GST is a uniform tax that is levied on all goods and services to put an end to the following problems – Central exercise, Luxury Tax, Service Tax, VAT, Entertainment Tax, and Entry Tax.
The country has gained very much from GST. The most important gain is the abolition of interstate check-posts erected to enforce taxes on cross border transactions.
This has reduced the impediments to interstate movements of goods and helps to create national common markets.
TDS, i.e Tax Deducted at Source. It means the income is taxed when there is earning in any transaction. This concept is applicable in Goods and Services Tax also.
It is also essential to understand the difference between GST and TDS as they are using interchangeably by many people.
GST vs TDS
The main difference between GST and TDS is that GST is applied to any kind of supply or delivery of any kind of goods or services whereas TDS is a term used when any kind of tax is deducted at source (i.e at the time of payout).
GST is a percentage of income generated from profit or loss of selling goods or services, which is payable on completing the business. In TDS, then the tax is deducted at source, which enables the government an advantage over people who either forget to pay tax or hide their transactions to not pay the tax. It makes sure that income is deducted in advance from the payments.
Comparison Table Between GST and TDS (in Tabular Form)
| Parameter of Comparison | GST | TDS |
|---|---|---|
| Implication | GST can also be said a type of indirect tax which is levied on the sale of Goods and Service in India. | The person who pays the tax is known as ‘deductor’ and the person who is receiving the tax is known as ‘deductee’.(usually the Govt.) |
| Importance | The introduction of GST establishes the common unified national market, which attracts foreign investments in the Indian business sector. | TDS is only applicable to the tax-deductible transactions. hence it can not be deducted in case an income is exempt. |
| Main features | GST harmonizes the indirect taxation system throughout India by subsuming various taxes into one .hence it minimizes the administrative burden of government. | · Aims at the smooth collection of tax. · Prevention of tax evasion. |
| Disadvantages | · Many services became costlier like Air tickets, courier service, and School fees. · It arises complexity for business Plans. · It is a little bit confusing form of taxation in some sectors. | · Calculation of Advanced tax also requires a professional person, and that requires high fees. · Delay in a refund of TDS from the department for some cases. |
| Advantages | · GST replaces all major indirect taxes. · It will remove the ‘Cascading Effect’. · It minimizes the transaction of Black money. | · Sharing the responsibility between deductor and tax collection agencies. · It is relatively steady as compared to other sources of revenue to the government. |
What is GST?
GST is a uniform tax which is levied on all goods and services to put an end to the following problems –
- Central exercise
- Luxury Tax
- Service Tax
- VAT
- Entertainment Tax
- Entry Tax.
To understand GST, we must understand the current indirect taxation system. Direct taxes such as income tax are borne by the person liable to pay the tax; this means that the tax burden cannot be shifted to anyone else.
The liability of indirect taxes, on the other hand, can be shifted to another person. So, the person liable to pay the tax can collect the tax from someone else and then pay it to the government; thus shifting the tax burden. The GST tax falls in this category.
The current indirect tax structure, which comprises of so many different taxes, can be classified as:
Central taxes: levied by the Central govt (includes Central Sales Tax, Excise Duty, etc.) State taxes: levied by the various state govt (VAT, Service Tax, Octroi)
The current indirect tax has one major problem – the cascading effect. When you buy something, you pay a tax on the tax itself.
What is TDS?
TDS means the income is taxed when there is earning in any transaction. This concept is applicable in Goods and Services Tax also.
TDS lies in the category of direct tax which is collected from the people during payment of any service. A tax collected in the form of TDS is sent to the account of the Government. TDS is the short form of Tax Deducted at Source.
Advantages of TDS
- As tax deduction takes place throughout the year, it ensures a continuous flow of revenue to the Government.
- It is a measure to prevent tax evasion.
- It helps in increasing the tax reach as it is deducted at the time of payment itself preventing fraud.
Main Differences Between GST and TDS
- The main difference between GST and TDS that GST is a percentage of income tax that has to be paid to the deductor when a profit or loss in the selling of goods and services is made. Whereas TDS is a term used to deduct the percentage of income at that point of business when the profit is made.
- GST is a type of indirect tax to be paid to deductor whereas TDS is a type of direct tax to be levied upon deductee.
- GST has to be paid whether the deductee made a profit or loss whereas TDS is only to be paid when there is a sustainable profit in the business transaction.
- GST reduces the flow of black money in the market. Whereas TDS assures that the process of collection of tax goes fairly and smoothly.
- GST replaced all of the primitive taxes and combined them into one whereas TDS is a process of submitting these taxes at the initial stage of the business.
Conclusion
Whenever a business plan is made, there has to be a percentage of money to be levied upon the businessman to be paid to the respective Government. This percentage of money from the profit or loss incurred from the transaction is called Tax.
In the current taxation system in India, there was a problem with Cascading Effect i.e people pay tax on the tax itself. So to prevent such a thing to happen, the Government of India combined every type of Tax under a single Taxation System and that is called GST( Goods and Service Tax).
If income tax is paid at the time of making a profit , then that term is called TDS (Tax deducted from source).
References
- https://www.icicibank.com/knowledge-base/tax/about-tds.page
- https://www.ajol.info/index.php/wsa/article/view/116183
- https://rrjournals.com/wp-content/uploads/2018/11/884-886_RRIJM180310178.pdf