‘No cascading of taxes’ -- is one of the characteristics of GST. Define
Answers
Answer:
Cascading of tax means tax at the next stage is calculated at the amount which includes taxes paid earlier.
Explanation:
Say, I sell a product to you for 100 plus 12% excise duty, i.e., for 112.
Then you further sell this product to a customer on which you need to pay sales tax @5%. This sales tax is collected under a different law than the excise duty law.
So the sales tax will be 5% of 112 (100 + Excise duty). It means that the next tax (sales tax) is being calculated on the tax paid earlier (excise duty). Here sales tax on excise duty portion is 5% x 12 = 2.40.
In GST, these two laws have been merged into a new law and this tax on tax is not calculated.
Under GST, in the example above, you’ll sell your customer for 100 plus GST rate. And whatever GST you’ve paid while purchasing can be claimed from the government while paying your GST liabilities on sales or by claiming refunds.
Feel free to ask if any doubt.