We explain that what is the difference between GST and income tax with table. The tax is an involuntary fee that the government charges individuals or corporations each year. The collection of taxes and the payment of taxes is in fact a law that all governments enforce.
Tax and tax policies may differ from country to country, however, the main purpose of collecting the tax is to fund various government activities. The tax system has been around for a long time in this world.
Previously, the import tax applied when the goods were shipped to a particular country. Some countries also applied the consumption tax.
With time and the need for funds during wartime, governments began to tax various other aspects as well. Traditionally, they were collecting property taxes and that too temporarily.
The income tax was first introduced by Great Britain in 1799 as a war measure. Subsequently, Germany followed the tax on turnover or on purchases.
Taxes are of many types today. The most prominent tax that exists in the current era is the GST and the income tax.
Both taxes benefit the government in one way or another, but there are differences in fiscal policy. The main difference between GST and income tax , that is, GST is applied to the consumption of goods and services, while income tax is applied to income or profits obtained. In a way, GST is the indirect tax, while the income tax is the direct tax.
Comparison table between GST and income tax
Comparison parameter GST Income tax
|Meaning / Definition||GST is the tax on the supply or consumption of goods and services.||Income tax is the tax on income earned in a particular year.|
|Tax type.||GST is an indirect tax that is paid to the government.||Income tax is the direct tax that is paid to the government.|
|Tax filing rules||GST registration is mandatory if the turnover is more than 20 lakhs per year.||Income tax must be filed if annual income is more than 2.5 lakhs.|
|Tax payment rules||The tax burden can be passed on to the final consumer.||The person cannot transfer the burden to anyone, the person who earns an income of 2.5 Lakhs and more must pay the tax on their own.|
|Tax chiefs||The GST applies to goods purchased or services offered.||Income tax is levied on salary, homeownership, business profits, capital gains.|
What is GST?
GST, abbreviated as Goods and Services Tax, is an indirect tax paid to the government. It is also called a consumption tax.
The GST is considered a comprehensive, multi-stage, destination-based tax.
It is called integral because it has subsumed many indirect taxes in one form. It has replaced the central excise tax, the service tax, additional customs duties, surcharges, and a certain value-added tax.
It is a multi-stage tax system because GST is imposed at every step of the production process. The tax is returned in the different stages of production and the final consumer pays the tax when purchasing the product or using the service.
Therefore, it is called a destination-based tax, since the tax is applied where you arrive and not where you come from. Therefore, the tax burden can be transferred from one person to another.
GST becomes an indirect tax for the whole country. The cascade of many taxes is avoided by using this tax policy.
As is, GST has eliminated the tax on the tax, which means that the price of the product has been reduced. GST is technology-based and can be submitted online. It is a mandate that if the annual turnover is Rs 20 lakhs or more, GST registration is mandatory. GST has improved a country’s tax collection.
What is income tax?
Income tax is a type of tax levied on income earned per year. It is the tax imposed by the government on the income generated by a company.
Income tax is one of the government’s sources of revenue. The tax collected is used for many developments in the country.
The percentage of the tax is directly proportional to the income earned by an individual. The higher the income, the higher the tax to pay.
In fact, income tax is the direct tax that is paid to the government. Income tax must be filed if a person earns 2.5 lakhs or more in a particular year.
The personal income tax is also known as the personal income tax. There is another so-called business income tax that applies to businesses, corporations, partnerships and also to self-employed workers.
Personal income tax is levied on the salary that a person receives each year. It also includes the business income that a person earns in a particular financial year.
There are many ways to get tax breaks. If it is invested in non-taxable forms, that amount of money is not included in taxable income.
Mainly, these exemptions are granted to any repayment of loans, insurance policies, and allowances for the rental of the house. In some cases, medical exemptions may be cited to obtain tax exemptions.
Main differences between GST and income tax
- Both taxes are benefiting the government in many ways. The main difference between GST and income tax, that is, the GST is applied to the consumption of goods and services, while the income tax is applied to the income obtained in an exercise.
- Regarding the collection of the tax, GST is the indirect tax paid to the government, while the income tax is the direct tax paid to the government.
- GST applies only to the purchase of a product and the use of a service, while income tax applies to salary, home, business income, and capital gains income.
- The GST tax burden is transferred from the manufacturer to the consumer, while in income tax such a transfer cannot occur if a person earns income that reaches the taxation benchmark, he/she is obliged to pay the tax on the rent.
- GST registration is mandatory if a company makes an annual turnover of Rs 20 lakhs per year, while income tax applies to individuals if the annual salary is more than Rs 2.5 lakhs.
Taxes play a vital role in the development of a country. The nation depends on people for financial resources. These resources help the government to find infrastructure development in the country. In fact, it is a mandate for all citizens to pay the tax on time.
It is a punishable offense if it is not paid. The other side of the coin is, when paying taxes, what the citizen receives in return. With the arrival of GST, product prices have dropped dramatically. The common man can afford many things that he was dreaming about a few years ago.
Whether indirect or direct tax, a government’s policy should not only collect the tax, but also show tangible results to the citizens of the nation.