This is how GST will affect Karnataka
The 3 types of taxes under GST are CGST, SGST and IGST.
The tax shared between State and Centre is 50:50.
Tax deducted by Centre will be subtracted at subsequent transactions.
FollowFinance Minister Arun Jaitley has described GST as “The old India was economically fragmented, the new India will create one tax, one market for one nation.”
The Goods and Services Tax (GST) is actually a culmination of various taxes under different heads like production tax, customs duty, service tax etc, imposed by Central government and Vat, sales tax, entertainment and amusement tax, lottery, betting etc imposed by State governments. Under GST there are 3 types CGST, SGST and IGST.
The taxes that the Central Government directly collects is called Central GST ie CGST. All taxes that are collected by the states for all transactions within the state are called State GST ie SGST. All taxes that are collected by the Central Government for interstate transactions are called integrated GST ie IGST.
To elicit examples:
- Say a trader sells a product worth Rs 10,000 to a client in the State. Say it attracts a tax of 18 per cent. Of this the State and Centre share 50:50 per cent, ie 9 per cent each is shared by State and Centre. Hence, by the sale of a product costing Rs 10,000, the State and the Centre will each get Rs 900.
- Say the same product is sold by the trader to another state, say Andhra, Kerala or Tamil Nadu, then it attracts 18 per cent IGST and directly goes to Centre. There is no sharing with the State.
- Say the trader sells a product worth Rs 10,000 to a trader from Hubballi for Rs 20,000 and the Hubballi trader in turn sells it to a trader in Mumbai for Rs 40,000 and the trader in Mumbai sells it to a customer in Mumbai for Rs 80,000. The transaction between Bengaluru and Hubballi traders attracts SGST and the Centre already has taken 50 per cent. (Rs 900). When the Hubballi trader sells it to Mumbai trader it attracts IGST of Rs 3600. Since IGST goes directly to the Centre, the already paid Rs 900 has to be deducted from Rs 3600 and only Rs 2700 has to be paid. When the Mumbai trader sells it to a customer for Rs 80,000 it attracts a tax of Rs 7,200. Of this both the states will get Rs 3600 each. Since the Centre has already received Rs 900, the trader has to pay 7,200 minus 900 ie Rs 6,300. Of this Maharashtra will get Rs 3600 and Centre will get Rs 2700.
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