Taxes subsumed under Gst pdf Upsc

Need for Goods and Services Tax

The Government propose GST after the implement of VAT (Value added Tax). GST aimed at making a single tax pan India by integrating the taxes of the state and centre. The government of India believed that by a created a single market throughout India, might help the Industry, business etc in a big way. Going by the expert’s opinions, GST has the potential to increase the GDP up to 2%.

The GST bill was passed in the parliament on 29 March 2017 and can into effect on July 1, 2017.

The introduction of the Goods and Services Tax (GST) in India was driven by the need to reform the existing indirect tax structure, which was complex and inefficient. Here are the key reasons for implementing GST:

1. Simplification of Tax Structure

Prior to GST, businesses faced a myriad of indirect taxes at both state and central levels, including excise duty, VAT, and service tax. This complexity not only increased compliance costs but also created confusion among taxpayers. GST consolidates these multiple taxes into a single tax regime, making it easier for businesses and consumers to understand their tax liabilities.

2. Elimination of Cascading Tax Effect

One of the significant drawbacks of the previous tax system was the cascading effect, where taxes were levied on top of other taxes (tax-on-tax). GST addresses this issue by allowing input tax credits at each stage of the supply chain, meaning that tax is only paid on the value added at each step. This mechanism reduces the overall tax burden on goods and services, leading to lower prices for consumers.

3. Uniformity Across States

GST brings uniformity to the taxation process across different states in India. Previously, varying state taxes created barriers to trade and increased logistical costs. With GST, goods and services can move across state lines without incurring additional taxes, fostering a more integrated national market.

4. Increased Compliance and Revenue Generation

The GST framework encourages better compliance through its transparent structure and automated processes. By simplifying tax payments and reducing opportunities for evasion, GST is expected to increase the number of taxpayers and improve overall tax revenue for the government. The anticipated increase in compliance could raise India’s tax-to-GDP ratio significantly.

5. Boosting Economic Growth

By reducing the cost of goods and services through a simplified tax structure, GST is expected to stimulate demand and economic growth. Lower prices can lead to increased consumption, benefiting businesses and potentially leading to higher employment rates.

6. Enhancing Export Competitiveness

With a more competitive pricing structure due to reduced indirect taxes, Indian products can become more appealing in international markets. This could lead to an increase in exports as Indian goods become more affordable compared to foreign products.

7. Transparency in Taxation

GST aims to bring greater transparency to the taxation system, allowing consumers to see exactly how much tax they are paying on goods and services. This transparency can help build trust in government institutions and reduce corruption associated with tax collection.

Suggestion for GST in the First Proposal

The GST is to be collected same as VAT and it is imposed pan India with Uniformity. That is single rate throughout the country.

The first proposal for the Goods and Services Tax (GST) in India was shaped by several key recommendations and discussions that laid the groundwork for its eventual implementation. Here are the main suggestions and features outlined in the initial proposals:

1. Comprehensive Tax Structure

The GST was envisioned as a comprehensive indirect tax to replace multiple existing taxes, including Central Excise Duty, VAT, and Service Tax. This consolidation aimed to simplify the tax structure and reduce compliance burdens on businesses.

2. Dual GST Model

The proposal included a dual GST framework, where both the Central Government and State Governments would levy taxes concurrently. The Central GST (CGST) would be collected by the central government, while the State GST (SGST) would be collected by state governments. Additionally, an Integrated GST (IGST) would be applied to inter-state transactions, ensuring seamless credit flow across states.

3. Destination-Based Taxation

GST was proposed to be based on the principle of destination-based consumption taxation rather than origin-based taxation. This means that taxes would be levied where goods and services are consumed, promoting fairness in tax distribution among states.

4. Input Tax Credit Mechanism

A significant feature of the GST proposal was the introduction of an input tax credit mechanism, allowing businesses to claim credits for taxes paid on inputs used in production. This would help eliminate the cascading effect of taxes and lower overall tax burdens on consumers.

5. Establishment of GST Council

The proposal included the establishment of a Goods and Services Tax Council to oversee GST implementation, comprising representatives from both the central and state governments. This council would be responsible for recommending tax rates, exemptions, and resolving disputes related to GST.

6. Tax Rates Structure

The initial discussions suggested a multi-tiered tax rate structure with four primary rates: 5%, 12%, 18%, and 28%. Certain goods and services would also be exempt from GST, while a cess might be imposed on luxury items to compensate states for potential revenue losses during the transition.

