Understanding the Implications of GST on Indirect Taxes in India

The introduction of the Goods and Services Tax (GST) in India marks a significant shift in the country's tax landscape. One of the key aspects of GST is the subsumption of various indirect taxes under a single, comprehensive tax system. But what happens to all indirect taxes after the implementation of GST? This article delves into the details and clarifies the changes.

Overview of GST and Its Role in Tax Reforms

Goods and Services Tax (GST) is designed to streamline the tax process and create a unified tax system across India. It aims to subsume most of the existing indirect taxes under a single tax category. According to the GST framework, a central goal is to achieve 'One Nation, One Tax.' This holistic tax reform is expected to simplify the taxpaying process for businesses and ease the compliance burden.

Indirect Taxes Subsumed under GST

Under the GST regime, all indirect taxes levied by both the central and state governments get subsumed into the GST system. This includes:

Central Levies

Excise Duty: Applicable on goods manufactured in India. Countervailing Duty (CVD) and Special Additional Duty (SAD): Levied on imported goods. Service Tax: On service provided.

State Levies

Value Added Tax (VAT): Applicable on the sale of goods. Entry Tax: Levied on the entry of goods into a local area. Luxury Tax: A luxury tax on luxuries. Entertainment and Betting Tax: Applicable on entertainment, amusement, and betting activities.

Abolished Central Sales Tax

A significant change brought about by GST is the abolition of the Central Sales Tax (CST). CST, which was levied by the central government but collected by state governments on inter-state sales, is no longer required. This central levy on interstate sales is completely abolished with the introduction of GST, making interstate transactions simpler and more efficient.

Other Indirect Taxes Continuing Post-GST

While most indirect taxes are being subsumed under GST, certain taxes will continue to be levied. These include:

Customs Duty

As with CST, customs duty continues to be applied to imported goods and is not subsumed under GST. Customs duty serves as a tariff on foreign goods entering the country, protecting domestic industries and ensuring compliance with international trade agreements.

Other Levies

Central Excise Duty: Specifically applied to petroleum crude, petrol, diesel, aviation turbine fuel, natural gas, and tobacco and tobacco products. State Excise Duty: Levied on alcoholic liquor for human consumption. VAT: On petroleum crude, petrol, diesel, aviation turbine fuel, natural gas, and alcoholic liquor for human consumption. Electricity Duty: On the sale and consumption of electricity. Entertainment Tax: If levied by panchayat, municipality, or regional/district council.

Falling in Line with GST Laws

After the implementation of GST, all indirect taxes levied by the central and state governments will be replaced by the GST framework. However, it is important to note that certain taxes, such as customs duty, along with other municipal levies, will continue to be applied. This ensures continuity and clarity in the tax system while facilitating a smoother transition to GST.

For more detailed information, feel free to reach out. The journey to 'One Nation, One Tax' with GST is a transformative step in India's tax history, and understanding these changes is essential for businesses and individuals alike.