GST proposes to abolish the varying levels of
taxation between States, and consider the country as a single whole organism when
it comes to taxes on goods and services instead of as a segmented creature. All the sundry taxes will be clubbed into just 2
levels – Central GST (CGST) and State GST (SGST). What a trader will essentially be able to do is claim a refund on the taxes already paid
at different stages of value addition. The consumer who buys the product will have to pay only the GST charged by the last
dealer in the supply chain, as everyone else would have the opportunity to set-off the taxes paid at the previous stages.
If we take the example above under the GST system, the Cenvat on manufacturing the dress and the taxes paid on dyes and
buttons can be offset at each level, thereby considerably reducing the total taxes paid.
GST will also prevent the multiple taxation occurring on certain goods, and ensure transparency with regards to the rate of
taxation and the total amount that goes to the government as taxes on a product. Currently, a consumer is not aware of the total
amount of taxes s/he pays for a product, apart from VAT which is mentioned on the bill.