Taxes Subsumed and Not Subsumed Under GST

In India, the Goods and Services Tax (GST) represents a pivotal shift in indirect taxation, replacing various taxes and levies with a unified system. 

This transformation under the GST regime has streamlined the tax process, alleviating the complexity and multiplicity of previous taxes. Yet, confusion persists among taxpayers regarding the specific taxes that have been subsumed under GST. 

The article aims to clarify which taxes are included and excluded within the GST framework, shedding light on its comprehensive impact.

Principles of taxes subsumed

The principles of tax inclusion under the Goods and Services Tax (GST) are guided by specific criteria outlined by the Indian Constitution and GST laws. 

These criteria were established to identify which central, state, and local taxes could be incorporated into GST. The key principles are as follows:

• Indirect Nature of Taxes: GST encompasses taxes that are incorporated into the cost of goods and services. Taxes unrelated to purchasing or selling goods and services do not fall under the GST regime.
• Inclusion in the Transaction Chain: Taxes under GST are applicable throughout the supply chain, encompassing the delivery of goods and services from production to final consumption, ensuring a comprehensive tax framework.
• Uninterrupted Tax Credit Flow: Integrating taxes under GST allows businesses to seamlessly claim tax credits for taxes paid on inputs against taxes due on sales, facilitating cross-state transactions.
• Fair Sharing of Money: When combining taxes into GST, it's important that both the government in a state and the whole country get a fair share of the tax money.

These principles aim to streamline tax administration, eliminate tax on tax, and ensure that the GST system is comprehensive, equitable, and conducive to a unified market across the country.

List of taxes subsumed under GST in India 

The Goods and Services Tax (GST) consolidated numerous central and state taxes into a single tax system. Here's a simplified overview of the taxes that were absorbed into GST-

Central Taxes Subsumed:

• Central Excise Duty (CENVAT): Central Excise Duty (CENVAT) is an indirect tax imposed and collected by the central government on goods manufactured or produced within India.
• Additional Excise Duties: Additional Excise Duties refer to an extra tax on specific domestically manufactured items, as outlined under the 1957 'Additional Duties of Excise Act,' with revenue divided between the central and state governments.
• Duties of Excise (Medicinal and Toilet Preparations): It is an indirect tax on the making of medicinal and toilet preparations containing alcohol, narcotic drugs.
• Additional Duties of Excise (Goods of Special Importance): It is an additional tax levied and collected on special items like tobacco, sugar, and clothes made from textiles.
• Additional Duties of Excise (Textiles and Textile Products): This is an additional charge specifically for products made from textiles.
• Additional Duties of Customs (Countervailing Duty, CVD): Additional Duties of Customs (Countervailing Duty, CVD) is a tax applied to imported goods to align their prices with those of domestic products, supporting Indian manufacturers.
• Service Tax: Service Tax is applied to various services, including restaurant dining, travel services, and cable television subscriptions.
• Central Surcharge and Cess: These were extra charges and taxes the central government added to the supply of goods and services. It’s like an extra charge on luxury items to fund education or health initiatives.

State Taxes Subsumed:

• State VAT (Value Added Tax): A tax on the value added to goods and services at each stage of the supply chain, varying by state.
• Central Sales Tax: Central Sales Tax is applied to the sale of goods that occur across state lines.
• Luxury Tax: Luxury Tax is imposed on high-end goods and services considered luxurious.
• Entry Tax (All Forms): In all its forms, states charge taxes on goods that enter their territory from another state.
• Entertainment and Amusement Tax: Entertainment and Amusement Tax is levied on commercial entertainment and amusement activities by state governments.
• Taxes on Advertisements: Taxes on Advertisements are applied to advertisements that appear in print media.
• State Surcharge and Cess: All state-imposed surcharges and cesses were included.

List of taxes not subsumed under GST in India

The following taxes are not subsumed under GST:

• Basic Customs Duty: Basic Customs Duty is a tax on imported goods, separate from GST, aimed at regulating imports and supporting local businesses, calculated based on the item's value entering India.
• Tax on Petrol and Diesel: These fuels don't fall under GST. Instead, they're taxed by both the central and state governments due to the adverse revenue impact it has. 
• Tax on Tobacco and Alcohol: This lets states keep taxing these products.
• Stamp Duty on Property: When people buy property, they pay this tax to the state, and it's not included in GST. The cost varies in different states.
• Electricity Duty: The tax on electricity consumption remains outside GST. It applies to individuals and businesses based on their electricity usage.
• Vehicle Tax: When registering a new vehicle, people pay this tax to the state, which isn't part of GST.
• Property Tax: This tax is on owning property like houses and land. Local governments charge it, and it's separate from GST.

Impact of taxes subsumed under GST

Consolidating taxes under GST simplifies tax management, benefiting businesses with easier compliance and operational efficiency. The following points represent the impact of taxes submitted under GST in a better way:

Pros:

• Reduces the cascading effect of taxes.
• Ease of doing business with a reduction in multiple compliances
• GST Simplifies Taxes: It applies one tax rate to all goods and services, reducing business complexity.
• One Tax System: GST combines various taxes into one, making tax compliance easier for businesses.
• Tougher on Tax Avoidance, Good for Revenue: GST has tightened up tax collection and made it harder to skip paying taxes, helping the government earn more.
• GST has made it cheaper for smaller companies and new startups, supporting their growth.
• Businesses get a pricing advantage due to ITC claims. 
• There was a drop in prices of many commodities due to a reduction in tax rate.  

Cons:

• Higher Tax Rates for Certain Services: GST makes certain services, like phone bills and bank fees, more expensive due to higher tax rates.
• Exclusion of Essential Commodities: Items like petrol and alcohol don't fall under GST, so their prices remain unaffected by the tax reform.
• Need to obtain multiple GSTINs: Multiple registrations of GST to be taken by businesses operating in more than one state.

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