How GST is Destination Based Tax

 How GST is Destination Based Tax

-Dr. Lalit Kumar Setia

The Goods and Services Tax Collection is more in the state where goods and services are consumed in more quantity and amount. Higher the consumption, higher the GST benefit to the State Government. How it is possible?

Illustration:

Suppose Mr. A, resident of Haryana purchased goods from M/s ABC Limited located in Haryana. The M/s ABC Limited will levy GST on goods and Mr. A will have to pay GST included in the MRP of the Goods. The collection of GST (i.e. CGST and SGST) will be paid to the Central Government and Haryana Government respectively. Take another example, suppose Mr. A is the resident of Delhi and M/s ABC Limited of Haryana supplied goods to Mr. A. Then M/s ABC Limited will levy IGST on goods and Mr. A will have to pay IGST included in the MRP of the goods. The Collection of IGST will be paid on the portal of GST by the M/s ABC Limited. In such case, the place of consumption will decide the State that will collect the tax. The IGST paid by M/s ABC Limited will be divided between Centre and Delhi. The Haryana which produces the goods will get nothing in the GST collection.

The GST is destination based Consumption based tax. Hence, the place of consumption will decide the State that will collect the tax. The State Governments which are promoting consumption with full billing without stealing of tax are getting maximum benefit from the GST.

Destination Based Tax on Consumption:

It is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

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