Are you tired of the confusing and never-ending list of taxes that you have to pay? Worry no more. With the introduction of the Goods and Services Tax (GST), the Indian government has subsumed multiple taxes into one simplified tax regime. GST has revolutionized the era of taxes and has brought in a single unified taxation system throughout the country.
GST has subsumed various indirect taxes such as Service Tax, Central Excise Tax, State VAT, and many more. This has significantly reduced the burden of taxpayers as they no longer have to go through the hassles of complying with multiple taxes. The implementation of GST has helped businesses to avoid the cascading effect of multiple taxes, which would ultimately increase the cost of goods and services.
The GST system enables seamless credit of input taxes across the supply chain and helps businesses to reduce the overall tax burden. It has also helped consumers as the prices of goods and services have become affordable due to the reduced tax burden. The introduction of GST has been one of the biggest tax reforms in India, and it has positively impacted the economy in various ways. With GST in place, the taxation system in India has become more efficient and transparent.
Introduction to GST and its Tax Structure
The Goods and Services Tax (GST) is an indirect tax levied on goods and services. It is a comprehensive tax system that has replaced various indirect taxes in India. GST was introduced on July 1, 2017, with the aim of streamlining the taxation system, reducing tax evasion, and promoting economic growth.
The GST tax structure is divided into four categories: CGST (Central Goods and Services Tax), SGST (State Goods and Services Tax), IGST (Integrated Goods and Services Tax), and UTGST (Union Territory Goods and Services Tax).
Taxes subsumed in GST
- Central Excise Duty
- Service Tax
- Value Added Tax (VAT)
- Entry Tax
- Octroi
- Luxury Tax
- Entertainment Tax
Impact of GST on the Indian Economy
GST has had a significant impact on the Indian economy. One of the most significant impacts is the simplification of the tax system and the reduction in tax evasion. This has helped businesses focus on their operations and growth rather than worrying about taxation. GST has also led to the removal of various tax barriers between states, making it easier to trade across the country. The introduction of GST has also led to an increase in tax revenue for the government.
However, the introduction of GST has also led to some challenges for businesses. The new tax system has led to an increase in compliance costs and a transitional period of adjustment for the industry. The GST Council has taken several measures to address these issues and has continued to improve the tax system.
Comparison between Pre-GST and Post-GST Tax Rates
The table below shows a comparison of tax rates before and after the introduction of GST in India. The reduction in tax rates has led to a decrease in the prices of goods and services for consumers, leading to increased demand and growth in various sectors of the Indian economy.
| Tax Component | Pre-GST Tax Rate | Post-GST Tax Rate |
|---|---|---|
| Consumer Durables | 26.50% | 18.00% |
| Food Items | 12.50% | 0.00% |
| Services | 15.00% | 18.00% |
| Textiles | 5.45% | 5.00% |
The introduction of GST has been a significant reform for the Indian economy. While the transition onto a new tax system has had its challenges, the benefits of GST far outweigh the costs. GST has led to the removal of various tax barriers, simplified the tax structure, and increased tax revenue for the government. The reduction in tax rates has also led to a decrease in prices for consumers, benefitting various sectors of the economy.
Taxes subsumed in GST: Central Taxes
One of the major advantages of GST is that it has subsumed various taxes under its umbrella, thereby ensuring that multiple taxes do not get levied on a single product or service. In this article, we will discuss in detail the taxes subsumed in GST, starting with central taxes.
- Central Excise Duty
- Additional Excise Duty
- Service Tax
- Additional Customs Duty (CVD)
- Special Additional Duty of Customs (SAD)
The central taxes subsumed under GST are as follows:
The Central Excise Duty was levied on the manufacturing of goods in India. GST has taken over this tax, and now the production, manufacture, and sale of goods and services are controlled under a single tax law. Goods and Services Tax replaced the Additional Excise Duty, which was levied on goods that were already subjected to Excise Duty. The Service Tax that was levied on the supply of services in India, including the import of services, has also been subsumed under GST.
