Taxes Subsumed Under The GST Regime

The main objective of GST is the eradication of multiplicity of taxes thereby reducing the complexity and removing the cascading effect of taxes.

Present taxes levied on the sale of goods or services by either Central or State Government will be subsumed under the GST Regime. The subsumption of all these taxes will ensure a free flow of a larger pool of tax credits at both Central and State level.

Principles of Subsumption:

While identifying the possibility of central and states taxes being subsumed under the GST regime, the following principles were taken into account:

1. Taxes or levies to be subsumed should necessarily be in the nature of indirect taxes, either on the supply of goods or services.
2. Taxes or levies to be subsumed must be a part of the transaction chain commencing with import or manufacture or production of goods or provision of services at one end and the consumption of goods and services at the other.
3. The eventual result of subsumption must be a free flow of tax crediting intra and inter-State levels. Revenue fairness for both the Union and the States individually would need to be attempted.
4. Taxes, levies and fees not exclusively related to supply of goods & services should not be subsumed under the GST regime.

Central Taxes to be Subsumed:

The following Central Taxes will be subsumed under the Goods and Services Tax law;

• Central Excise Duty (CENVAT)
• Additional Excise Duties and the Excise Duty levied under the Medicinal and Toiletries Preparations Act, 1955
• Service Tax
• Additional Customs Duty, also known as the countervailing duty (CVD)
• Special Additional Duty of Customs (SAD) – 4%
• Surcharges & Cesses levied by the Centre will also get subsumed including cess on tea, coffee, rubber, etc.
• Central Sales Tax will be eliminated.

State Taxes to be Subsumed in GST

Following State taxes and levies will be subsumed under GST;

• VAT or sales tax
• Octroi and Entry Tax
• Purchase Tax
• Luxury tax
• Taxes on the lottery, gambling and betting
• Entertainment tax (unless it is levied by the local bodies)
• Surcharges & State Cesses (related to the supply of goods and services)

Taxes not to be Subsumed

The following taxes are subsumed under GST;

• Property Tax
• Stamp Duty
• Electricity Duty
• Basic Customs Duty (duties levied at the time of Import of goods into India).
• Exports Duty
• Road & Passenger Tax & Toll Tax (in the nature of fees and not in the nature of taxes on goods and services).