uttrakhand, Jharkhand, Assam, etc. are depending on GSTN to manage back-end tasks such as tax settlement, assessment, refunds, etc. hands-on application training for the CBEC officers. maintaining help desk for the ACES GST systems.
Does India Have Dual GST?
India implements a dual GST, with the Center and States taxing goods and services at the same time. GST is a unified tax based on the principle of “One Nation, One Tax.” The absence of the cascading impact of various taxes and the smooth flow of Input Tax Credit is the most significant benefits of GST adoption.
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