Customs Duty is a tax payable on goods that are imported into India. The GST Council has replaced Additional Customs Duty, also known as Countervailing Duty (CVD), and Special Additional Duty of Customs (SAD) under GST. Goods and services imported into India are now liable to Integrated Goods and Services Tax (IGST).
| Tax | Description |
|---|---|
| Central Excise Duty | A tax levied on the manufacture of goods in India. |
| Additional Excise Duty | A tax levied on goods that were already subjected to Excise Duty. |
| Service Tax | A tax levied on the supply of services in India, including the import of services. |
| Additional Customs Duty (CVD) | A tax payable on goods that are imported into India. |
| Special Additional Duty of Customs (SAD) | A tax levied on imported goods which are exempt from CVD. |
With the subsumption of central taxes under GST, businesses can now comply with a single tax regulation, thereby ensuring ease of doing business in India.
Taxes subsumed in GST: State Taxes
State taxes have been subsumed in GST to simplify the tax structure in the country. Earlier, each state levied its own set of taxes, which led to a complicated tax system. However, with the implementation of GST, all state taxes have been merged into a single tax, thereby reducing the overall tax burden on businesses and consumers.
List of State Taxes Subsumed in GST
- VAT: Value Added Tax, which was levied on goods sold within the state, has been subsumed in GST.
- CST: Central Sales Tax, which was levied on inter-state sales, has also been subsumed in GST.
- Entry Tax: Entry tax was levied on the entry of goods into a state, and has been subsumed in GST.
Impact on State Revenues
Since all state taxes have been subsumed in GST, the revenue of state governments has been impacted. Earlier, states had the power to levy and collect taxes, which led to variations in the tax rates. However, with GST in place, the tax rates are uniform across the country, and the revenue collected is distributed between the central and state governments according to the GST Council’s decision.
The states were promised compensation for the revenue loss due to GST implementation for a period of five years. However, with the Covid-19 pandemic affecting the economy, many states have demanded an extension of the compensation period.
State-Wise GST Collection
The total GST collected in a state is divided between the central and state governments. The state’s share is known as SGST (State Goods and Services Tax). As of July 2021, Maharashtra had the highest SGST collection followed by Tamil Nadu and Karnataka. The state with the lowest SGST collection was Sikkim.
| State | SGST Collected (in crores) |
|---|---|
| Maharashtra | 44,787 |
| Tamil Nadu | 22,901 |
| Karnataka | 16,079 |
| Uttar Pradesh | 14,138 |
| Gujarat | 13,585 |
| West Bengal | 12,228 |
| Bihar | 7,185 |
| Rajasthan | 6,915 |
| Haryana | 6,213 |
| Madhya Pradesh | 5,349 |
| Sikkim | 15 |
Overall, the subsuming of state taxes in GST has simplified the tax structure in the country, and has led to a reduction in the overall tax burden on businesses and consumers.
Taxes not subsumed in GST
Although the implementation of Goods and Services Tax (GST) has led to the subsumption of several taxes, there are still a few taxes that have not been merged with GST. Here are the taxes that are not included in the GST framework:
- Stamp Duty
- Property Tax
- Customs Duty
Stamp Duty
Stamp duty is a tax levied by the state governments on various transactions such as sale, transfer, and lease of property. The rates of stamp duty vary from state to state and can go up to 10% of the property value in some cases. Under the current tax regime, stamp duty continues to be applicable and is not subsumed under GST.
Property Tax
Another tax that is not subsumed in GST is Property Tax, which is levied by the municipal corporation or local authority on the ownership of property. Property tax rates are determined by the local authorities and can vary from one jurisdiction to another. Since property tax is levied by the local bodies, it is not included in the GST framework.
Customs Duty
Customs duty is a tax levied by the central government on the import and export of goods. It is charged based on the value of the imported or exported goods and is collected by the customs department. Customs duty rates are determined by the government and can vary depending on the nature of the product, country of origin, and other factors. Customs duty is still applicable in the current tax regime and is not subsumed under GST.
