[Solved] Enumerate the indirect taxes which have been subsumed in the goods and services tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017?(UPSC GS-3 Mains 2019)

GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. Under the GST regime, the tax is levied at every point of sale. In the case of intrastate sales, Central GST and State GST are charged. Inter-state sales are chargeable to Integrated GST.

 The GST introduction can be considered to be a path breaking moment as it single-handedly subsumed various indirect taxes that were creating unnecessary complications in our business structure.

 In the earlier indirect tax regime, there were many indirect taxes levied by both state and center. States mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different set of rules and regulations. Interstate sale of goods was taxed by the Centre. CST (Central State Tax) was applicable in case of interstate sale of goods. Other than above there were many indirect taxes like entertainment tax, octroi and local tax that was levied by state and center

 The GST replaced the following taxes:

 Value added Tax

 Value Added Tax or VAT was usually added on goods and services and was usually a amount that was collected by the sellers on behalf of the government.

 Sales Tax

 The form of tax that is imposed by the state government on business entities for selling  goods or service to customers.

 Inter-state tax

 This tax was a major reason for delay in transport of goods from one state to another. The vehicles moving from one state to another had to pay taxes for moving his goods into a new state.

 Gambling Tax

 Taxes collected through sale of lottery and permitting legitimate gambling.

 (i) Taxes currently levied and collected by the Centre:

 Central Excise duty

 Duties of Excise (Medicinal and Toilet Preparations)

 Additional Duties of Excise (Goods of Special Importance)

 Additional Duties of Excise (Textiles and Textile Products)

 Additional Duties of Customs (commonly known as CVD)

 Special Additional Duty of Customs (SAD)

 Service Tax

 Central Surcharges and Cesses so far as they relate to supply of goods and services (ii) State taxes that would be subsumed under the GST are:

 State VAT

 Central Sales Tax

 Luxury Tax

 Entry Tax (all forms)

 Entertainment and Amusement Tax (except when levied by the local bodies) Taxes on advertisements g. Purchase Tax

 Taxes on lotteries, betting and gambling

 State Surcharges and Cesses so far as they relate to supply of goods and services Positive Implication:

 According to the Economic Survey, though there has been an improvement in tax to GDP ratio over the last six years, gross tax revenues as a proportion of GDP has declined by 0.3 percentage points in 2018-19 over 2017-18.

 In the first year of implementation of GST, revenues grew by 11.9% and the tax  buoyancy was 1.2 % Some other analyses show that the tax-to-final consumption expenditure also grew from 10.3% in the year before GST (2015-16) to 11.9% in 2017-18 Post the introduction of the e-way bill system, collections rose. The GST revenue for 2017-18 fiscal was Rs 7.41 lakh crore People filing tax returns: Increased from 5.43 crore in FY16-17 to 6.84 crore in FY17-18.

 Formalization of the economy: Formalization of the economy seems to have gathered pace. Rise in the Employees’ Provident Fund Organisation subscriber base provides evidence for the fact Registration of business: Increase in the number of businesses registered. This implies that the tax base has expanded with GST. Registration under the old indirect tax regime was 6.4 million. Registration of businesses increased to 11.2 million under GST 5. Facilitated transport of goods between states with the introduction of the E-Way Bill system Issues with the GST:

 The gross GST collections are short of expectations. The shortfall is a problem especially for the States because while they have given up a significant part of the taxation powers, they will be compensated only for five years for any shortfall in revenues relative to a projected revenue growth target of 14 per cent per annum.

 While month-wise gross GST collections have been rising almost consistently over time, collections by or due directly to the States have been quite volatile and have not displayed the same consistent rise.

 The GST revenue accruing to the Central divisible pool is doing better than that received by the States from the State GST (SGST) and Integrated GST (IGST). This raises concerns about what the revenue position of the States would be three years from now.

 Further, there has been a decline in monthly GST collection in the current fiscal, with monthly CHST collection barely crossing 100000 crore mark Finally, while many States seem to be losing out as of now with regard to the minimum revenue growth targeted after the move to the GST regime, the new structure of indirect taxation seems geared to accentuate inter-State inequalities.

 Revenue Implications

 Equal sharing between centre and state

 There has been no separation as central and state taxes. Instead the revenue generated is equally shared between state and centre. This has somehow improved financial conditions of the states.

 Loss to producer states

 Under the current regime GST is applied at the destination of the goods. This means that the tax benefits are reaped by states that sell them instead of those states that produce them.


 Nearly two years have passed since, and there’s a widespread perception that GST revenue growth has not lived up to expectations. Post implementation of GST, the Centre’s revenue from goods and services (excluding Central excise on petroleum and tobacco) registered a decline of 10 per cent in 2017/18, compared to the revenue from the subsumed taxes in 2016/17. In 2018/19, the Union government had to revise its GST collection target by Rs 1 lakh crore – from Rs 7.43 lakh crore to Rs 6.43 lakh crore. The target for 2019/20 is Rs 6.63 lakh crore, just Rs 20,000 crore more than the last year’s revised target

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