7. Exemptions and Special Provisions

The first proposal recommended that certain goods, such as alcoholic beverages for human consumption, remain outside the purview of GST. It also suggested provisions for compensating states for any revenue loss incurred due to the implementation of GST over an initial period.

These foundational elements laid out in the first proposal were crucial in shaping the eventual framework of GST in India, which was implemented on July 1, 2017, after years of deliberation and adjustments based on stakeholder feedback.

Taxes subsumed under Gst

The taxes subsumed under GST are Four central taxes such as cenvat, service tax, stamp duty, and central sales tax. Also, Nine state taxes such as excise duty, sales tax/vat, entry, lease, works contract tax, luxury tax and turnover taxes and also octroi, and cess to be merged into GST.

The Goods and Services Tax (GST) in India subsumed several existing indirect taxes to create a unified tax structure. Here is a comprehensive list of the key taxes that were subsumed under GST:

Central Taxes Subsumed

• Central Excise Duty
• Additional Excise Duty
• Service Tax
• Additional Customs Duty (also known as Countervailing Duty)
• Special Additional Duty of Customs (SAD)
• Central Sales Tax (CST)
• Central Cesses and Surcharges related to the supply of goods and services

State Taxes Subsumed

• Value Added Tax (VAT)
• Sales Tax
• Entertainment Tax (excluding local body levies)
• Luxury Tax
• Entry Tax (all forms)
• Octroi
• Taxes on Lotteries, Betting, and Gambling
• Purchase Tax
• State Cesses and Surcharges related to the supply of goods and services

Taxes Not Subsumed Under GST

It’s important to note that certain taxes remain outside the GST framework, including:

• Basic Customs Duty on imported goods
• Excise Duty on Petroleum Products (like petrol and diesel)
• Income Tax, which is a direct tax
• Other direct taxes such as property tax and stamp duty

The subsumption of these indirect taxes under GST was aimed at simplifying the tax structure, reducing compliance costs, and eliminating the cascading effect of taxation in India.

Implementation of GST

The government of India decided to introduce GST in the financial year 2010-2011 after the Kelkar Committee Report in 2006 but the process was delayed due to various reasons such as disputes between the state and central etc.

Finally, by 101st Amendment Bill,2016 was cleared by the parliament in August 2016 and by September 2016 GST council was created.

The council had the power to make recommendations to Union and states on rates, floor rates, exceptions, etc and the new federal GST was implemented on July 1, 2017.

Gst rates in India

It is a new Indirect tax that is applied to all except Alcoholic liquor and five petroleum products such as crude petroleum, motor spirit/petrol, high-speed diesel, natural gas, and aviation turbine fuel.

Central excise duty, duties of excise(Medicinal and Toilet preparations), additional duties of excise (Goods of special importance), additional duties of excise (textile and textile products), additional duties of customs/ countervailing duties (CVD), and special additional duty of customs (SAD), service tax, and central surcharges and cesses, these 8 cental taxed subsumed under Goods and Services Tax.

State Vat, Central sales tax, luxury tax, entry tax, entertainment and amusement tax (except Local Bodies), taxes on an advertisement, purchase tax, lottery tax, betting, and gambling, and state surcharges and cesses, these nine states are merged into GST.

The method of declared ‘goods of special importance‘ is dropped. For the inter-state transactions of the goods and services, an “Integrated GST” will be levied.

The upper limit for the exception from levy of GST would be 20 Lakh rupees for the normal states and 10 lakh rupees for the special category states.

The upper limit for getting the composition would be 50 lakh rupees with the service providers kept out of it. States to get compensation for five years for loss of revenue due to implementation of Goods and Services Tax ( for the base year will be 2015-16) with a growth rate of 14%.

Small amendments in rules may be allowed with the approval of the chairperson if required. All exemptions/incentives on indirect taxes will rest withdrawn with an obligation to pay GST. If any of them continue it will be administered by way of a reimbursement mechanism.

Bands of rates of good under GST shall be 5,12,18, and 28, and also there would be a category of exempt goods. Further, a cess would be levied on certain goods such as luxury cars, aerated drinks, pan masala, and tobacco products, over and above the rate of 28 per cent (for payment of compensation to the states).

Keeping in mind the structure of the federal, there will two taxes CGST(Central GST) and SGST (State GST).

Both centre and state levying GST across the value chain on every supply of goods and services. States with assess 90% of assesses with annual turnover below 1.5 crore rupees while 10% by the centre. For taxpayers with over 1.5 crore rupees turnover, the split is 50:50 between the centre and states.

Conclusion

We have discussed, What is GST and what are taxes subsumed under it. Kindly check the latest GST rates, as it changes regularly.

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