Entertainment Tax
Although entertainment tax was initially part of the GST framework, it was later removed and is not subsumed in GST. Entertainment tax was levied by the state governments on various entertainment activities such as movies, amusement parks, and sporting events.
| Tax | Current Tax Regime |
|---|---|
| Stamp Duty | Applicable, not subsumed in GST |
| Property Tax | Applicable, not subsumed in GST |
| Customs Duty | Applicable, not subsumed in GST |
| Entertainment Tax | Not applicable in GST |
Despite the fact that some taxes are not included in the GST framework, the implementation of GST has significantly simplified the tax structure in India. The main objective of GST was to create a uniform and simplified tax structure that reduces the cascading effect of taxes and improves compliance. While the GST tax regime has achieved significant progress in achieving these objectives, there is still room for improvement and refinement.
Advantages of GST over previous tax structures
Goods and Services Tax (GST) subsumed multiple taxes that were levied by both the Central government and the State governments. The previous tax structure was complex, leading to increased compliance costs and tax evasion. The following are the advantages of GST over the previous tax structures:
- Simplified Tax Structure: GST has simplified the tax structure by amalgamating multiple indirect taxes into one. This has made the tax system easy to understand and implement.
- Reduced Tax Evasion: GST has brought more transparency and accountability into the tax system. It has reduced the instances of tax evasion, as each transaction is recorded and tracked with a unique identification number called GSTIN.
- Uniform Tax Structure: GST has brought uniformity to the Indian tax system. It has replaced the multiple taxes with a single tax, making it easier for businesses to operate across different states in India.
Additionally, GST has also led to a reduction in overall tax rates in some sectors, which has resulted in a lower tax burden on businesses and consumers alike. Moreover, GST has also made it easier for businesses to claim input tax credit, which was not possible under the previous tax structure.
The following table shows the taxes subsumed under GST:
| Taxes subsumed under GST | Central taxes | State taxes |
|---|---|---|
| Central Excise Duty | Yes | No |
| Service Tax | Yes | No |
| Additional Duty of Excise | Yes | No |
| Additional Duty of Customs | Yes | No |
| Excise Duty levied under the Medicinal and Toiletries Preparation Act | Yes | No |
| Countervailing Duty | Yes | No |
| Sales Tax or Value Added Tax (VAT) | No | Yes |
| Central Sales Tax | No | Yes |
| Entertainment Tax | No | Yes |
| Octroi and Entry Tax | No | Yes |
In conclusion, the introduction of GST has brought significant advantages over the previous tax structures. The simplified and uniform tax system, reduction in tax evasion, and increased transparency are among the many benefits that GST has brought to businesses and the Indian economy.
Limitations of GST
While GST is a significant tax reform that has simplified the tax structure in India, there are still some limitations to this system:
- Multiple rates: Although GST aims to have a unified tax rate, it still has different rates for different goods and services. This can be confusing for taxpayers and may lead to disputes.
- Technology-dependent: GST implementation heavily relies on technology, including the GSTN portal and e-way bills. Any technical glitches may cause significant problems for taxpayers.
- Compliance burden: GST compliance requires businesses to file multiple returns and maintain detailed records. This can be cumbersome, especially for small businesses.
Minimizing the Limitations of GST
While these limitations exist, there are ways to minimize their impact:
Firstly, the government can work towards reducing the number of GST rates and simplifying the tax structure further. This will help in reducing the compliance burden on taxpayers.
Secondly, taxpayers can ensure they keep up with the technological requirements of GST implementation. This includes regularly updating their GSTN profile and being aware of any new compliance requirements.
Thirdly, businesses can adopt automated processes to minimize the manual effort required for GST compliance. For example, using accounting software that can generate invoices and record transactions can greatly simplify GST compliance requirements.
Comparison of Taxes Subsumed in GST
Here’s a table outlining the taxes that were subsumed under GST:
| Tax | Description |
|---|---|
| VAT | Value Added Tax, levied on the value added to goods |
| Central Excise Duty | Levied on the manufacture and production of goods |
| Octroi and Entry Tax | State taxes levied on goods entering a particular state |
| Service Tax | Levied on services provided by businesses |
| Additional Customs Duty/Countervailing Duty | Levied on imported goods to protect domestic industry |
| Special Additional Duty of Customs | Levied on imported goods to fund specific schemes |
In conclusion, while GST has its limitations, it is still a significant step towards simplifying the complex tax structure in India. With continuous efforts to streamline the tax system and adopt technological advancements, it is expected to become more effective in the long run.
