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Wednesday, April 17, 2024

Which Taxes Were Subsumed by GST?

The GST, implemented on the 1st of July, 2017, caused a lot of people to run to the GST site for better understanding the tax system and aimed to create a better system of taxation for the country. India, plagued by several taxes that affect businesses adversely, underwent a serious tax reform once the bill was implemented.

Quite a few taxes were included in the GST to create a system of one taxation, some that were considered crucial, and some that just created problems for taxpayers. This article is a comprehensive examination of the taxes subsumed by GST so that you can understand your country’s tax system better. Here is the list of taxes subsumed by gst.


Taxes Subsumed by GST

Union Level

  1. Central excise duty: The central excise duty, replaced by CGST, was excise duty which was imposed on goods meant only for domestic consumption. It was an indirect tax and was applicable as soon as a product was manufactured.

  1. Additional duties of excise: This kind of excise was imposed on goods like sugar, tobacco, and textile. The tax was shared between the state and the center according to the second schedule of the law that created this act.

  1. Additional Custom’s Duty: This tax was imposed on imported goods and was equal to the central excise duty for products of the same kind that were domestically produced in India. In case the good was unique, and there was no Indian equivalent, it was charged the highest rate of tax from the category it was placed in.

  1. Service tax: Service tax was specifically imposed on services by businesses having a turnover of at least ten lakhs per annum. Although the company had to pay the taxes, ultimately, customers were liable to pay the tax, in turn, reimbursing the business of the tax it had paid the government. To know more about gst read here.

  1. Central cess: Cess, a form of temporary taxation, is charged after the permanent tax liability. Central cess was not a permanent form of taxation. It was only imposed when additional by the government was needed for a specific cause, for example, recovery from a natural disaster. Once the purpose was fulfilled, the cess was discontinued.

State Level

  1. State VAT: Value Added Tax, better known as VAT, was imposed in several states, and the rates of tax were purely on the discretion of the state itself. Under the GST regime, the system of VAT has been entirely removed, and the rates are set for every state by the central committee itself, making sure that every state has a unified rate, making it easier for businesses to operate inter-state.

  1. Luxury tax: Luxury tax was levied on items that were not considered essential for the day to day functioning of people. The tax was levied after VAT, so the end consumer had to pay two taxes on luxury goods. This tax was charged on items such as expensive cars and jewelry.

  1. Entertainment tax: This tax is also known as amusement tax. The tax was levied on services that are supposed to bring leisure to people and is a form of comfort. This tax was levied on movies, exhibitions, sports events, and more.

  1. Entry tax: Since the tax system before GST was not the best for inter-state trading and didn’t quite support inter-state trade much, entry tax was levied on goods moving from one state to another, to support the tax system followed by the latter state. Entry tax created yet another complication for small businesses, stopping them from expanding to different states.

  1. Purchase tax: When a consumer purchased a good from a business, he/she was liable to pay a purchase tax imposed by the state. The purchase tax varied and depended on the product that was being purchased by the consumer.

  1. State cess: Much like the central cess, the state cess was levied when the state needed additional monetary help for an unforeseen circumstance. The cess was temporary and was recalled once the state’s goal was fulfilled.

  1. Taxes on advertisement: The tax here was levied on traders and businesses that were advertising their goods and services. It didn’t matter where they put the ad, they were liable to pay a specific rate of tax from their advertisement transaction.

  1. Taxes on lotteries: In case you won a lottery and were celebrating, it was to be known that you were liable to pay a fee on your lottery winnings. The tax rate, fixed by the state, was to be paid by the winner, and the charges here were exuberant.

  1. Central sales tax: When a transaction happens between two states or when a business or a trade is inter-state, the company was liable to pay a Central sales tax along with the respective state taxes. As can be seen, the former tax was not very accommodating towards inter-state trade and business.

Concluding Remarks

From the taxes listed above, it can be inferred that the GST has subsumed several taxes, and while doing so, has created a simpler and more convenient tax system for the country.