1. Goods and Services Tax (GST)

GST is an Indirect Tax levied on the supply of goods and services. It is a multi-stage, destination-oriented consumption tax that replaced many central and state-level indirect taxes (like VAT, Service Tax, Excise Duty) to create a “One Nation, One Tax” system.

  • Multi-Stage: Applied at every stage of the supply chain (from manufacture to final consumption).
  • Value Addition: Tax is only on the value added at each stage, as businesses can claim Input Tax Credit (ITC) for the GST paid on their purchases, thereby mitigating the cascading effect of taxes.
  • Types:
    • CGST (Central GST): Tax levied by the Central Government on intra-state supplies.
    • SGST (State GST): Tax levied by the State Government on intra-state supplies.
    • IGST (Integrated GST): Tax levied by the Central Government on inter-state supplies and imports. This revenue is shared between the Centre and the destination state.
    • UTGST (Union Territory GST): Replaces SGST in Union Territories without a legislature.

2. Corporate Tax

Corporate Tax is a Direct Tax levied on the net income or profits of a domestic or foreign company operating in India. It is governed by the Income Tax Act, 1961.

  • Domestic Company: Taxed on its worldwide income.
  • Foreign Company: Taxed only on income earned or received in India.
  • Tax Rates: Rates vary based on factors like the company’s turnover, whether it is a domestic or foreign company, and whether it opts for concessional tax regimes (e.g., lower rates for certain new manufacturing companies or for domestic companies foregoing specific deductions).
  • Minimum Alternate Tax (MAT): A provision to ensure that profitable companies, which manage to reduce their taxable income to almost zero using various deductions, still pay a minimum amount of tax, usually levied on “book profits.”

3. Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)

TDS and TCS are mechanisms for collecting Income Tax at the source of income or transaction, ensuring a steady revenue stream for the government and aiding in tracking transactions for compliance.