Under the GST (Goods and Services Tax) regime, several indirect taxes levied earlier have been subsumed. These include taxes like Central Excise Duty, Service Tax, Value Added Tax (VAT), Central Sales Tax (CST), and Entry Tax. By consolidating these taxes into a single comprehensive tax, GST helps eliminate cascading effects, where taxes were levied on taxes, reducing the overall tax burden for businesses and consumers. This seamless integration streamlines tax administration, reducing compliance costs and promoting a fair and transparent tax system.
Central Excise Duty
Central Excise Duty, also known as Central Excise, was a type of indirect tax levied by the Indian government on the production and sale of goods within India. It was a major source of revenue for the government and was levied on a wide range of goods, including alcoholic beverages, tobacco products, textiles, and automobiles.
Under the Goods and Services Tax (GST) regime, Central Excise Duty has been subsumed into the GST. This means that the tax is now levied on the supply of goods and services, rather than just on the production and sale of goods. The GST is a comprehensive tax that applies to all goods and services, with a few exceptions. The GST is also levied at a single rate, which is different from the multiple rates that were levied under the Central Excise Duty regime.
The following table shows the different rates of GST that are applicable to different goods and services:
| GST Rate | Goods and Services |
|---|---|
| 0% | Essential food items, such as milk, bread, and cereals |
| 5% | Essential non-food items, such as books, newspapers, and salt |
| 12% | Most goods and services, such as clothing, furniture, and electronics |
| 18% | Luxury goods and services, such as jewelry, perfumes, and restaurants |
| 28% | Sin goods and services, such as cigarettes, alcohol, and gambling |
Value Added Tax (VAT)
Value Added Tax (VAT) was a consumption tax levied on the value added to goods and services at each stage of production and distribution.
- VAT was charged on the difference between the purchase price of goods or services and the sale price.
- The tax was calculated as a percentage of the value added at each stage, and was ultimately borne by the end consumer.
- VAT was a major source of revenue for state governments in India.
Service Tax
Service tax was a tax levied on services provided in India. It was introduced in 1994 and was one of the major indirect taxes in the country. Service tax was levied on a wide range of services, including:
- Telecommunication services
- Banking and financial services
- Insurance services
- Transportation services
- Professional services
The GST regime has subsumed service tax into the GST. This means that service tax is no longer a separate tax and is now part of the GST. The GST rate for services is 18%.
| Service | GST Rate |
|---|---|
| Telecommunication services | 18% |
| Banking and financial services | 18% |
| Insurance services | 18% |
| Transportation services | 18% |
| Professional services | 18% |
Customs Duty
Customs duty is a tax levied on goods imported into or exported from a country. It is a type of indirect tax, as it is paid by the consumer of the goods. Customs duty is typically used to protect domestic industries from foreign competition, and to raise revenue for the government.
Types of Customs Duty
- Ad valorem duty: This is a duty levied as a percentage of the value of the goods.
- Specific duty: This is a duty levied as a fixed amount per unit of the goods.
- Compound duty: This is a duty levied as a combination of ad valorem and specific duty.
GST and Customs Duty
GST is a comprehensive indirect tax levied on the supply of goods and services. It is a destination-based tax, which means that it is levied at the point of consumption.
Customs duty is not subsumed in GST. However, GST is levied on the value of goods imported into India, including the customs duty paid on those goods.
| Type of Tax | Subsumed in GST |
|---|---|
| Customs Duty | No |
And there you have it! GST has indeed simplified the tax system in India, but it’s always a good idea to brush up on your GST knowledge to avoid any bobbles. I hope this article has cleared up any confusion you may have had. Thanks for sticking with me till the end. If you have any more questions or want to delve deeper into the world of GST, don’t hesitate to drop by again. I’ll be waiting to geek out over tax intricacies with you!