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CS Executive · Tax Laws and Practice · Concept of Indirect Taxes at a Glance

Which feature correctly describes GST as a destination-based tax?

GST is destination-based because the tax revenue goes to the State where the goods or services are consumed, not where they are produced. Inter-State supplies are therefore taxed through IGST, and the proceeds are passed on to the State of consumption.

  1. ATax revenue accrues to the State where goods are produced
  2. BTax revenue accrues to the State where consumption takes placeCorrect
  3. CTax is levied only at the final retail stage
  4. DTax is levied only at the stage of import

Explanation

In a destination-based tax, revenue goes to the place of consumption, not origin. This is why IGST is settled to the consuming State. Stating that revenue goes to the producing State describes an origin-based tax. GST is levied at every stage of supply with input credit, not only at retail.

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