In to how many component is GST divided?

Correct option is C

The correct answer is (c) Three.

The Goods and Services Tax (GST) in India is divided into three main components to ensure efficient tax collection and distribution between the Central Government and the State Governments.

The Three Components of GST:

1. Central GST (CGST):

   • Collected by the Central Government on intra-state transactions (within the same state).
   • Example: If a transaction occurs in Uttar Pradesh, CGST goes to the Central Government.

2. State GST (SGST):

   • Collected by the State Government on intra-state transactions.
   • Example: In the same Uttar Pradesh transaction, SGST goes to the Uttar Pradesh State Government.

3. Integrated GST (IGST):

   • Collected by the Central Government on inter-state transactions (between different states) and imports.
   • Example: If a transaction occurs between Uttar Pradesh and Maharashtra, IGST is applied.

Why GST is Divided:

• To maintain a federal structure of taxation.
• To ensure proper revenue sharing between the central and state governments.
• To avoid double taxation by integrating multiple indirect taxes into a unified system.

Fourth Component (Cess):
While GST primarily has three components, a compensation cess is also levied on certain goods (like luxury items or sin goods) to compensate states for revenue loss due to GST implementation. However, it is not considered a core GST component.

Benefits of GST Structure:

• Simplifies the indirect tax system.
• Reduces cascading effects of taxes (tax on tax).
• Promotes uniformity in taxation across India.

Additional Information:
The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based tax that was implemented in India on July 1, 2017, as part of a significant tax reform. It replaced a complex web of indirect taxes like VAT, service tax, and excise duty, creating a unified tax system across the country.