GST Reg

Destination Based taxes under GST

Destination Based taxes under GST
Swarit Advisors
| Updated: Aug 28, 2017 | Category: GST

GST is a destination based tax or a consumption-based tax. Thus the place of consumption will decide the state which will liable to collect taxes under GST.

This principle seeks to tax the goods and services at the point where consumption takes place rather than the point where it is originated.

The idea behind introducing the destination-based tax is to provide the benefit to the consuming states in the form of a share of the revenue.

For Example, If an in Mumbai produces the goods and sells the goods to B in Jaipur, then in such case the tax should be levied and collected and should accrue on the goods in the State of Jaipur and not in the State of Mumbai[1]. The revenue in the case of destination-based taxation belongs to the place, where the goods are finally consumed and not to the State where the goods are produced.

Difference between Destination Based Tax and Origin Based Tax:

Destination-Based Taxation

Origin-Based Taxation

Destination-based taxation means the taxation based on the consumption of the goods or services tax (GST)Origination based taxation means taxation based on the place where the goods or services are produced
If an in Mumbai produces the goods and sells the goods to B in Jaipur, then in such case the tax should be levied and collected and should accrue on the goods in the State of Jaipur and not in the State of Mumbai.If an in Mumbai produces the goods and sells the goods to B in Jaipur, then in such case the tax should be levied and collected in the State of Mumbai and not in the State of Jaipur
Export is exempt or zero-rated under destination-based taxationExport as always taxed under origin-based taxation in spite of whether it is domestic or export consumption
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