Impact of GST on the Indian economy
Since its implementation in July 2017, the Goods and Services Tax (GST) has had a significant impact on the Indian economy. The GST was introduced to streamline the tax structure and improve compliance while reducing the cascading effect of taxes. In this article section, we will delve into the specific taxes that have been subsumed in GST and its effect on the Indian economy.
Taxes subsumed in GST
- Central Excise Duty
- Service Tax
- Additional Excise Duty
- Central Sales Tax
- Value Added Tax (VAT)
- Entertainment Tax
- Octroi and Entry Tax
These taxes have been subsumed in GST, and it has resulted in the removal of various taxes such as octroi, entry tax, and central sales tax that added to the costs of goods and services. With the introduction of GST, businesses now deal with a single tax instead of multiple taxes that were levied earlier.
Efficiency in the tax system
With the implementation of GST, businesses have experienced a reduction in the overall tax burden as the cascading effect of taxes has been eliminated. The tax system has become more efficient as compliance rules have been rationalized, which has resulted in businesses having increased access to input tax credit. The compliance mechanism has been simplified through a common return filing system.
Positive impact on the manufacturing sector
The manufacturing sector has benefited from the implementation of GST as it has led to the reduction in transportation time, ultimately lowering the costs of goods and services. GST has also improved the ease of doing business as it has eliminated the need for tax compliance at the state level, which previously resulted in higher compliance costs.
| Impact | Effect |
|---|---|
| Increase in revenue collection | GST has led to an increase in revenue collection as it has simplified the tax structure, improved compliance, and brought more businesses into the tax net. |
| Reduction in tax evasion | GST has made tax evasion more difficult as businesses now have greater accountability and transparency in their transactions. |
| Growth of organized sector | GST has led to the growth of the organized sector at the expense of the unorganized sector, as businesses now prefer to deal with organized firms due to the ease of compliance. |
Overall, the introduction of GST has undoubtedly had a significant impact on the Indian economy. It has led to the simplification of the tax structure, reduced compliance costs for businesses, and improved the ease of doing business. The manufacturing sector has also seen a positive impact due to the elimination of state-level compliance. The removal of multiple taxes and the cascading effect of taxes has resulted in an increase in revenue collection and has made tax evasion more difficult. With more businesses now being brought under the tax net, the economy has become more organized, leading to growth in the organized sector.
Which Taxes have been Subsumed in GST?
Q1. What is GST and how is it different from other taxes?
GST is a single indirect tax system that has subsumed multiple taxes, including VAT, excise duty, and service tax. It is different from other taxes because it is a value-added tax that is levied on the value of goods or services at each stage of the supply chain.
Q2. Which taxes have been subsumed in GST?
The taxes that have been subsumed in GST are – Central Excise Duty, Service Tax, Value-Added Tax (VAT), Central Sales Tax (CST), Entry Tax, Octroi, and Luxury Tax.
Q3. What is the impact of GST on the economy?
GST aims to make the tax system simpler, transparent, and more business-friendly, which, in turn, promotes economic growth. It eliminates the cascading effect of taxes and reduces the overall tax burden on consumers and businesses.
Q4. Has the GST implementation led to any reduction in taxes?
Yes, the GST implementation has led to a reduction in taxes as various state taxes and levies have been subsumed in it. Additionally, GST has brought down the compliance costs for businesses, which has helped in reducing their tax burden.
Q5. Are there any exemptions under GST?
Yes, there are certain goods and services that are exempted from GST, such as healthcare and education. Additionally, there are some items that attract lower GST rates, such as essential commodities like food items and medicines.
Q6. What are the benefits of GST for businesses?
GST is beneficial for businesses as it eliminates the need for multiple registrations and compliances. It also simplifies the tax structure and reduces the overall tax burden. Additionally, it helps in reducing the cost of goods and services by eliminating the cascading effect of taxes.
Closing Thoughts
Thank you for taking the time to read about the taxes that have been subsumed in GST. With the introduction of GST, the government aims to create a transparent and efficient tax system that benefits both consumers and businesses. We hope that this article has helped you understand the different taxes that have been subsumed in GST. Please visit us again for more informative articles.