What are the Taxes Subsumed Under GST?

What are the Principles of Tax Subsumation?

Various types of Central, State, and Local taxes were identified to be subsumed in GST. The principles given below were used to identify taxes that can be subsumed under GST -

• Indirect Taxes: The taxes subsumed in GST should be indirect in nature. These taxes should be levied on the supply of either services or goods. Taxes not related to the supply of services and goods should not be included in GST.
• Part of the Transaction Chain: The taxes selected for subsumption should be a part of the transaction chain that starts with the import, manufacture, and production of goods or services and ends with the consumption of goods and services.
• Free Flow of Tax Credit: This subsumation must lead to a free flow of tax credit on inter-state and intra-state levels.
• Revenue Fairness: The subsumation should be done keeping in mind the fairness of revenue for both the states and unions individually.

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What Central Taxes were Subsumed in GST?

After applying the above-mentioned principles, a set of taxes was selected to be subsumed under the GST. Given below are the Central taxes that were subsumed under GST -

• Central Excise Duty (CENVAT) - Central excise duty is the indirect tax levied on the goods and services at the time when they are transferred from the production unit to the warehouse.
• Additional Excise Duties - This tax is levied on the goods scheduled under section 3 of the Additional Duties Act of 1957.
• Duties of Excise (Toilet and Medicinal Preparations) - It is the indirect tax or excise duty that is levied on the toilet and medicinal preparations.
• Additional Duties of Excise (Goods of Special Importance) - It is the additional duty levied on special goods such as tobacco, sugar, and textiles made in a mill.
• Additional Duties of Excise (Textiles and Textile Products) - The excise duty levied on textile products is known as additional excise duties.
• Additional Duties of Custom (CVD) - Additional CVD or special countervailing duty is the tax or duty imposed on imported goods to equalize the value of imported goods with domestic products to protect the interests of domestic manufacturers.
• Service Tax - Service tax is an indirect tax imposed on the services provided by cable operators, travel agents, restaurants, cab services, etc.
• Central Surcharge and Cesses - All the surcharges and cesses were also subsumed under GST.

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List of taxes subsumed under GST in India

Central Taxes Subsumed

• Central Excise Duty
• Service Tax
• Additional Excise Duties (Textiles and Textile Products, Goods of Special Importance, etc.)
• Additional Customs Duty (Countervailing Duty - CVD)
• Special Additional Duty of Customs (SAD)
• Central Surcharges and Cesses (related to supply of goods and services)

State Taxes Subsumed

• Value Added Tax (VAT) / Sales Tax
• Entertainment Tax (other than the tax levied by local bodies)
• Luxury Tax
• Entry Tax (All forms of Entry tax, Octroi, etc.)
• Purchase Tax
• Taxes on Advertisements
• Taxes on Lotteries, Betting, and Gambling
• State Cesses and Surcharges (insofar as they relate to supply of goods and services)

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List of taxes not subsumed under GST in India

• Basic Customs Duty (BCD) – Still levied on imports.
• Stamp Duty – On property transactions.
• Excise Duty on Liquor, Petroleum Products (like petrol, diesel, ATF) – Currently outside GST purview.
• Electricity Duty – Levied by states.

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Impact of taxes subsumed under GST

Positive Impacts

• Simplification of Tax Structure
• Reduction in Cascading Effect (Tax-on-Tax)
• Improved Ease of Doing Business
• Increased Transparency and Compliance
• Boost to Make in India & Exports
• Higher Revenue Efficiency

Negative Impacts

• Initial Implementation Challenges
• Higher Compliance Costs
• Short-term Inflationary Impact
• Exclusion of Key Sectors

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What are the State Taxes Subsumed Under GST?

• State VAT - VAT is a value-added tax levied on goods and services at every stage of the supply chain. VAT varies from state to state.
• Central Sales Tax - It refers to the tax levied on the sales generated during interstate trade and commerce in the industry.
• Luxury Tax - Luxury tax is the indirect tax levied on the goods and services that are considered to be luxurious.
• Entry Tax of all Types - It refers to a tax levied by the state governments on the movement of goods from one area to another.
• Entertainment and Amusement Tax - It is a tax levied on commercial entertainment events by the state government.
• Taxes on Advertisements - The tax levied on the advertisements published in print media like magazines, newspapers, etc.
• State Surcharges and Cesses - All the surcharges and cesses levied by the state governments.

The implementation of GST has indeed streamlined India's tax structure by subsuming a multitude of complex and cascading indirect taxes. However, the transition is not without its intricacies, and the classification of taxes under GST can be complex. It's crucial to understand the nuances of this system to ensure compliance with tax provisions.

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