With the passage of time and the need for finances during wartime, governments began to tax several other components. They used to charge GST and Income Tax on real estate, but only for a limited time.
In today’s world, there are many different forms of taxes. GST and income tax are the two most prominent taxes in the modern age. Both taxes help the government somehow, but the taxation policies are different.
What exactly is GST?
GST stands for Goods and Services Tax and is a government-imposed indirect tax. A consumption tax is another name for it. GST is a multi-stage, destination-based tax that is deemed comprehensive.
It’s named comprehensive because it combines several indirect taxes into one. Central excise duty, services tax, additional customs duty, surcharges, and various value-added taxes have changed.
The final consumer pays the tax when they buy the product or use the service, which is refunded at various manufacturing stages.
As the tax is levied on where it reaches rather than where it originated, it is known as a destination-based tax. As a result, the tax burden may be passed down from generation to generation.
GST unifies all indirect taxes in the country. This taxation scheme prevents several levies from cascading.
As it is, the GST has eliminated the tax on tax, cutting commodities prices. GST is a technologically progressive tax that accepts electronic filing. Businesses with annual revenues of $20,000 or more must register for GST. GST has improved a nation’s ability to collect taxes.
What is income tax, exactly?
Income tax is a tax imposed on yearly earnings. The tax revenue is used to fund various projects across the country. The tax rate is related to the amount of money an individual earns.
Individuals must submit income tax if they earn more than 2.5 lakhs in a given year.
Another tax is the business income tax, which applies to corporations, partnerships, and self-employed individuals.
Individual income tax is a tax on a person’s annual earnings. It also covers a person’s business income for a certain fiscal year. If the money is invested in non-taxable forms, it does not constitute taxable income.
Medical exemptions can be used in a few instances to avoid paying taxes.
GST and Income Tax: What’s the Difference?
- Regarding collection, GST is an indirect tax paid to the government, whereas income tax is a direct tax paid to the government.
- GST is only charged when you buy a product or utilize a service, whereas income tax is charged on your pay, home, business revenue, and capital gain income.
- The tax burden of GST passes from the maker to the consumer, whereas there is no such transfer in income tax: A person must pay income tax if they earn enough money to meet the taxation threshold.
- Individuals must register for GST if their annual salary exceeds 2.5 lakhs.
Suggested Read: GST Registration