Streamlined Tax Structure: Central and State Taxes Subsumed by GST in India
In 2017, India underwent a significant tax reform with the implementation of the Goods and Services Tax (GST). This reform aimed to simplify the complex tax structure by subsuming various central and state taxes into a single unified system. Let’s delve into the types of central and state taxes that were subsumed by GST, paving the way for a more streamlined and efficient taxation framework.
Central Taxes Subsumed by GST
- Central Excise Duty: This tax was levied on the production of goods within the country. With the advent of GST, excise duty was integrated into the new system, eliminating the cascading effect of taxes and ensuring smoother movement of goods.
- Service Tax: Previously imposed on services provided by businesses, service tax is now a part of the GST regime. This includes various services, from telecommunications to hospitality, under the common tax umbrella.
- Additional Customs Duty: Commonly known as Countervailing Duty (CVD) and Special Additional Duty (SAD), these taxes were charged on imported goods. With GST’s implementation, these duties were replaced, promoting ease of doing business and enhancing cross-border trade.
State Taxes Subsumed by GST
- Value Added Tax (VAT): State-level VAT, which was charged on the value added to goods at each stage of production or distribution, became an integral part of GST. This move eliminated the tax-on-tax phenomenon prevalent under the earlier tax regime.
- Central Sales Tax (CST): CST, levied on interstate sales of goods, was absorbed by GST. This not only facilitated seamless interstate trade but also reduced the compliance burden on businesses.
- Entertainment Tax: Taxes on entertainment activities that were previously under state jurisdiction were subsumed into GST. This brought uniformity in tax rates across states and simplified the taxation process for the entertainment industry.
- Luxury Tax: GST replaced the luxury tax imposed by states on services in luxury hotels and resorts. The unified tax structure ensures a consistent approach and reduces confusion for both businesses and consumers.
- Octroi and Entry Tax: GST eradicated the need for entry taxes that were charged on the movement of goods into a local area for consumption. This elimination of barriers at state borders boosted the logistics sector and reduced transportation time and costs.
The Goods and Services Tax (GST) implementation in India marked a paradigm shift in the country’s tax landscape. By subsuming a plethora of central and state taxes, GST successfully created a uniform taxation system that streamlined processes for businesses and enhanced economic growth. The elimination of cascading taxes and the simplification of compliance procedures have collectively contributed to a more efficient and transparent tax framework in the country.