Government goods and service tax (GST) is defined as a multi stage process in which taxes are going to be levied on each value addition.
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In order to have a clear picture of GST, one should understand the concepts under it.
A product passes through the multiple stages followed by buying raw material to production to warehousing of products to the sale of the product. In simple words, when a product was manufactured, the centre would levy an Excise Duty on the manufacture, then before the item is sold to the next stage the state will add a VAT tax to it after which there would be a VAT at the next point of sale also. Likewise the liability of tax passes from one person to another.
Further, there are two types of taxes direct and indirect. Under direct taxes, liability cannot be passed on to someone whereas in direct taxes the liability is keep on passing from one person to another.
For example if a shopkeeper pays VAT to the government then in order to recover that he will impose VAT to the customers as well.
GST,in order to decrease the final liability from the end customers, it has a system of Input Tax credit which allows sellers to claim for the taxes already paid so that the issue of imposing VAT on each other can be eradicated.
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